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  Exhibit 10.62 July 18, 2005 Margaret Julier Dear Maggie, RE: Employee Share Incentive Plan and Employee Share Option Plan In accordance with the Employee Share Incentive Plan (“the Preference Share Plan”), you are hereby advised that the Grant Date is July 14, 2005 for benefits you have accrued during the year ended 31 December 2004. Accordingly you are granted 95 Preference Shares in the Company. You have the option to purchase an equal number of Preference Shares at a price of US$18.31 or CI$15.26 each, which has been calculated in accordance to the terms of the Preference Share Plan. If you intend to exercise this option, then payment must be received in full no later than the close of business on August 15, 2005. As a member of the Employee Share Option Plan (“the Option Plan”), you will also be granted, as of July 14, 2005, the option to purchase 475 Ordinary Shares in the Company. These options are exercisable in accordance to the terms of the Option Plan. You furthermore have the opportunity to obtain an equal amount of options to purchase Ordinary Shares of the Company, in accordance to the terms of the Option Plan, if you exercise your right to purchase the above additional Preference Shares before August 15, 2005. Your continued dedication and hard work have contributed to another successful year for Consolidated Water, and I look forward to a very bright future. Yours sincerely, CONSOLIDATED WATER CO. LTD. /s/ Frederick McTaggart Frederick W. McTaggart President and CEO

EXHIBIT I TO EXHIBIT C TO  ASSET PURCHASE AGREEMENT Net Perceptions, Inc. One Landmark Square, 22nd Floor Stamford, CT 06901 Tel. (203) 428.2040 October 3, 2006 CRC Acquisition Co. LLC c/o Riparian Partners, Ltd. 2400 Financial Plaza Providence, Rhode Island 02903 Attn: Brendan VanDeventer Re: Asset Purchase Agreement dated as of September 22, 2006, among CRC Acquisition Co. LLC, Net Perceptions, Inc. and SIG Acquisition Corp. Gentlemen: Reference is made to (i) that certain Asset Purchase Agreement, dated as of September 22, 2006, among CRC Acquisition Co. LLC (the “Equityholder”), Net Perceptions, Inc. (the “Company”) and SIG Acquisition Corp., a newly formed wholly-owned subsidiary of the Company, pursuant to which SIG Acquisition Corp proposes to acquire substantially all of the assets of the Acquired Business on the terms and conditions set forth therein and (ii) that certain Stock Purchase Agreement (the “Stock Purchase Agreement”) dated as of the date hereof by and between the Company and Equityholder (collectively, the “Transactions”). In connection with the Transactions, the Equityholder will receive, among other things, 3,529,412 shares of the capital common stock, par value $0.0001 per share, of the Company (the “Shares”). The Equityholder (i) acknowledges that this letter agreement is entered into pursuant to, and the issuance and delivery of the Shares is being made pursuant to, the Stock Purchase Agreement and is subject to the further terms and conditions thereof, and (ii) understands that the Company is willing to proceed with this transaction only if the undersigned enters into this letter agreement. Capitalized terms used herein, but not defined herein, shall have the meanings ascribed to such terms in the Asset Purchase Agreement. The Equityholder hereby warrants and represents as follows:   (a) Equityholder is familiar with the terms of the Transactions, and it has had the opportunity to discuss in detail the terms of the Transactions with the officers and directors of the Company; (b)            Equityholder is the sole beneficial owner of the Shares, and no other Person has any Lien or other interest of any nature in such Shares (without limiting the foregoing, it acknowledges that it will not hold such Shares of the Company in any representative or fiduciary capacity); and --------------------------------------------------------------------------------   (c)        Equityholder has the full authority and capacity to enter into and carry out all the terms of this letter agreement, which has been duly authorized by all necessary limited liability company action and it is not subject to, or bound by, any agreement or instrument or any order of any court or other Governmental Authority that in any way restricts its authority or capacity to enter into and carry out all the terms of this letter agreement. In consideration of the consummation of the Transaction, including, without limitation, Equityholder’s receipt of the Shares and the other consideration set forth in the Asset Purchase Agreement, the Equityholder irrevocably agree that it will not (except pursuant to an order by a court of competent jurisdiction) directly or indirectly:   (1) Offer for sale, sell, pledge, assign, hypothecate or otherwise create any interest in or dispose of (or enter into any transaction or device that is designed to, or could reasonably be expected to, result in any of the foregoing) any securities of the Company, including the Shares as well as securities that it will “beneficially own” (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended, including the rules and regulations of the Securities and Exchange Commission thereunder), and securities of the Company that may be issued upon the occurrence of any future contingency or securities convertible into or exchangeable for securities of the Company which may be issued or transferred to the Equityholder during the period commencing on the Closing Date and ending on the six month anniversary of the Closing Date (the “Lock-up Period”); or (2)           Enter into any swap or other derivatives transaction that transfers to another Person, in whole or in part, any of the economic benefits or risks of ownership of such securities, including the Shares, including, without limitation, any short sales, puts, calls or other hedging transactions (including, without limitation, private hedging transactions); whether any such transaction described in paragraph (1) or (2) above is to be settled by delivery of Shares or other securities, in cash or otherwise during the Lock-Up Period. Equityholder agrees to the legending of the certificates evidencing the Shares with a legend indicating that the Shares are subject to the Lock-Up Period and this letter agreement. The Company and its agents, including its transfer agent, are authorized to decline to make any transfer of securities if such transfer would constitute a violation or breach of this letter agreement. The Equityholder understands that the Company will proceed with the Transactions in reliance on this letter agreement, and that any Shares transferred or issued to it under the terms of the Transaction will contain a restrictive legend stating that the transfer of such shares is restricted. --------------------------------------------------------------------------------   The Equityholder agrees that it will execute any additional documents reasonably necessary or related to the enforcement of this letter agreement and its obligations under this letter agreement is binding upon its managers, members, employees, successors and assigns. This letter agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same letter agreement. [signature page follows] --------------------------------------------------------------------------------             Very truly yours,   NET PERCEPTIONS, INC.             By:     -------------------------------------------------------------------------------- Name: Nigel P. Ekern Title: Chief Administrative Officer Acknowledged and agreed to by the undersigned as of the 3rd day of October, 2006: CRC ACQUISITION CO. LLC         By:     -------------------------------------------------------------------------------- Name: Title:     --------------------------------------------------------------------------------  

  Exhibit 10.24 Execution Draft February 1, 2006 Manufacturing Services Agreement Between Patheon Pharmaceuticals Inc. and Somaxon Pharmaceuticals, Inc. February 1, 2006 CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.   --------------------------------------------------------------------------------   Table of Contents               ARTICLE 1. INTERPRETATION     1                      1.1   Definitions     1        1.2   Currency     6        1.3   Sections and Headings     6        1.4   Singular Terms     6        1.5   Schedules     6                 ARTICLE 2. PATHEON’S MANUFACTURING SERVICES     7                      2.1   Manufacturing Services     7        2.2   Standard of Performance     9                 ARTICLE 3. CLIENT’S OBLIGATIONS     9                      3.1   Payment     9                 ARTICLE 4. CONVERSION FEES AND COMPONENT COSTS     9                      4.1   [***] Pricing     9        4.2   Price Adjustments - Subsequent Years’ Pricing     9        4.3   Mid-Year Pricing     10        4.4   Fee Adjustment Procedure     11        4.5   Adjustments Due to Technical Changes     11        4.6   Multi-Country Packaging Requirements     11                 ARTICLE 5. ORDERS, SHIPMENT, INVOICING, PAYMENT     12                      5.1   Orders and Forecasts     12        5.2   Reliance by Patheon     12        5.3   Minimum Orders     13        5.4   Shipments     13        5.5   Invoices and Payment     14                 ARTICLE 6. PRODUCT CLAIMS; RECALLS; ADVERSE EVENTS     15                      6.1   Product Claims     15        6.2   Product Recalls and Returns     16        6.3   Disposition of Defective or Recalled Products     17        6.4   Customer Questions and Complaints     18        6.5   Adverse Event Reporting     18                 ARTICLE 7. CO-OPERATION     18                      7.1   Quarterly Review     18        7.2   Communication with Governmental Agencies     18        7.3   Records and Accounting by Patheon     19     ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - i - --------------------------------------------------------------------------------                      7.4   Client’s Inspection of Reports and Records     19        7.5   Client’s Access to Manufacturing Site     19        7.6   Government Inspection     19        7.7   Reports     20        7.8   Validation and FDA Filings     20                 ARTICLE 8. TERM AND TERMINATION     22                      8.1   Initial Term     22        8.2   Termination for Cause     22        8.3   Product Partnering     22        8.4   Product Discontinuation     23        8.5   Obligations on Termination     23                 ARTICLE 9. REPRESENTATIONS, WARRANTIES AND COVENANTS     25                      9.1   Each Party     25        9.2   Client Warranties     25        9.3   Patheon Warranties     26        9.4   Debarred Persons     27        9.5   Permits     27        9.6   Compliance with Laws     28        9.7   No Other Warranty     28                 ARTICLE 10. REMEDIES AND INDEMNITIES     28                      10.1   Consequential Damages     28        10.2   Limitation of Liability     28        10.3   Patheon     29        10.4   Client     30        10.5   Indemnification Procedure     30                 ARTICLE 11. CONFIDENTIALITY     31                      11.1   Confidentiality     31        11.2   Exceptions     32        11.3   Authorized Disclosure     32        11.4   Return of Confidential Information     33        11.5   Equitable Relief     33                 ARTICLE 12. DISPUTE RESOLUTION     33                      12.1   Commercial Disputes     33        12.2   Technical Dispute Resolution     34                 ARTICLE 13. MISCELLANEOUS     34                      13.1   Inventions     34        13.2   Intellectual Property     35        13.3   Insurance     35   - ii - --------------------------------------------------------------------------------                      13.4   Independent Contractors     36        13.5   Trademarks     36        13.6   No Waiver     36        13.7   Assignment     36        13.8   Force Majeure     37        13.9   Additional Product     37        13.10   Notices     37        13.11   Severability     38        13.12   Entire Agreement     39        13.13   Other Terms     39        13.14   No Third Party Benefit or Right     39        13.15   Execution in Counterparts     39        13.16   Governing Law     39   - iii - --------------------------------------------------------------------------------   MANUFACTURING SERVICES AGREEMENT           THIS MANUFACTURING SERVICES AGREEMENT (the “Agreement”) made as of the 1st day of February 2006. B E T W E E N:           PATHEON PHARMACEUTICALS INC.,     a corporation existing under the laws of Delaware,           (hereinafter referred to as “Patheon”), - and -           SOMAXON PHARMACEUTICALS, INC.,     a corporation existing under the laws of Delaware,           (hereinafter referred to as the “Client”).           THIS AGREEMENT WITNESSES THAT in consideration of the rights conferred and the obligations assumed herein, and for other good and valuable consideration (the receipt and sufficiency of which are acknowledged by each party), and intending to be legally bound the parties agree as follows: ARTICLE 1. INTERPRETATION 1.1 Definitions. The following terms shall, unless the context otherwise requires, have the respective meanings set out below and grammatical variations of such terms shall have corresponding meanings: “Act” means the Federal Food, Drug, and Cosmetic Act, together with any regulation promulgated thereunder, including without limitation cGMPs, in each case as amended from time to time; “Active Materials” means the materials listed on Schedule E hereto; “Active Materials Reimbursement Value” means the value attributable to the Active Materials for certain purposes of this Agreement, as set forth in Schedule E hereto; “ANDA” shall have the meaning ascribed thereto in Section 7.8(d);   --------------------------------------------------------------------------------   “Adverse Experience” shall mean any side effect, injury, toxicity, sensitivity reaction, unexpected incidence, untoward medical occurrence or other adverse event or experience associated with the use of the Products, including, but not limited to, a “serious adverse event” within the meaning of 21 C.F.R. § 314.80(a), as amended from time to time; “Affiliate” means:   (a)   a business entity which owns, directly or indirectly, a controlling interest in a party to this Agreement, by stock ownership or otherwise; or     (b)   a business entity which is controlled by a party to this Agreement, either directly or indirectly, by stock ownership or otherwise; or     (c)   a business entity, the controlling interest of which is directly or indirectly common to the majority ownership of a party to this Agreement;     (d)   For the purposes of this definition, “control” means the ownership of shares carrying at least a majority of the votes in respect of the election of the directors of a corporation; “Agreement” shall have the meaning ascribed thereto in the preamble; “Applicable Laws” means all Laws to the extent applicable to the subject matter of, or the performance by the parties of their respective obligations under, this Agreement, including, but not limited to, (i) with respect to Patheon, the Act and any other Laws of all jurisdictions where the Products are manufactured, and (ii) with respect to Client, the Laws of all jurisdictions where the Products are manufactured, distributed and marketed; “Annual Report” means the annual report as described in 21 CFR, Section 314.81(b)(2); “Annual Product Review Report” means the annual product review report as described in 21 CFR, Section 211.180(e); “Authority” means any governmental or regulatory authority, department, body or agency or any court, tribunal, bureau, commission or other similar body, whether federal, state, provincial, county or municipal, including, but not limited to, the FDA; “Broader Intellectual Property Rights” shall have the meaning ascribed thereto in Section 13.1(c); - 2 - --------------------------------------------------------------------------------   “Business Day” means a day other than a Saturday, Sunday or a day that is a statutory holiday in the State of Ohio or State of California; “cGMPs” means current good manufacturing practices as described in Parts 210 and 211 of Title 21 of the United States’ Code of Federal Regulations, together with the latest FDA guidance documents pertaining to manufacturing and quality control practice, all as updated, amended and revised from time to time, including, but not limited to, the FDA’s Guidance for Industry, Manufacturing, Processing or Holding Active Pharmaceutical Ingredients; “CMC” shall have the meaning ascribed thereto in Section 7.8(d); “Certificate of Analysis” means (a) the certificate of analysis confirming the identity, strength, quality and purity of each batch of finished Product to which it pertains; “Client” shall have the meaning ascribed thereto in the preamble; “Commencement Date” means the first day upon which the Manufacturing Services shall commence; “Components” means, collectively, all packaging components, raw materials and ingredients (including labels, product inserts and other labeling for the Products), required to be used in order to produce the Products in accordance with the Specifications, including the Active Materials; “Confidential Information” shall have the meaning ascribed thereto in Section 11.1; “Deficiency Notice” shall have the meaning ascribed thereto in Section 6.1(a); “Disclosing Party” shall have the meaning ascribed thereto in Section 11.1; “FCA” means free carrier, as that term is defined in INCOTERMS 2000 published by the International Chamber of Commerce; “FDA” means the United States government agency known as the United States Food and Drug Administration, and any successor thereto; “Firm Orders” has the meaning specified in Section 5.1(b); “Force Majeure Event” shall have the meaning ascribed thereto in Section 13.8; “Indemnitor” shall have the meaning ascribed thereto in Section 10.5(a); - 3 - --------------------------------------------------------------------------------   “Indemnitee” shall have the meaning ascribed thereto in Section 10.5(a); “Initial Term” shall have the meaning ascribed thereto in Section 8.1; “Intellectual Property” includes, without limitation, rights in patents, patent applications, formulae, trade-marks, trade-mark applications, trade-names, Inventions, copyright and industrial designs; “Invention” means information relating to any invention, innovation, improvement, development, discovery, computer program, device, trade secret, method, know-how, process, technique or the like, whether or not written or otherwise fixed in any form or medium, regardless of the media on which it is contained and whether or not patentable or copyrightable; “Inventory” means all inventories of Components and work-in-process produced or held by Patheon or its Affiliates in connection with the manufacture of the Products, including, but not limited to, the Active Materials; “Late Shipment” shall have the meaning ascribed thereto in Section 6.1(d); “Laws” means all laws, statutes, ordinances, regulations, rules, by-laws, judgments, decrees or orders of any Authority, including, but not limited to, the Act and cGMPs; “Manufacturing Services” means the manufacturing, quality control, quality assurance and stability testing, packaging and related activities of Patheon, as contemplated in this Agreement, required to produce Products from Active Materials and Components; “Manufacturing Site” means the facility owned and operated by Patheon that is located at 2110 East Galbraith Road, Cincinnati, Ohio, USA 45237; “Minimum Run Quantity” means the minimum number of batches, bottles or blisters of a Product to be produced during the same cycle of manufacturing as set forth in Schedule C hereto; “NDA” shall have the meaning ascribed thereto in Section 7.8(d); “Patheon” shall have the meaning ascribed thereto in the preamble; “Patheon Manufacturing Responsibilities” means Patheon’s responsibilities and obligations with respect to the provision of Manufacturing Services as set forth in Section 2.2; - 4 - --------------------------------------------------------------------------------   “Process Specifications” means clauses (a), (b), (c) and (d) of the definition of Specifications; “Products” means the products listed on Schedule A hereto; “Product Claims” shall have the meaning ascribed thereto in Section 10.2; “Product Quality Complaint” is defined as any complaint that questions the purity, identity, potency or quality of the Product, its packaging, or labeling, or any complaint that concerns any incident that causes the Product or its labeling to be mistaken for, or applied to, another article or any bacteriological contamination, or any significant chemical, physical, or other change or deterioration in the distributed Product, or any failure of one or more distributed batches of the Product to meet the Specifications therefor. “Quality Agreement” means the agreement entered into between the parties hereto setting out the quality assurance standards to be applicable to the Manufacturing Services provided by Patheon, attached hereto as Schedule H; “Recall” shall have the meaning ascribed thereto in Section 6.2(a); “Receiving Party” shall have the meaning ascribed thereto in Section 11.1; “Short Shipment” shall have the meaning ascribed thereto in Section 6.1(d); “Specifications” means the file, for each Product, which is approved by the Client in accordance with the procedures listed in Schedule B hereto and which contains documents relating to such Product, including, without limitation:   (a)   specifications for Active Materials and Components;     (b)   manufacturing specifications, directions and processes;     (c)   storage requirements;     (d)   all environmental, health and safety information relating to the Product including material safety data sheets;     (e)   the finished Product specifications, packaging specifications and shipping requirements for each Product, including, but not limited to, any requirements set forth in the applicable regulatory filings made with the FDA or other Authority (e.g., the NDA and/or ANDA) and provided by Client to Patheon; - 5 - --------------------------------------------------------------------------------   all as updated, amended and revised from time to time by the Client in accordance with the terms of this Agreement; “Technical Dispute” has the meaning specified in Section 12.2; “Territory” shall mean (i) [***] and (ii) any additional country(ies) and/or commonwealths, territories and possessions which the Client may later designate in its sole discretion in an addendum to this Agreement; provided that the Client shall bear all incremental costs, including, but not limited to labeling costs, associated with the manufacture of the Product for such additional country(ies) and/or commonwealths, territories and possessions in amounts to be agreed by the parties; “Third Party Rights” means the Intellectual Property of any third party; “Year” means a calendar year, except that the first “Year” of this Agreement shall be deemed to be the period from the Commencement Date up to and including December 31, 2007; 1.2 Currency. Unless otherwise indicated, all monetary amounts are expressed in this Agreement in the lawful currency of the United States of America. 1.3 Sections and Headings.           The division of this Agreement into Articles, Sections, subsections and Schedules and the insertion of headings are for convenience of reference only and shall not affect the interpretation of this Agreement. Unless otherwise indicated, any reference in this Agreement to a Section or Schedule refers to the specified Section or Schedule to this Agreement. In this Agreement, the terms “this Agreement”, “hereof”, “herein”, “hereunder” and similar expressions refer to this Agreement and not to any particular part, Section, Schedule or the provision hereof. 1.4 Singular Terms.           Except as otherwise expressly provided herein or unless the context otherwise requires, all references to the singular shall include the plural and vice versa. 1.5 Schedules.           The following Schedules are attached to, incorporated in and form part of this Agreement:                   Schedule A   -   Products     Schedule B   -   Procedure for Shipment & Acceptance of Product Specifications   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 6 - --------------------------------------------------------------------------------                     Schedule C   -   Minimum Run Quantity, Annual Volume & Fees     Schedule D   -   Stability Testing     Schedule E   -   Active Materials & Active Materials Reimbursement Value     Schedule F   -   Batch Numbering & Expiration Dates     Schedule G   -   Technical Dispute Resolution     Schedule H   -   Quality Agreement     Schedule I   -   Product Bill of Materials ARTICLE 2. PATHEON’S MANUFACTURING SERVICES 2.1 Manufacturing Services.           During the term of this Agreement, Patheon shall manufacture and supply, in accordance with the provisions of this Agreement, all quantities of the Products ordered by the Client consistent with Article 5, and shall provide such Manufacturing Services for the Territory for the fees specified in Schedules C and D. The Client shall purchase at least (i) [***]% of its requirement of Products of between [***] tablets per Year; and (ii) [***]% of its requirement of Products of greater than [***] tablets per Year for sale in the Territory from Patheon pursuant to the terms of this Agreement; provided, however, that such purchase requirements shall be prorated for the first Year to the extent the first Year is less than a complete calendar year. In providing the Manufacturing Services, the Client and Patheon agree that:           (a) Conversion of Active Materials and Components. Patheon shall convert Active Materials and Components into Products.           (b) Quality Control and Quality Assurance. Patheon shall perform the quality control and quality assurance testing specified in the Quality Agreement. Each time Patheon ships Products to the Client, it shall provide the Client with a Certificate of Analysis that sets out the test results for each batch of Products, and that certifies that such batch has been evaluated by Patheon’s Quality Control/Quality Assurance department and that the Products comply with the Specifications.           (c) Components. Patheon shall purchase and test all Components (with the exception of those that are supplied by the Client) at Patheon’s expense and as specified by the Specifications.           (d) Active Materials. [***] shall purchase the Active Materials in sufficient quantities and at such times as may be necessary to provide the Manufacturing Services by Patheon hereunder. [***] shall bear the risk of loss of the Active Materials while in transit from the supplier and thereafter until incorporated into Products and deemed shipped to the Client   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 7 - --------------------------------------------------------------------------------   under Section 5.4. Patheon shall test the Active Materials at [***] expense and as specified by the Specifications.           (e) Stability Testing. Patheon shall conduct stability testing on the Products in accordance with the protocols set out in the Specifications for the separate fees specified in Schedule D. Patheon shall not make any changes to these testing protocols without prior written approval from the Client. In the event that any batch of Products fails stability testing, (i) Patheon shall investigate and confirm that all analytical methods have been properly applied and, if applicable, corrected, and (ii) Patheon and the Client shall jointly determine the proceedings and methods to be undertaken to investigate the causes of such failure, including which party shall bear the cost of such investigation, provided that, subject to Section 10.2, Patheon shall be liable for such costs if the failure is attributable to Patheon’s failure to provide the Manufacturing Services in accordance with the Specifications or cGMPs. Patheon will provide any and all data and results relating to the stability testing upon request by the Client.           (f) Packaging. Patheon shall package the Products with labels, product inserts and other packaging as set out in the Specifications. The Client shall be responsible for the cost of artwork development. In addition, Patheon shall make arrangements for and implement the imprinting of batch numbers and expiration dates for each Product shipped. Such batch numbers and expiration dates shall be affixed on the Products and on the shipping carton of each Product as outlined in the Specifications and as required by cGMPs. The system used by Patheon for batch numbering and expiration dates is detailed in Schedule F hereto. The Client may, in its sole discretion, make changes to labels, product inserts and other packaging for the Products, which changes shall be submitted by the Client to all applicable Agencies and other third parties responsible for the approval of the Products. The Client shall be responsible for the cost of labeling obsolescence when changes occur. Patheon’s name shall not appear on the label or anywhere else on the Products unless: (i) required by any Laws; or (ii) Patheon and the Client expressly consent to such use of Patheon’s name in writing.           (g) Storage. Until finished Products are shipped, Patheon shall store all such Products identifiably distinct from any other raw material and finished or filled product stocks and shall comply with all storage requirements set forth in the Specifications and all Applicable Laws, including, but not limited to, cGMPs. Patheon shall assume responsibility for any loss or damage to such finished Product while stored by Patheon.           (h) Facility. Patheon will manufacture, test, perform quality control and package the Product at the Manufacturing Site. Patheon shall not manufacture, test, perform quality control or package any Product in any other facility without first obtaining the Client’s prior written consent.           (i) Product Rejection for Process Failure. The parties acknowledge that at the time of execution of this Agreement the Product is in development. Prior to packaging any bulk   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 8 - --------------------------------------------------------------------------------   finished Product, Patheon shall test each batch of bulk finished Product for compliance with the finished Product Specifications (excluding packaging-related specifications). In the event any nonconforming Product is observed in connection with such testing procedures, Patheon shall promptly suspend the packaging of the applicable batch, notify Client in writing, and consult with Client with respect to available alternatives.           If Patheon manufactures Products in accordance with the Process Specifications and a batch or portion of a batch does not meet a finished Product Specification, [***] shall [***] for its [***], any [***], and any [***]. 2.2 Standard of Performance.           Patheon shall provide the Manufacturing Services in accordance with the Specifications, cGMPs and Applicable Laws. ARTICLE 3. CLIENT’S OBLIGATIONS 3.1 Payment.           Pursuant to the terms of this Agreement, the Client shall pay Patheon for the provision of the Manufacturing Services according to the fees specified in Schedules C and D hereto (such fees being subject to adjustment in accordance with the terms hereof). ARTICLE 4. CONVERSION FEES AND COMPONENT COSTS 4.1 [***] Pricing.           The fees for the Manufacturing Services (including Component costs) for the [***] are listed in Schedules C and D and the fees for the Manufacturing Services ([***]) are intended by the parties to be [***] for the [***] of this Agreement, subject to the adjustments set forth in Section 4.3. 4.2 Price Adjustments — Subsequent Years’ Pricing.           The fees for the Manufacturing Services provided pursuant to the terms of this Agreement for any Year beginning after the [***] Year under this Agreement shall be determined in accordance with the following:           (a) Manufacturing and Component Costs. At the [***] and [***] of this Agreement, Patheon shall be entitled to request an adjustment to the fees (i) for Manufacturing Services in respect of the Products to reflect inflation, which adjustment shall not exceed [***],   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 9 - --------------------------------------------------------------------------------   unless the parties otherwise agree in writing; and (ii) for Component costs to [***] any increase or decrease in such costs; provided, however, that in the event any proposed increase in the cost of a Component exceeds [***]% of the cost for that Component upon which the most recent fee quote was based, Patheon shall use its commercially reasonable efforts to locate an equivalent alternative lower cost supplier for the applicable Component. Notwithstanding the foregoing, to the extent costs for Components decrease in the [***] or any [***] of this Agreement, Patheon shall pass on to the Client [***] of any decrease in such costs.           (b) Pricing Basis. The Client acknowledges that the fee for Manufacturing Services in respect of a Product in any Year is quoted based upon the Minimum Run Quantity per Product specified in Schedule C and is subject to change if the specified Minimum Run Quantity is revised. For greater certainty, if Patheon and the Client agree that the Minimum Run Quantity in respect of a Product shall be increased or decreased and, as a result of such increase or decrease, Patheon’s fees for services relating to such Product decrease or increase on a per unit basis, then if such revised Minimum Run Quantity is not otherwise contemplated in Schedule C, Patheon shall be entitled to a decrease or increase in the fee for Manufacturing Services in respect of such Product by an amount sufficient to pass on to the Client the cost savings or to absorb, but not exceed, such increased costs, as the case may be. When the volume reaches the upper tiers contemplated in Schedule C, the Client will need to select which option Patheon is to follow, i.e. small batch size and two (2) batches per campaign or one (1) large batch per campaign. Batch sizes will not be varied on an order by order basis. 4.3 Mid-Year Pricing           During any Year of this Agreement, Patheon shall be entitled to request an adjustment to the fees for Component costs (i) to pass on the actual amount of any increase or decrease in such costs; and (ii) if at any time market conditions result in Patheon’s cost of Components being materially greater than normal forecasted increases, then Patheon shall be entitled to request an adjustment to the fee for Manufacturing Services in respect of any affected Product to compensate it for such increased Component costs; provided, however, that in the event any proposed increase in the cost of a Component exceeds [***]% of the cost for that Component upon which the most recent fee quote was based, Patheon shall use its commercially reasonable efforts to locate an equivalent alternative lower cost supplier for the applicable Component. For the purposes of this Section 4.3, changes materially greater than normal forecasted increases shall be considered to have occurred if: (i) the cost of a Component increases by [***]% of the cost for that Component upon which the most recent fee quote was based; or (ii) the aggregate cost for all Components required to manufacture a Product increases by [***]% of the total Component costs for such Product upon which the most recent fee quote was based. To the extent that Component costs have been previously adjusted pursuant to clause (a) of Section 4.2 or this Section 4.3 to reflect an increase in the cost of one or more Components, the adjustments provided for in (i) and (ii) above shall operate based on the costs   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 10 - --------------------------------------------------------------------------------   attributed to such Component (or Components) at the time the last of such adjustments were made. 4.4 Fee Adjustment Procedure           In connection with all fee adjustment requests pursuant to this Article 4, Patheon shall deliver to the Client by not later than November 1st of each Year a revised Schedule C in draft form and such budgetary pricing information or other documentation (including the [***] in the case of any adjustment request pertaining to fees for Manufacturing Services and, the adjusted Component costs) reasonably sufficient to demonstrate that a fee adjustment is justified. Upon delivery of such a request, each of the Client and Patheon shall forthwith use all reasonable efforts to agree on a revised fee for the Manufacturing Services in respect of each affected Product and Schedule C shall be amended accordingly. Such revised fee shall be effective with respect to any Product delivered after the end of the then current Year. 4.5 Adjustments Due to Technical Changes.           Amendments to the Specifications or the Quality Agreement requested by the Client will only be implemented following a technical and cost review by Patheon and are subject to the Client and Patheon reaching agreement as to revisions, if any, to the fees specified in Schedules C or D necessitated by any such amendment. If the Client accepts a proposed fee change, the proposed change in the Specifications shall be implemented, and the fee change shall become effective only with respect to those orders of Products that are manufactured in accordance with the revised Specifications. In addition, the Client agrees to purchase, at Patheon’s cost therefor (including all costs incurred by Patheon in connection with the purchase and handling of such Inventory), all Inventory utilized under the “old” Specifications and purchased or maintained by Patheon in order to fill Firm Orders or in accordance with Section 5.2, to the extent that such Inventory can no longer be utilized under the revised Specifications. Open purchase orders for Components no longer required under any revised Specifications that were placed by Patheon with suppliers in order to fill Firm Orders or in accordance with Section 5.2 shall be cancelled where possible, and where such orders are not subject to cancellation without penalty, shall be assigned to and satisfied by the Client. 4.6 Multi-Country Packaging Requirements.           If and when the Client decides that it wishes to have Patheon manufacture the Product for countries in the Territory in addition to [***], then the Client shall inform Patheon of the packaging requirements for each new country and Patheon shall prepare a quotation for consideration by the Client of the additional Component costs, if any, and the change over fees for the Product destined for such new country. The agreed additional packaging requirements and related packaging costs and change over fees shall be set out in a written amendment to this Agreement.   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 11 - --------------------------------------------------------------------------------   ARTICLE 5. ORDERS, SHIPMENT, INVOICING, PAYMENT 5.1 Orders and Forecasts.           (a) Rolling Forecasts. Concurrent with the execution of this Agreement, the Client shall provide Patheon with a written non-binding 12 month forecast of the volume of each Product that the Client then anticipates will be required to be produced and delivered to the Client during each month of the 12 month period thereafter. Such forecast will be updated by the Client monthly on or before the 10th day of the month on a rolling 12 month basis and updated promptly after such time as the Client determines that the volumes contemplated in the most recent of such forecasts has changed by more than [***]%. The most recent 12 month forecast shall supersede all previous forecasts.           (b) Firm Orders. On or before the 20th day of each calendar month, the Client shall issue firm written orders (“Firm Orders”) for the Products to be produced and delivered to the Client on a date not less than 90 days from the first day of the calendar month immediately following the date that the Firm Order is submitted. Such Firm Orders submitted to Patheon shall specify the Client’s purchase order number, quantities by Product type, monthly delivery schedule and any other elements necessary to ensure the timely production and shipment of the Products. The quantities of Products ordered in such Firm Orders shall be firm and binding on the Client and shall not be subject to reduction by the Client. Firm Orders submitted by the Client pursuant to this Section 5.1 must be accepted by Patheon and shall be automatically firm and binding on Patheon if they are not more than [***]% of the amount most recently forecast for the delivery period specified in the Firm Order. Patheon will use commercially reasonable efforts to manufacture Product in excess of [***]% of the amount most recently forecast for the delivery period specified in the Firm Order. Firm Orders not rejected by Patheon within three Business Days of receipt by Patheon shall be deemed to have been accepted by Patheon.           (c) Three Year Forecast. On or before the 1st day of November of each Year commencing not later than six months prior to the anticipated Commencement Date (as estimated in the Client’s reasonable judgment based on clinical development timelines and regulatory activities), the Client shall provide Patheon with a written non-binding three-year forecast (broken down by quarters for the second and third years of the forecast) of the volume of each Product the Client then anticipates will be required to be produced and delivered to the Client during the three-year period, and updated on or before the 1st day of May in each Year. 5.2 Reliance by Patheon.      The Client understands and acknowledges that Patheon will rely on the first [***] months contemplated in the most recent forecast provided by the Client pursuant to Section 5.1(a) and the Firm Orders submitted pursuant to Section 5.1(b) in ordering the Components   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 12 - --------------------------------------------------------------------------------   required to meet such Firm Orders. In addition, the Client understands that to ensure an orderly supply of such Components, it may be desirable for Patheon to purchase such Components in sufficient volumes to meet the production requirements for Products during part or all of the forecasted periods referred to in Section 5.1(a) or to meet the production requirements of any longer period agreed to by Patheon and the Client. Accordingly, the Client authorizes Patheon to purchase Components in order to satisfy the production requirements for Products for the first [***] months contemplated in the most recent forecast provided by the Client pursuant to Section 5.1(a) and agrees that Patheon may make such other purchases of Components to meet production requirements during such longer periods as may be agreed to in writing from time to time by the Client at the request of Patheon or the Client. The Client shall provide Patheon with its written authorization to order Components in respect of any launch quantities of Product requested by the Client, which upon acceptance by Patheon shall constitute a Firm Order. If Components ordered by Patheon pursuant to Firm Orders or in order to satisfy the production requirements for Products for the first [***] months contemplated in the most recent forecast provided by the Client pursuant to Section 5.1(a) are not included in finished Products purchased by the Client within [***] months after the forecasted month in respect of which such purchases have been made (or such longer period as the parties may agree), then Patheon shall promptly notify Client and the Client shall pay to Patheon [***]; provided, however, that (i) the Client shall have the option but not the obligation to take title to and possession of all or any portion of such Components by written notice to Patheon, in which case Patheon shall cooperate with the Client in the surrender, delivery and transfer of such Components as promptly as is commercially reasonable, with any shipping and related expenses to be borne by the Client, or (ii) in the event such Components are incorporated into Products subsequently purchased by the Client or into third party products manufactured by Patheon and subsequently purchased by a third party, the Client will receive credit for any costs of such Components previously paid to Patheon by the Client. Patheon shall not be obligated to provide information regarding any Component which is subject to confidentiality obligations between Patheon and its supplier. 5.3 Minimum Orders.           The Client may only order Products in multiples of the Minimum Run Quantities set out in Schedule C. 5.4 Shipments.           Shipments of Products shall be made FCA the Manufacturing Site unless otherwise mutually agreed in writing and Patheon shall make every reasonable effort to ship finished goods within [***] months of the start of manufacture of the Products unless otherwise agreed upon in writing by both parties. Failure to ship within [***] months is not a cause for refusal of Product. Notwithstanding the foregoing, if FDA approves the Products for [***] months of shelf life, the Products must carry at least [***] months of shelf life when shipped.   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 13 - --------------------------------------------------------------------------------   Risk of loss or of damage to Products shall remain with Patheon until Products are loaded onto the carrier’s vehicle by Patheon for shipment at the shipping point at which time risk of loss or damage shall transfer to the Client. Patheon shall, in accordance with the Client’s instructions and as agent for the Client, (i) arrange for shipping, including preparing and executing a packing list, so that the Product will be delivered to the delivery address on the delivery date set forth in the applicable Firm Order, with such shipping to be paid by the Client and (ii) at the Client’s risk and expense, obtain any export license or other official authorization necessary to export the Products, including all customs formalities. The Client shall arrange for insurance and shall select the freight carrier used by Patheon to ship Products and may monitor Patheon’s shipping and freight practices as they pertain to this Agreement. Patheon shall notify Client in writing at the time of shipment as to the quantity of Product shipped, the anticipated delivery date and confirmation of the carrier. If any order is delayed and is not likely to be delivered to the carrier on time, Patheon shall immediately notify Client and Client may reasonably direct Patheon to ship such order by expedited means of transportation as designated by Client, at [***] expense. If the delay of any order results in substantial back orders to the Client and Patheon caused the delay, [***] shall pay the reasonable additional cost for the expedited transport. In all cases, Products shall be transported in accordance with the Specifications and Applicable Laws, including, but not limited to, cGMPs. 5.5 Invoices and Payment.           (a) Invoices. Invoices for Products that are shipped to Client shall be sent by fax or email to such fax number or email address as may be provided by the Client in writing from time to time, but not earlier than the date of shipment of the corresponding Products. Patheon shall also submit to the Client, with each shipment of Products, a duplicate copy of the invoice covering such shipment. Patheon shall also provide the Client with an invoice covering any Inventory or Components which are to be purchased by Patheon pursuant to Section 5.2 hereof. Each such invoice shall, to the extent applicable, identify the Client purchase order number, Product numbers, names and quantities, unit price, freight charges and the total amount to be remitted by the Client.           (b) Payment. The Client shall pay undisputed amounts of all invoices within [***] days of the date of postmark or confirmed facsimile or email transmission of the invoice.           (c) Disputed Amounts. In the event that the Client disputes any amounts under any invoice for Products, such dispute shall be resolved in accordance with Section 6.1 (with respect to non-conformance of Products) or otherwise under Article 12. Pending resolution of such dispute, the Client shall be obligated to pay any amounts under such invoice that are not in dispute. Upon resolution of any such dispute in favor of Patheon, the Client shall pay all remaining amounts owing under such invoice within the later of (i) [***] Business days after such resolution or (ii) [***] days after the date of such invoice.   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 14 - --------------------------------------------------------------------------------   ARTICLE 6. PRODUCT CLAIMS; RECALLS; ADVERSE EVENTS 6.1 Product Claims.           (a) Product Claims. The Client has the right to reject and return, at the expense of Patheon, all or any portion of any shipment of Products that deviates from the Specifications or cGMPs, without invalidating any remainder of such shipment. The Client or its designated agent shall inspect the Products manufactured by Patheon upon receipt of such Products and related Certificate(s) of Analysis and shall give Patheon written notice (a “Deficiency Notice”) of all claims for Products that deviate from the Specifications or cGMPs within 30 days after the Client’s receipt of such Products and related Certificate(s) of Analysis (or, in the case of any defects not reasonably susceptible to discovery upon receipt of the Product, within 30 days after discovery thereof by the Client, but in no event after the expiration date of the Product). Should the Client fail to provide Patheon with the Deficiency Notice within the applicable 30-day period, then the delivery shall be deemed to have been accepted by the Client on the 30th day after delivery or discovery, as applicable. Except as set out in Section 6.2, Patheon shall have no liability for any deviations for which Client has failed to provide notice within the applicable 30-day period.           (b) Determination of Deficiency. Upon receipt of a Deficiency Notice, Patheon shall have 10 days to advise the Client by notice in writing that it disagrees with the contents of such Deficiency Notice. If the Client and Patheon fail to agree within 10 days after Patheon’s notice to the Client as to whether any Products identified in the Deficiency Notice deviate from the Specifications or cGMPs, then the parties shall mutually select an independent laboratory within five days from the parties’ failure to agree, which independent laboratory shall evaluate if the Products deviate from the Specifications or cGMPs. The parties shall cause the independent laboratory to conduct its evaluation as promptly as practicable, and in any event within 30 days from the date of selection of the laboratory. Such evaluation shall be binding on the parties, and if such evaluation certifies that any Products deviate from the Specifications or cGMPs, the Client may reject those Products in the manner contemplated in this Section 6.1. If such evaluation does not so certify in respect of any such Products, then the Client shall be deemed to have accepted delivery of such Products on the date the evaluation is delivered by the independent laboratory to the parties. The expenses of such testing shall be borne by Patheon if the non-conformity with the Specifications or cGMPs is confirmed by the independent laboratory, and otherwise by the Client.           (c) Patheon Responsibility. In the event the Client rejects Products in accordance with this Section 6.1 and the deviation is determined to arise from Patheon’s failure to provide the Manufacturing Services in accordance with the Specifications or cGMPs, Patheon will, at the Client’s election, either: (i) credit the Client’s account for Patheon’s invoice price to - 15 - --------------------------------------------------------------------------------   the Client for such defective Products or (ii) use its commercially reasonable efforts to replace such Products with conforming Products within [***] days’ of the Client’s rejection of the non-conforming Products; provided, however, that Patheon shall [***]. If the Client shall have previously paid for such defective Products, Patheon shall, at the Client’s election, either: (i) refund the invoice price for such defective Products within [***] days’ of the Client’s rejection of the non-conforming Products; (ii) offset such amount against other amounts due to Patheon hereunder; or (iii) use its commercially reasonable efforts to replace such Products with conforming Products within [***] days’ of the Client’s rejection of the non-conforming Products without the Client being liable for payment therefor under Section 3.1. In connection with the production of any replacement Products under this Section 6.1(c), Patheon’s cost for the procurement of any additional [***] required for the manufacture of such replacement Products shall be limited to the [***]. Nothing in this Section 6.1 shall be construed to limit the rights and remedies available to the Client at law or in equity.           (d) Shortages. Claims for shortages in the amount of Products shipped by Patheon shall be dealt with as may reasonably be agreed to by the parties. If a shipment of Products, however, contains less than [***] % of the minimum yield performance (as defined in the final Specifications and mutually agreed to by the parties) of the quantity specified in the corresponding Firm Order (the “Shortage Amount”), the Client shall notify Patheon promptly upon such discovery and, in any event, not later than 10 days after receipt of the shipment. Upon receipt of Client’s written request, Patheon shall use commercially reasonable efforts, subject to the availability of Active Materials and Components, to manufacture and ship the Shortage Amount within [***] days provided, however, that Patheon shall [***]. In the event that the Shortage Amount is less than a validated batch size as set forth in Schedule C, then Patheon shall manufacture the next highest validated batch size of the Product (“Shortage Batch”) and package the Shortage Batch, including the Shortage Amount, in accord with the Client’s written instructions. Nothing in this Section 6.1 shall be construed to limit the rights and remedies available to the Client at law or in equity. 6.2 Product Recalls and Returns.           (a) Records and Notice. Patheon and the Client shall each maintain such records as may be necessary to permit a Recall of any Products delivered to the Client or customers of the Client. Each party shall promptly notify the other by telephone (to be confirmed in writing) of any information which might affect the marketability, safety or effectiveness of the Products and/or which might result in the Recall or seizure of the Products. Upon receiving any such notice or upon any such discovery, each party shall cease and desist from further shipments of such Products in its possession or control until a decision has been made whether a Recall or some other corrective action is necessary. The decision to initiate a Recall or to take some other corrective action, if any, shall be made and implemented by the Client. “Recall” shall mean any action (i) by the Client to recover title to or possession of   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 16 - --------------------------------------------------------------------------------   quantities of the Products sold or shipped to third parties (including, without limitation, the voluntary withdrawal of Products from the market); or (ii) by any regulatory authorities to detain or destroy any of the Products. Recall shall also include any action by either party to refrain from selling or shipping quantities of the Products to third parties which would have been subject to a Recall if sold or shipped.           (b) Recalls. In the event (i) any Authority issues a directive, order or, following the issuance of a safety warning or alert with respect to a Product, a written request that any Product be Recalled, (ii) a court of competent jurisdiction orders such a Recall, or (iii) the Client determines that any Product should be Recalled or that a “dear doctor” letter is required relating the restrictions on the use of any Product, Patheon will co-operate as reasonably requested by the Client, having regard to all Applicable Laws.           (c) Product Returns. The Client shall have the responsibility for handling customer returns of the Products. Patheon shall provide the Client with such assistance as the Client may reasonably request to handle such returns.           (d) Patheon’s Responsibility. To the extent that a Recall or return results from, or arises out of, a failure by Patheon to provide the Manufacturing Services in accordance with the Specifications or cGMPs, Patheon shall be responsible for the documented out-of-pocket expenses of such Recall or return and shall promptly, at the Client’s election, either: (i) refund the invoice price for such Recalled or returned Products; (ii) offset such amount against other amounts due to Patheon hereunder; or (iii) use its commercially reasonable efforts to replace such Recalled or returned Products with conforming Products within [***] days’ of the Client’s election under this clause (d) without the Client being liable for payment therefor under Section 3.1; provided, however, that Patheon shall [***]. In all other circumstances, Recalls, returns or other corrective actions shall be made at the Client’s direction and cost and expense. In connection with the production of any replacement Products under this clause (d), Patheon’s cost for the procurement of any additional [***] required for the manufacture of such replacement Products shall be limited to the [***]. 6.3 Disposition of Defective or Recalled Products.           The Client shall not dispose of any damaged, defective, returned or Recalled Products in relation to which it intends to assert a claim against Patheon unless it has given Patheon 60 days’ notice of its intention to do so, and Patheon has not, in turn, instructed the Client to return such Products to Patheon. Patheon shall bear the cost of shipping, storage and disposition with respect to any damaged, defective, returned or Recalled Products in relation to which it bears responsibility under Section 6.1 or 6.2 hereof, and shall promptly reimburse Client for any such costs which may be incurred directly by the Client. In all other circumstances, the Client shall bear the cost of disposition with respect to any damaged, defective, returned or   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 17 - --------------------------------------------------------------------------------   Recalled Products. Notwithstanding the foregoing, the Client shall have the right at all times to retain a reasonable sample of such Products for its own archival purposes. 6.4 Customer Questions and Complaints.           The Client shall have the sole responsibility for responding to Product Quality Complaints, subject to Patheon’s obligation of cooperation and expense reimbursement set forth below. Product Quality Complaints received by Patheon from the Client’s customers shall be referred to the Client within two Business Days from the receipt thereof by Patheon. 6.5 Adverse Event Reporting.           Patheon shall notify the Client promptly and not later than 24 hours after it becomes aware of any Adverse Experience associated with the use of the Products, whether or not determined to be attributable to the Products, and whether or not deemed to be serious or non-serious. Such information shall be sent to the Client as set forth in the Quality Agreement.           If the cause of any Adverse Experience results from a failure by Patheon to provide the Manufacturing Services in accordance with the Specifications or cGMPs, Patheon shall bear all costs incurred in respect of this Section 6.5. In all other circumstances, such costs shall be borne by the Client. ARTICLE 7. CO-OPERATION 7.1 Quarterly Review.           Each party shall forthwith upon execution of this Agreement appoint one of its employees to be a relationship manager responsible for liaison between the parties. The relationship managers shall meet not less than quarterly to review the current status of the business relationship and manage any issues that have arisen. 7.2 Communication with Governmental Agencies.           The Client shall be primarily responsible for communicating with any Authority regarding such Products, including, but not limited to, the FDA and any other Authority responsible for granting regulatory approval for the Products; provided, however, that if in the opinion of Patheon’s counsel, Patheon must communicate with an Authority to comply with the terms of this Agreement or the requirements of any Applicable Laws, it may do so. Unless, in the reasonable opinion of its counsel, there is a legal prohibition against doing so, each party shall permit the other party to accompany and take part in any communications with any Authority, and to receive copies of all such communications from any Authority. - 18 - --------------------------------------------------------------------------------   7.3 Records and Accounting by Patheon.           Patheon shall keep records of the manufacture, testing and shipping of the Products, Active Materials and Components and retain samples of such Products, Active Materials and Components as are necessary to comply with all Applicable Laws, including, but not limited to, cGMPs and other manufacturing regulatory requirements applicable to Patheon, the Manufacturing Site, the Products, the Active Materials and/or the Components, as well as to assist with resolving Product complaints and other similar investigations. Copies of such records and samples shall be retained for a period of one year following the date of Product expiry, or longer if required by Applicable Laws after which Patheon may destroy such records or samples; provided that Patheon has first given the Client 60 days notice of its intention to do so and the Client has not, in turn, instructed Patheon to ship such records or samples to the Client at the Client’s expense. 7.4 Client’s Inspection of Reports and Records.           The Client may inspect Patheon reports and records relating to this Agreement during normal business hours and with reasonable advance notice, provided a Patheon representative is present during any such inspection. 7.5 Client’s Access to Manufacturing Site.           Patheon shall provide the Client with reasonable access at mutually agreeable times to its Manufacturing Site or any other facilities in which the Products are manufactured, stored, handled or shipped in order to permit the Client’s verification of Patheon’s compliance with the Patheon Manufacturing Responsibilities and with all Applicable Laws. For greater certainty, the right of access provided in this Section 7.5 shall not include a right to access or inspect Patheon’s financial records. 7.6 Government Inspection.           Patheon shall make its internal practices, books and records relating to the manufacture of the Products available and allow access to all facilities used for manufacturing the Products to the FDA and any other Authority having jurisdiction over the manufacture of the Products for the purposes of determining Patheon’s compliance with Applicable Laws, including, but not limited to, cGMPs. Patheon shall advise the Client by telephone and facsimile within one Business Day of any proposed or announced visit, audit or inspection, and as soon as possible (but in any case within two Business Days) after any unannounced visit, audit or inspection, by the FDA or any other Authority relating to the Products. Patheon shall provide the Client with a reasonable description in writing of each such visit or inspection promptly (but in no event later than five calendar days) thereafter, and with copies of any Authority-issued inspection observation reports (including, without limitation, FDA Form 483s and equivalent - 19 - --------------------------------------------------------------------------------   forms from other regulatory bodies) and Authority correspondence, purged only of confidential information that is unrelated to the Products. Patheon and the Client will cooperate in resolving any concerns with any Authority, and the Client may review Patheon’s responses to any such reports and communications, and Patheon shall in its reasonable discretion incorporate into such responses any comments received from the Client. Patheon will also inform the Client of any action taken by any Authority against Patheon or any of its officers or employees which may be reasonably expected to adversely affect the Products or Patheon’s ability to supply the Products hereunder within two Business Days after the action is taken. 7.7 Reports.           Patheon will supply on an annual basis all Product data in its control, including release test results, complaint test results and all investigations (in manufacturing, testing and storage), that the Client reasonably requires in order to complete any filing under any applicable regulatory regime, including any Annual Report that the Client is required to file with the FDA. At the Client’s request Patheon shall provide a copy of the Annual Product Review Report to the Client [***]. Any additional report requested by Client beyond the scope of cGMPs and customary FDA requirements shall [***]. 7.8 Validation and FDA Filings           (a) Validation. Patheon will validate all applicable processes, methods, equipment, utilities, facilities and computers used in the manufacture, packaging, storage, testing and release of Products in conformance with all Applicable Laws, including, but not limited to, cGMPs. Upon request, Patheon shall provide to Client a copy of the results of Product specific validation when such results are available.           (b) FDA Filings. The Client shall have the sole responsibility for filing all documents with the FDA and taking any other actions that may be required for the receipt of FDA Approval for the commercial manufacture of all of the Products. Patheon shall assist the Client, to the extent consistent with Patheon’s obligations under this Agreement, including, but not limited to, the obligations under clause (a) of this Section 7.8 above, to obtain FDA Approval for the commercial manufacture of all Products as quickly as reasonably possible. Copies of all relevant CMC (as hereinafter defined) submissions and any related FDA correspondence are to be provided to Patheon by the Client.           (c) Verification of Data. At least 14 days prior to filing any documents with the FDA that incorporate data generated by Patheon, the Client shall provide Patheon with a copy of the documents incorporating such data so as to give Patheon the opportunity to verify the accuracy and regulatory validity of such documents as they relate to the Patheon generated data.   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 20 - --------------------------------------------------------------------------------             (d) Verification of CMC. At least 14 days prior to filing with the FDA the Chemistry and Manufacturing Controls (“CMC”) of the New Drug Application (“NDA”) or the Abbreviated New Drug Application (“ANDA”) filing, as the case may be, the Client shall provide Patheon with a copy of the CMC portion as well as any supporting documents which have been relied upon to prepare the CMC portion so as to permit Patheon to verify that the CMC portion accurately describes the work that Patheon has performed and the manufacturing processes that Patheon will perform pursuant to this Agreement. Notwithstanding the foregoing, the Client may omit from the materials provided to Patheon any CMC portion and supporting documents which have been previously provided by Patheon to the Client and which have not been modified or edited by the Client.           (e) Pre-Approval Inspection. If Client does not provide Patheon with the documentation requested under paragraphs (c) and (d) above within the time stipulated in these paragraphs and if Patheon reasonably believes that Patheon’s standing with the FDA may be jeopardized, [***].           (f) Comments. Within 10 days of Patheon’s receipt from the Client of any documents under paragraphs (c) and (d) above, Patheon shall provide any comments it may have on such documents in writing to the Client, including any alleged inaccuracies or deficiencies, and representatives of the parties shall cooperate in good faith with one another over the following four-day period to address the comments and revise the materials accordingly.           (g) Deficiencies. In the event the representatives of the parties fail to agree upon the resolution of any alleged inaccuracies or deficiencies within such four-day period, the program directors or equivalent executives of each of Patheon and the Client shall meet as promptly as possible to discuss and attempt to resolve the dispute. If the program directors or equivalent executive are unable to resolve the dispute (or otherwise fail to meet) within the following 10-day period, then the parties will submit the dispute to an independent scientific mediator mutually selected by the parties. None of such mediator candidates may have been previously employed or otherwise received compensation from either the Client or Patheon except pursuant to any earlier dispute between Client and Patheon. The selected mediator shall hold any proceedings deemed necessary and make his or her findings within 30 days of his or her selection. The findings of the mediator shall be conclusive and binding upon the parties for purposes of any subsequent submissions to the Regulatory Authority and the parties shall thereafter cooperate with one another in connection with any pre-approval inspection by the FDA that may follow. All out-of-pocket costs relating to the dispute resolution process, including the mediator’s fees and expenses, shall be borne solely by the unsuccessful party or as otherwise determined by the mediator.           (h) Client Responsibility. For clarity, the parties agree that in reviewing the documents referred to in paragraphs (c) and (d) above, Patheon’s role will be limited to verifying   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 21 - --------------------------------------------------------------------------------   the accuracy of the description and documentation of the work undertaken or to be undertaken by Patheon. As such, Patheon shall not assume any responsibility for the accuracy of the NDA or the ANDA, as the case may be. The sole responsibility of the preparation and filing of the NDA shall be borne by the Client. ARTICLE 8. TERM AND TERMINATION 8.1 Initial Term.           This Agreement shall become effective as of the date of execution hereof by both parties and shall continue until the date that is five Years from the Commencement Date (the “Initial Term”), unless terminated earlier by one of the parties in accordance herewith. This Agreement shall automatically continue after the Initial Term for successive terms of 12 months each unless either party gives written notice to the other party of its intention to terminate this Agreement at least 18 months prior to the end of the then current term. 8.2 Termination for Cause.           (a) Either party at its sole option may terminate this Agreement upon written notice in circumstances where the other party has failed to remedy a material breach of any of its representations, warranties or other obligations under this Agreement within 60 days following receipt of a written notice of said breach that expressly states that it is a notice under this Section 8.2(a).           (b) Either party at its sole option may immediately terminate this Agreement upon written notice, but without prior advance notice, to the other party in the event that: (i) the other party is declared insolvent or bankrupt by a court of competent jurisdiction; (ii) a voluntary petition of bankruptcy is filed in any court of competent jurisdiction by such other party; or (iii) this Agreement is assigned by such other party for the benefit of creditors.           (c) The Client may terminate this Agreement as to any Product upon 30 days’ prior written notice in the event that any Authority takes any action, or raises any objection, that prevents the Client from importing, exporting, purchasing or selling such Product. 8.3 Product Partnering.           The Client may, at its sole option, terminate this Agreement upon 12 months’ prior written notice to Patheon in connection with the Client’s partnering, collaboration, licensing, sublicensing, co-promotion, sale or divestiture of rights to any Product; provided, however, that no such termination shall be effective prior to the 36th month anniversary of the Commencement Date of this Agreement. - 22 - --------------------------------------------------------------------------------   8.4 Product Discontinuation.           The Client shall provide at least [***] months’ advance notice if it intends to no longer order a Product due to that Product’s discontinuance in the market. 8.5 Obligations on Termination.           If this Agreement expires or is terminated in whole or in part for any reason, then (in addition to any other remedies either party may have in the event of default by the other party):           (a) Patheon shall cease the manufacture of Products and shall terminate any unfilled orders with third parties that Patheon may have previously submitted with respect to Active Materials and Components to the extent such orders may be terminated or revoked;           (b) the Client shall take delivery of and pay for all undelivered Products that are manufactured and/or packaged pursuant to a Firm Order, at the price in effect at the time the Firm Order was placed; provided that no such payment shall be due from the Client if this Agreement is terminated by Client pursuant to Section 8.2(a), including, but not limited to, termination for Patheon’s failure to provide Manufacturing Services in respect of such undelivered Products in accordance with the Specifications and cGMPs;           (c) the Client shall purchase, at Patheon’s [***] costs ([***] in connection with the purchase and handling of such Inventory), the Inventory applicable to the Products which was purchased, produced or maintained by Patheon in contemplation of filling Firm Orders or in accordance with Section 5.2 prior to notice of termination being given; provided that no such payment shall be due from the Client if this Agreement is terminated by Client pursuant to Section 8.2(a), including, but not limited to, termination for Patheon’s failure to provide Manufacturing Services in accordance with the Specifications and cGMPs;           (d) the Client shall satisfy the purchase price payable pursuant to Patheon’s orders with suppliers of Components, provided such orders were made by Patheon in reliance on Firm Orders or in accordance with Section 5.2; provided that no such payment shall be due from the Client if this Agreement is terminated by Client pursuant to Section 8.2(a), including, but not limited to, termination for Patheon’s failure to provide Manufacturing Services in accordance with the Specifications and cGMPs;           (e) if this Agreement is terminated by Client pursuant to Section 8.2(a), including, but not limited to, termination for Patheon’s failure to provide Manufacturing Services in accordance with the Specifications and cGMPs, the Client shall have the option but not the obligation to take title to, possession of, all of any (i) undelivered Products and (ii) Inventory, including, but not limited to Active Materials and/or Components, in each case only after the   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 23 - --------------------------------------------------------------------------------   Client has made any payment(s) which may be required under this Section 8.5 above, and Patheon shall cooperate with the Client in the surrender, delivery and transfer of such items as promptly as is commercially reasonable, with any shipping and related expenses to be borne by [***];           (f) if this Agreement is terminated for any reason other than pursuant to Section 8.2(a), the Client shall have the obligation to take title to, possession of, all of any (i) undelivered Products and (ii) Inventory, including, but not limited to Active Materials and/or Components, in each case only after the Client has made any payment(s) which may be required under this Section 8.5 above, and Patheon shall cooperate with the Client in the surrender, delivery and transfer of such items as promptly as is commercially reasonable, with any shipping and related expenses to be borne by [***];           (g) upon the request of the Client, and at the Client’s expense, Patheon shall provide such assistance as is reasonably necessary to assist the Client in transferring the manufacture of the Product to another facility; provided, however, no competitor of Patheon shall be permitted to have access to the Manufacturing Site; and           (h) upon the request of the Client, Patheon shall cooperate in the technology transfer of the manufacture of the Products to a third-party supplier/manufacturer selected by the Client in its sole discretion. In furtherance of the technology transfer, Patheon shall make its employees and other internal resources reasonably available to the Client and the designated third-party supplier/manufacturer and provide copies of all technology, documents, data and other information constituting manufacturing know-how or otherwise necessary for regulatory qualification of the successor manufacturing process. Any such third-party supplier/ manufacturer that the Client may designate to manufacture the Products shall be required to sign a customary and appropriate confidentiality agreement with Patheon with respect to the nondisclosure and use of any such manufacturing know-how or other confidential information transferred. With respect to all documents, data and other information provided in connection with the technology transfer, (i) Patheon shall be responsible for the cost of providing a single copy only; and (ii) in addition to paper and other tangible copies, Patheon shall, upon the Client’s request, also provide to the Client and/or the third-party supplier/manufacturer electronic copies of such documents, data and other information, provided, that, Patheon or its affiliates have electronic copies thereof, and provided, further, that Patheon shall have no obligation to reformat or otherwise alter or modify any such electronic materials. Notwithstanding the foregoing, no competitor of Patheon shall be permitted to have access to the Manufacturing Site without Patheon’s written consent. In order to facilitate the technology transfer contemplated hereby, Patheon shall provide to the Client the services of at least the equivalent of [***] full-time equivalent (“FTE”) [***]. In addition to the foregoing FTE, the Client shall reimburse Patheon for its costs associated with the transfer of technology contemplated by this subsection (h) unless the transfer is in connection with the termination of this Agreement by the Client pursuant to   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 24 - --------------------------------------------------------------------------------   Section 8.2(a), including, but not limited to, termination for Patheon’s failure to provide Manufacturing Services in accordance with the Specifications and cGMPs. Any termination or expiration of this Agreement shall not affect any outstanding obligations or payments due hereunder prior to such termination or expiration, nor shall it prejudice any other remedies that the parties may have under this Agreement. For greater certainty, termination of this Agreement for any reason shall not affect the obligations and responsibilities of the parties pursuant to Sections 6.2, 6.3, 6.4, 6.5, 7.2, 7.3, 7.4, 7.6, 7.7, 8.5, Articles 10, 11 and 12 and Sections 13.1, 13.2, 13.3, 13.4, 13.5, 13.6, 13.7, 13.11 and 13.16, all of which survive any termination. ARTICLE 9. REPRESENTATIONS, WARRANTIES AND COVENANTS 9.1 Each Party.           Each party covenants, represents and warrants that:           (a) it has the full right and authority to enter into this Agreement, and that it is not aware of any impediment that would inhibit its ability to perform its obligations hereunder;           (b) this Agreement has been duly executed and delivered by, and is a legal and valid obligation binding upon such party, subject to the effects of bankruptcy, insolvency, or other laws of general application affecting the enforcement of creditor rights and judicial principles affecting the availability of specific performance and general principles of equity, whether enforceability is considered a proceeding at law or equity; and           (c) the entry into, the execution and delivery of, and the carrying out and other performance of its obligations under this Agreement by such party (i) does not conflict with, or contravene or constitute any default under, any agreement, instrument or understanding, oral or written, to which it is a party, including, but not limited to, its certificate of incorporation or by-laws, and (b) does not violate Applicable Laws or any judgment, injunction, order or decree of any Authority having jurisdiction over it. 9.2 Client Warranties.           The Client covenants, represents and warrants that:           (a) the Specifications for each of the Products are its or its Affiliate’s property and that the Client may lawfully disclose the Specifications to Patheon; - 25 - --------------------------------------------------------------------------------             (b) any Intellectual Property included in the Specifications or otherwise provided to Patheon by the Client to be utilized by Patheon and in connection with the provision of the Manufacturing Services, other than Patheon Intellectual Property, (i) is the Client’s or its Affiliate’s unencumbered property, (ii) may be lawfully used as directed by the Client, and (iii) such use does not infringe and will not infringe any Third Party Rights;           (c) to the knowledge of the Client, the provision of the Manufacturing Services by Patheon in respect of any Product pursuant to this Agreement or use or other disposition of any Product by Patheon as may be required to perform its obligations under this Agreement does not and will not infringe any Third Party Rights;           (d) the Client is not aware of any pending or threatened claims against the Client, the subject of which is the infringement of Third Party Rights related to any of the Specifications, or any of the Active Materials and the Components, or the sale, use or other disposition of any Product made in accordance with the Specifications;           (e) following approval by the applicable Authority, the Specifications for all Products will conform to all Applicable Laws, including, without limitation, cGMPs; and           (f) the Products, if labeled and manufactured in accordance with the Specifications and in compliance with Applicable Laws, including, without limitation cGMPs, (i) may be lawfully sold and distributed in every jurisdiction in which the Client markets such Products, (ii) will be fit for the purpose intended, and (iii) will be safe for human consumption. 9.3 Patheon Warranties.           Patheon covenants, represents and warrants that:           (a) it shall perform the Manufacturing Services in accordance with the Specifications and cGMPs;           (b) it has and will maintain throughout the term of this Agreement, the expertise, with respect to personnel and equipment, to fulfill the obligations established hereunder, and has obtained all requisite material licenses, authorizations and approvals required by all Authorities to manufacture the Products;           (c) the Manufacturing Site, all other facilities, all equipment and all personnel to be employed by Patheon in rendering the Manufacturing Services are currently, and will be at the time each batch of Products is produced, qualified in accordance with all Applicable Laws, including, but not limited to, cGMPs; - 26 - --------------------------------------------------------------------------------             (d) there are no pending or uncorrected citations or adverse conditions noted in any inspection of the Manufacturing Site or any other facilities to be employed by Patheon in rendering the Manufacturing Services which would cause the Products to be misbranded or adulterated within the meaning of the Act, including, but not limited to, all cGMPs;           (e) to the knowledge of Patheon, the Manufacturing Services and the contributions of Patheon to the manufacture of the finished Product in accordance with this Agreement do not and will not infringe any Third Party Rights provided, however, that Patheon does not warrant against infringement attributable to the finished Product which, when used together with Patheon’s manufacturing processes, results in a claim for infringement;           (f) Patheon is not aware of any pending or threatened claims against Patheon asserting that any of the activities of Patheon relating to the manufacture, import, use, or sale of pharmaceutical products, or the conduct of the activities contemplated herein by the Client, infringe, misappropriate, or violate the rights of any Third Party Rights; and           (g) all employees, consultants, subcontractors and agents performing services for Patheon hereunder have assigned, or will assign, in writing to Patheon all of their right, title and interest in, to and under any and all Inventions directly relating to the Product.           (h) all Product manufactured and supplied to the Client under this Agreement shall not be adulterated or misbranded within the meaning of the Act or other Applicable Laws as of the time that the finished Product is transferred to the carrier at Patheon’s shipping point.           (i) all Product manufactured and supplied to the Client under this Agreement shall have the minimum shelf life specified for such Product in the Specifications and, in any event, shall be shipped to the Client promptly (and in any event not more than three (3) months) after the date of its manufacture. 9.4 Debarred Persons.           Patheon covenants that it will not in the performance of its obligations under this Agreement use the services of any person debarred or suspended under 21 U.S.C. §335(a) or (b). Patheon represents that it does not currently have, and covenants that it will not hire, as an officer or an employee any person who has been convicted of a felony under the laws of the United States for conduct relating to the regulation of any drug product under the Act. 9.5 Permits.      (a) The Client shall be solely responsible for obtaining or maintaining, on a timely basis, any permits or other regulatory approvals in respect of the Products or the Specifications, including, without limitation, all marketing and post-marketing approvals. - 27 - --------------------------------------------------------------------------------             (b) Patheon shall be solely responsible for obtaining and maintaining all permits, site licenses or other regulatory approvals for the manufacture of Products. In carrying out its obligations under this Agreement, Patheon shall comply with all applicable environmental and health and safety Laws (current or as amended or added), and shall be solely responsible for determining how to comply with same in carrying out these obligations. Notwithstanding the foregoing, nothing provided to Patheon by the Client, by way of materials, specifications, processing information or otherwise, is meant to diminish Patheon’s responsibility for such compliance. Patheon shall promptly notify the Client of any circumstances, including the receipt of any notice, warning, citation, finding, report or service of process or the occurrence of any release, spill, upset, or discharge of hazardous substances (as may be defined under Applicable Laws) relating to Patheon’s compliance with this Section 9.5(b) and which relates to the manufacture of the Products. 9.6 Compliance with Laws.           Each party, in connection with its performance under this Agreement, shall comply with all Applicable Laws. 9.7 No Other Warranty.           NEITHER PARTY MAKES ANY WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED, BY FACT OR LAW, OTHER THAN THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT. PATHEON MAKES NO WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR WARRANTY OF MERCHANTABILITY WITH RESPECT TO THE PRODUCTS. ARTICLE 10. REMEDIES AND INDEMNITIES 10.1 Consequential Damages.           Under no circumstances whatsoever shall either party be liable to the other in contract, tort, negligence, breach of statutory duty or otherwise for any (direct or indirect) loss of profits, of production, of anticipated savings, of business or goodwill or for any liability, damage, costs or expense of any kind incurred by the other party of an indirect or consequential nature. 10.2 Limitation of Liability.           (a) Active Materials. Under no circumstances whatsoever shall [***] be responsible for any loss or damage to the Active Materials unless the Active Materials are lost or   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 28 - --------------------------------------------------------------------------------   damaged through the negligence or willful misconduct of [***]. [***] for such Active Materials shall be limited to the [***].           (b) Products. Except to the extent that Patheon has failed to provide the Manufacturing Services in accordance with the Specifications, cGMPs, Applicable Laws or Section 9.3 of this Agreement, Patheon shall not be liable nor have any responsibility for any deficiencies in, or other liabilities associated with, any Product manufactured by it, including, without limitation, the costs and expenses of any Recall (collectively, “Product Claims”). For greater certainty, Patheon shall have no obligation for any Product Claims to the extent such Product Claim (i) is caused by deficiencies with respect to the Specifications, the safety, efficacy or marketability of the Products or any distribution thereof, (ii) results from a defect in the Active Materials or Components that is not reasonably discoverable by Patheon using the test methods set forth in the Specifications, (iii) is caused by actions of third parties occurring after such Product is shipped by Patheon pursuant to Section 5.4, (iv) is due to packaging or labeling defects or omissions for which Patheon has no responsibility, or (d) is due to any other breach by the Client of its obligations under this Agreement.            (c) Maximum Liability. Except as set forth in Sections 10.2(a) and 10.3, and excluding Patheon’s liability for replacement Product under Article 6, Patheon’s maximum liability under this Agreement for any reason whatsoever, shall not exceed in a Year, in the aggregate, the greater of $[***] or [***]% of the purchase price for Product arising from Firm Orders submitted in such Year up to a cap of $[***]. 10.3 Patheon.           Subject to Sections 10.1 and 10.2, Patheon agrees to defend, indemnify and hold the Client, its officers, employees and agents harmless against any and all losses, damages, costs, claims, demands, judgments and liability to, from and in favor of third parties (other than Affiliates) resulting from, or relating to any claim of personal injury or property damage to the extent that such injury or damage is the result of (a) a failure by Patheon to provide the Manufacturing Services in accordance with the Specifications, cGMPs, or Applicable Laws, or (b) any other breach of this Agreement by Patheon, including, without limitation, any representation, warranty or covenant contained herein, except to the extent that any such losses, damages, costs, claims, demands, judgments and liability are due to the negligence or wrongful act(s) of the Client, its officers, employees or agents or Affiliates. Patheon’s obligations under this Section 10.3 shall not be subject to the maximum liability limitation set forth in Section 10.2(c).           In the event of a claim, the Client shall: (i) promptly notify Patheon of any such claim; (ii) use commercially reasonable efforts to mitigate the effects of such claim; (iii) reasonably cooperate with Patheon in the defense of such claim; (iv) permit Patheon to control the defense and settlement of such claim, all at Patheon’s cost and expense.   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 29 - --------------------------------------------------------------------------------   10.4 Client.           Subject to Sections 10.1 and 10.2, the Client agrees to defend, indemnify and hold Patheon, its officers, employees and agents harmless against any and all losses, damages, costs, claims, demands, judgments and liability to, from and in favor of third parties (other than Affiliates) resulting from, or relating to (a) any claim of infringement or alleged infringement of any Third Party Rights in respect of the Products, or (b) any claim of personal injury or property damage to the extent that such injury or damage is the result of a breach of this Agreement by the Client, including, without limitation, any representation or warranty contained herein, except to the extent that any such losses, damages, costs, claims, demands, judgments and liability are due to the negligence or wrongful act(s) of Patheon, its officers, employees or agents or Affiliates.           In the event of a claim, Patheon shall: (i) promptly notify the Client of any such claims; (ii) use commercially reasonable efforts to mitigate the effects of such claim; (iii) reasonably cooperate with the Client in the defense of such claim; (iv) permit the Client to control the defense and settlement of such claim, all at the Client’s cost and expense. 10.5 Indemnification Procedure.           (a) Each indemnified party (the “Indemnitee”) agrees to give the indemnifying party (the “Indemnitor”) prompt written notice of any Claims or discovery of fact upon which the Indemnitee intends to base a request for indemnification. Notwithstanding the foregoing, the failure to give timely notice to the Indemnitor shall not release the Indemnitor from any liability to the Indemnitee to the extent the Indemnitor is not materially prejudiced thereby.           (b) The Indemnitee shall furnish promptly to the Indemnitor copies of all papers and official documents in the Indemnitee’s possession or control which relate to any Claims; provided, however, that if the Indemnitee defends or participates in the defense of any Claims, then the Indemnitor shall also provide such papers and documents to the Indemnitee. The Indemnitee shall reasonably cooperate with the Indemnitor in defending against any Claims.           (c) The Indemnitor shall have the right, by prompt written notice to the Indemnitee, to assume direction and control of the defense of any Claim, with counsel reasonably satisfactory to the Indemnitee and at the sole cost of the Indemnitor, so long as (i) the Indemnitor shall promptly notify the Indemnitee in writing (but in no event more than thirty (30) days after the Indemnitor’s receipt of notice of the Claim) that the Indemnitor intends to indemnify the Indemnitee pursuant to this Article absent the development of facts that give the Indemnitor the right to claim indemnification from the Indemnitee, and (ii) the Indemnitor diligently pursues the defense of the Claim. - 30 - --------------------------------------------------------------------------------             (d) If the Indemnitor assumes the defense of the Claim as provided in this Section 10.5, the Indemnitee may participate in such defense with the Indemnitee’s own counsel who shall be retained, at the Indemnitee’s sole cost and expense; provided, however, that neither the Indemnitee nor the Indemnitor shall consent to the entry of any judgment or enter into any settlement with respect to the Claim without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed. If the Indemnitee withholds consent in respect of a judgment or settlement involving only the payment of money by the Indemnitor and which would not involve any stipulation or admission of liability or result in the Indemnitee becoming subject to injunctive relief or other relief, the Indemnitor shall have the right, upon written notice to the Indemnitee within five days after receipt of the Indemnitee’s written denial of consent, to pay to the Indemnitee, or to a trust for its or the applicable third party’s benefit, such amount established by such judgment or settlement in addition to all interest, costs or other charges relating thereto, together with all attorneys’ fees and expenses incurred to such date for which the Indemnitor is obligated under this Agreement, if any, at which time the Indemnitor’s rights and obligations with respect to such Claim shall cease.           (e) The Indemnitor shall not be liable for any settlement or other disposition of a Claim by the Indemnitee which is reached without the written consent of the Indemnitor. ARTICLE 11. CONFIDENTIALITY 11.1 Confidentiality.           The parties agree that, for the term of this Agreement and for seven years thereafter (other than for trade secrets, for which the confidentiality obligations set forth herein shall last as long as trade secret law shall allow), all non-public, proprietary or “confidential” disclosures, know-how, data, and technical, financial and other information of any nature whatsoever (collectively, “Confidential Information”), disclosed or submitted, either orally or in writing (including, without limitation, by electronic means) or through observation, by one party (the “Disclosing Party”) to the other party (the “Receiving Party”) hereunder, including, without limitation, the terms of this Agreement, shall be received and maintained by the Receiving Party in strict confidence, shall not be used for any purpose other than the purposes expressly contemplated by this Agreement, and shall not be disclosed to any third party (including, without limitation, in connection with any publications, presentations or other disclosures). Notwithstanding the foregoing, (a) either party may disclose on a need-to-know basis the existence of this Agreement and the terms hereof to any bona fide potential acquirers, corporate partners, investors or financial advisors; (b) the Client may disclose that Patheon is a supplier to the Client with respect to the Product; (c) Patheon may disclose the fact that the Client is a client of Patheon but shall not disclose any other information relating to any product for which Patheon provides services to the Client. The Receiving Party will promptly notify the Disclosing Party - 31 - --------------------------------------------------------------------------------   upon discovery of any unauthorized use or disclosure of the Disclosing Party’s Confidential Information. Confidential Information belongs to and shall remain the property of the Disclosing Party. 11.2 Exceptions.           The provisions of Section 11.1 shall not apply to any information of the Disclosing Party which can be shown by competent evidence by the Receiving Party:           (a) to have been known to or in the possession of the Receiving Party prior to the date of its actual receipt from the Disclosing Party as evidenced by the Receiving Party’s written records;           (b) to be or to have become readily available to the public other than through any act or omission of any party in breach of any confidentiality obligations owed to the Disclosing Party;           (c) to have been disclosed to the Receiving Party, other than under an obligation of confidentiality, by a third party which had no obligation to the Disclosing Party not to disclose such information to others; or           (d) to have been subsequently independently developed by the Receiving Party without use of or reference or access to the Disclosing Party’s Confidential Information as evidenced by the Receiving Party’s written records. 11.3 Authorized Disclosure.           The Receiving Party may disclose the Disclosing Party’s Confidential Information hereunder solely to the extent (a) approved by the Disclosing Party; or (b) the Receiving Party is legally required to disclose such Confidential Information; provided, however, that prior to any such required disclosure, the Receiving Party will, except where impracticable, give reasonable advance written notice to the Disclosing Party of such disclosure (so that the Disclosing Party may seek a protective order and or other appropriate remedy or waive compliance with the confidentiality provisions of this Article 11) and will use good faith efforts to secure confidential treatment of such Confidential Information required to be disclosed. In the event that a party makes a disclosure of Confidential Information deemed necessary under applicable federal or state securities laws or any rule or regulation of a nationally recognized securities exchange, the party shall use good faith efforts to obtain confidential treatment for the disclosure to the extent available. The party making such a disclosure shall provide the other party with reasonable advance written notice of its intent to make such a disclosure and shall provide the other party the opportunity to comment on any confidential treatment requested prior to the submission. - 32 - --------------------------------------------------------------------------------   11.4 Return of Confidential Information.           The Receiving Party shall keep the Disclosing Party’s Confidential Information in appropriately secure locations. Upon the expiration or termination of this Agreement or at any time upon the Disclosing Party’s request, the Receiving Party shall destroy or return to the Disclosing Party, at the Disclosing Party’s written request, all Confidential Information belonging to the Disclosing Party possessed by the Receiving Party, or its officers, directors, employees, agents and consultants; provided, however, that a Receiving Party may retain one (1) copy of the Disclosing Party’s Confidential Information in an appropriately secure location, which by Applicable Laws it must retain, for so long as such Applicable Laws require such retention but thereafter shall dispose of such retained Confidential Information in accordance with Applicable Laws or this Section 11.4. 11.5 Equitable Relief.           The Receiving Party agrees that, due to the unique nature of the Confidential Information, the unauthorized disclosure or use of the Confidential Information of the Disclosing Party may cause irreparable harm and significant injury to the Disclosing Party, the extent of which may be difficult to ascertain and for which there may be no adequate remedy at law. Accordingly, the Receiving Party agrees that the Disclosing Party, in addition to any other available remedies, shall have the right to seek an immediate injunction and other equitable relief enjoining any breach or threatened breach of this Agreement. The Receiving Party shall notify the Disclosing Party in writing immediately upon the Receiving Party’s becoming aware of any such breach or threatened breach. ARTICLE 12. DISPUTE RESOLUTION 12.1 Commercial Disputes.           In the event of any dispute arising out of or in connection with this Agreement (other than a dispute determined in accordance with Section 6.1(b) or a Technical Dispute), the parties shall first try to solve it amicably. In this regard, any party may send a notice of dispute to the other, and each party shall appoint, within 10 Business Days from receipt of such notice of dispute, a single representative having full power and authority to solve the dispute. The representatives so designated shall meet as necessary in order to solve such dispute. If these representatives fail to solve the matter within one month from their appointment, or if a party fails to appoint a representative within the 10 Business Day period set forth above, such dispute shall immediately be referred to the Chief Operating Officer or Executive Vice President, Operations (or such other officer of comparable or greater authority as they may designate) of each party who will meet and discuss as necessary in order to try to solve the dispute amicably. - 33 - --------------------------------------------------------------------------------   Should the parties fail to reach a resolution under this Section 12.1, their dispute will be referred to a court of competent jurisdiction in accordance with Section 13.16. 12.2 Technical Dispute Resolution.           In the event of a dispute (other than disputes in relation to the matters set out in Sections 6.1(b) and 12.1) between the parties that is exclusively related to technical aspects of the manufacturing, packaging, labeling, quality control testing, handling, storage or other activities under this Agreement (a “Technical Dispute”), the parties shall make all reasonable efforts to resolve the dispute by amicable negotiations. In this regard, senior representatives of each party shall, as soon as practicable and in any event no later than 10 Business Days after a written request from either party to the other, meet in good faith to resolve any Technical Dispute. If, despite such meeting, the parties are unable to resolve a Technical Dispute within a reasonable time, and in any event within 30 Business Days of such written request, the Technical Dispute shall, at the request of either party, be referred for determination to an expert in accordance with the provisions of Schedule G. In the event that the parties cannot agree whether a dispute is a Technical Dispute, Section 12.1 shall prevail. For greater certainty, the parties agree that the release of the Products for sale or distribution pursuant to the applicable marketing approval for such Products shall not by itself indicate compliance by Patheon with its obligations in respect of the Manufacturing Services and further that nothing in this Agreement (including Schedule G) shall remove or limit the authority of the relevant qualified person (as specified by the Quality Agreement) to determine whether the Products are to be released for sale or distribution. ARTICLE 13. MISCELLANEOUS 13.1 Inventions.           (a) For the term of this Agreement, Client hereby grants to Patheon a non-exclusive, royalty-free, non-transferable, non-sublicensable license of Client’s Intellectual Property that relates to the Product solely to perform the Manufacturing Services.           (b) All Inventions and other Intellectual Property generated or derived by Patheon in the course of performing the Manufacturing Services, to the extent it is specific to the development, manufacture, use and sale of the Client’s Products that is the subject of the Manufacturing Services (including, but not limited to, any new use, new formulation or any change in the method of producing, testing or storing any Product), shall be the exclusive property of Client. Patheon shall execute such instruments as shall be required to evidence or effectuate the Client’s ownership of any such Inventions or other Intellectual Property, and shall cooperate upon reasonable request in the prosecution of patents and other Intellectual Property rights related thereto. - 34 - --------------------------------------------------------------------------------             (c) All Intellectual Property generated or derived by Patheon in the course of performing the Manufacturing Services which are not specific, or dependent upon, Client’s Product and which have general application to manufacturing processes or formulation development of drug products or drug delivery systems shall be the exclusive property of Patheon (the “Broader Intellectual Property Rights”). Patheon hereby grants to Client, a worldwide, perpetual, irrevocable, non-exclusive, paid-up, royalty-free, transferable and sublicensable license of Patheon’s Broader Intellectual Property Rights to manufacture and have manufactured the Products and to use, import, export, offer to sell, and sell the same, with full right to sublicense to any third party in connection with the manufacture, sale or distribution of the Product.           (d) Each party shall be solely responsible for the costs of filing, prosecution and maintenance of patents and patent applications on its own Inventions.           (e) Either party shall give the other party written notice, as promptly as practicable, of all Inventions which can reasonably be deemed to constitute improvements or other modifications of the Products or the processes for developing or manufacturing the Products owned or otherwise controlled by such party in respect of the Products. 13.2 Intellectual Property.           Subject to Section 13.1, all Intellectual Property of the Client shall be owned by the Client and all Intellectual Property of Patheon shall be owned by Patheon. The Client and Patheon hereby acknowledge that neither party has, nor shall it acquire, any interest in any of the other party’s Intellectual Property unless otherwise expressly agreed to in writing. Each party agrees not to use any Intellectual Property of the other party, except as specifically authorized by the other party or as required for the performance of its obligations under this Agreement. 13.3 Insurance.           Each party shall maintain commercial general liability insurance, including blanket contractual liability insurance covering the obligations of that party under this Agreement through the term of this Agreement and for a period of three years thereafter, which insurance, at the time of FDA approval for the Product, shall afford limits of not less than (i) $[***] for each occurrence for personal injury or property damage liability; and (ii) $[***] in the aggregate per annum with respect to product and completed operations liability. If requested each party will provide the other with a certificate of insurance evidencing the above and showing the name of the issuing company, the policy number, the effective date, the expiration date and the limits of liability. The insurance certificate shall further provide for a minimum of 30 days’ written notice to the insured of a cancellation of, or material change in, the insurance. If a party is unable to maintain the insurance policies required under this Agreement through no fault on the part of such party, then such party shall forthwith notify the other party in writing   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 35 - --------------------------------------------------------------------------------   and the parties shall in good faith negotiate appropriate amendments to the insurance provision of this Agreement in order to provide adequate assurances. 13.4 Independent Contractors.           The parties are independent contractors and this Agreement shall not be construed to create between Patheon and the Client any other relationship such as, by way of example only, that of employer-employee, principal agent, joint-venturer, co-partners or any similar relationship, the existence of which is expressly denied by the parties hereto, and nothing in this Agreement shall be construed to give either party the power or authority to act for, bind, or commit the other party. 13.5 Trademarks.           The Client and Patheon hereby acknowledge that neither party has, nor shall it acquire, any interest in any of the other party’s trademarks or trade names unless otherwise expressly agreed to in writing. Each party agrees not to use any trademark or trade name of the other party, except as specifically authorized by the other party or as required for the performance of its obligations under this Agreement. 13.6 No Waiver.           Either party’s failure to require the other party to comply with any provision of this Agreement shall not be deemed a waiver of such provision or any other provision of this Agreement. No waiver shall be effective unless made in writing and signed by the waiving party. 13.7 Assignment.           (a) Patheon may not assign this Agreement or any of its rights or obligations hereunder except with the written consent of the Client, such consent not to be unreasonably withheld; provided, however, that Patheon may arrange for subcontractors to perform specific testing services arising under this Agreement without the consent of the Client; provided, further, that Patheon shall provide advance notice of the name and function of any such subcontractor and shall ensure such subcontractor’s adherence to the terms of this Agreement, including, but not limited to, the obligations of confidentiality set forth in Article 11.           (b) The Client may assign this Agreement or any of its rights or obligations hereunder[***] without approval from Patheon; provided, however, that the Client shall give prior written notice of any assignment to Patheon, any assignee shall covenant in writing with Patheon to be bound by the terms of this Agreement and the Client shall remain liable hereunder. [***].   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 36 - --------------------------------------------------------------------------------             (c) Notwithstanding the foregoing provisions of this Section 13.7, either party may assign this Agreement to any of its Affiliates or to a successor to, purchaser or licensee of all or substantially all of its business, provided that such assignee agrees in writing to be bound hereunder. For purposes of the foregoing, the phrase “all or substantially all of its business” shall mean, with respect to the Client, the business of the Client relating to the Product and not necessarily any other products to which the Client may have rights. 13.8 Force Majeure.           Neither party shall be liable for the failure to perform its obligations under this Agreement if such failure is occasioned by a cause or contingency beyond such party’s reasonable control, including, but not limited to, the following if such cause or contingency beyond such party’s reasonable control: strikes or other labor disturbances, lockouts, riots, quarantines, communicable disease outbreaks, wars, acts of terrorism, fires, floods, storms, interruption of or delay in transportation, defective equipment, lack of or inability to obtain fuel, power or components, or compliance with any order or regulation of any Authority acting within color of right (a “Force Majeure Event”). A party claiming a right to excused performance under this Section 13.8 shall immediately notify the other party in writing of the extent of its inability to perform, which notice shall specify the occurrence beyond its reasonable control that prevents such performance. Notwithstanding the foregoing, if a Force Majeure Event prevents a party’s performance under this Agreement for an aggregate of 120 days, the other party may terminate this Agreement upon written notice to the non-performing party. 13.9 Additional Product.           Additional products may be added to this Agreement and such additional products shall be governed by the general conditions hereof with any special terms (including, without limitation, price) governed by an addendum signed by each of the parties hereto. 13.10 Notices.           Any notice, approval, instruction or other written communication required or permitted hereunder shall be sufficient if made or given to the other party by personal delivery, by telecopier or facsimile communication or by sending the same by first class mail, postage prepaid to the mailing address, or telecopier or facsimile number set forth below: If to the Client: Somaxon Pharmaceuticals, Inc. 12750 High Bluff Drive, Suite 310 - 37 - --------------------------------------------------------------------------------   San Diego, CA 92130 Attention: President and Chief Executive Officer Telecopier No.: 858-509-1589 with a copy to: Latham & Watkins LLP 12636 High Bluff Drive, Suite 400 San Diego, CA 92130 Attention: Scott N. Wolfe / Cheston J. Larson Telecopier No.: 858-523-5450 If to Patheon: Patheon Inc. 7070 Mississauga Road, Suite 350 Mississauga, Ontario L5N 7J8 Canada Attention: President, Patheon USA Telecopier No.: 905.812.6705 with a copy to: Patheon Pharmaceuticals Inc. 2110 East Galbraith Road Cincinnati, Ohio 45237 Attention: Director of Legal Services Telecopier No.: 513-948-6927 or to such other addresses or telecopier or facsimile numbers provided to the other party in accordance with the terms of this Section 13.10. Notices or written communications made or given by personal delivery or by telecopier or facsimile shall be deemed to have been sufficiently made or given when sent (receipt acknowledged), or if mailed, five days after being deposited in the United States or Canadian mail, postage prepaid or upon receipt, whichever is sooner. 13.11 Severability.           If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such determination shall not impair or affect the validity, legality or enforceability of the remaining provisions hereof, and each provision is hereby declared to be separate, severable and distinct. - 38 - --------------------------------------------------------------------------------   13.12 Entire Agreement.           This Agreement, together with the Quality Agreement constitutes the full, complete, final and integrated agreement between the parties hereto relating to the subject matter hereof and supersedes all previous written or oral negotiations, commitments, agreements, transactions or understandings with respect to the subject matter hereof. Any modification, amendment or supplement to this Agreement must be in writing and signed by authorized representatives of both parties. In case of conflict, the prevailing order of documents shall be this Agreement and the Quality Agreement. 13.13 Other Terms.           The parties agree that no terms, provisions or conditions of any purchase order or other business form or written authorization used by the Client or Patheon will have any effect on the rights, duties or obligations of the parties under or otherwise modify this Agreement, regardless of any failure of the Client or Patheon to object to such terms, provisions, or conditions unless such document specifically refers to this Agreement and is signed by both parties. 13.14 No Third Party Benefit or Right.           For greater certainty, nothing in this Agreement shall confer or be construed as conferring on any third party any benefit or the right to enforce any express or implied term of this Agreement. 13.15 Execution in Counterparts.           This Agreement may be executed in two counterparts, by original or facsimile signature, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 13.16 Governing Law.           This Agreement shall be construed and enforced under the laws of the State of New York, without regard to the United Nations Convention on Contracts for the International Sale of Goods and without giving effect to any choice of laws rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of New York, to the rights and duties of the parties. [Remainder of Page Left Blank Intentionally] - 39 - --------------------------------------------------------------------------------             IN WITNESS WHEREOF, the duly authorized representatives of the parties have executed this Agreement as of the date first written above.               PATHEON PHARMACEUTICALS INC.               by   /s/ Bradley J. Mitchell                         •   Treasurer               by   Bradley J. Mitchell                         SOMAXON PHARMACEUTICALS, INC.               by   /s/ Kenneth M. Cohen                         •   President & CEO               by   Kenneth M. Cohen                         •     - 40 - --------------------------------------------------------------------------------   SCHEDULE A PRODUCTS Doxepin 1, 3, and 6 mg tablets supplied in [***] as shown in Schedule C.   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.   --------------------------------------------------------------------------------   SCHEDULE B PROCEDURE FOR SHIPMENT AND ACCEPTANCE OF PRODUCT SPECIFICATIONS Prior to the commencement of commercial manufacturing of Product under this Agreement the Client shall provide Patheon with originally executed copies of the FDA approved Specifications. If the Specifications provided are subsequently amended, then the Client shall provide Patheon with revised and originally executed copies of such revised Specifications. Upon acceptance of the revised Specifications, Patheon shall provide the Client with a signed and dated receipt evidencing such acceptance of the revised Specifications by Patheon.   --------------------------------------------------------------------------------   SCHEDULE C MINIMUM RUN QUANTITY, ANNUAL VOLUME AND FEES                           [***].                                                   [***]                                                   [***]   [***]   [***]   [***]   [***]                           [***]   [***]   [***]   [***]   [***]                           [***]   [***]   [***]   [***]   [***]   [***]   [***]                           [***]   [***]   [***]   [***]   [***]   [***]   [***]                           [***]   [***]   [***]   [***]   [***]   [***]   [***]                           [***]                                                   [***]   [***]   [***]   [***]   [***]   [***]   [***]                           [***]   [***]   [***]   [***]   [***]   [***]   [***]                           [***]   [***]   [***]   [***]   [***]   [***]   [***]                           [***]                           ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. 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Confidential treatment has been requested with respect to the omitted portions. - 8 - --------------------------------------------------------------------------------   SCHEDULE D STABILITY TESTING Patheon shall conduct stability studies on the finished Products according to the Specifications therefor, as required by the FDA or foreign Agencies as advised by the Client or as requested by the Client, and in any case on: •   at least the first [***] of finished Product from the Manufacturing Site after the Commencement Date;   •   at least [***] of finished Product [***] per calendar Year thereafter; or   •   The cost of such stability studies shall be as follows or as may otherwise be agreed to between the parties in writing:     $[***] per stability time point (multiple samples may tested if they are due at the same time) Patheon shall provide to the Client a report of all results and data obtained from such stability studies periodically as may be specified in the stability protocol for the Product and/or the Quality Agreement. Patheon and the Client shall agree in writing on any further stability testing to be performed by Patheon in connection with the Products. Such agreement shall specify the commercial and Product stability protocols applicable to the stability testing and the fees payable by the Client in connection with such additional testing.   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.   --------------------------------------------------------------------------------   SCHEDULE E ACTIVE MATERIALS & ACTIVE MATERIALS REIMBURSEMENT VALUE                   Active Materials Active Material   Supplier   Reimbursement Value Doxepin HCI   [***]l   $[***] per kg. up to a         maximum amount of         $[***] per annum   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.   --------------------------------------------------------------------------------   SCHEDULE F BATCH NUMBERING AND EXPIRATION DATES Each batch of Product manufactured by Patheon will bear a unique packaging lot number using the Patheon batch numbering system. This number will appear on the Product label and on the batch documentation. Patheon will calculate the expiration date for each batch of Product by adding the expiration period, supplied by the Client to the date of manufacture of each batch. The expiration date will appear on the Product label.   --------------------------------------------------------------------------------   SCHEDULE G TECHNICAL DISPUTE RESOLUTION           Technical Disputes which cannot be resolved by negotiation as provided in Section 12.2 shall be resolved in the following matter: 1. Appointment of Expert. Within 10 Business Days after a party requests pursuant to Section 12.2 that an expert be appointed to resolve a Technical Dispute, the parties shall jointly appoint a mutually acceptable expert with experience and expertise in the subject matter of the dispute. If the parties are unable to so agree within such 10 Business Day period, or in the event of disclosure of a conflict by an expert pursuant to paragraph 2 hereof which results in the parties not confirming the appointment of such expert, then an expert (willing to act in that capacity hereunder) shall be appointed by an experienced arbitrator on the roster of the [American Arbitration Association]. 2. Conflicts of Interest. Any person appointed as an expert shall be entitled to act and continue to act as such notwithstanding that at the time of his appointment or at any time before he gives his determination, he has or may have some interest or duty which conflicts or may conflict with his appointment provided that before accepting such appointment (or as soon as practicable after he becomes aware of the conflict or potential conflict) he fully discloses any such interest or duty and the parties shall after such disclosure have confirmed his appointment. 3. Procedure. Where an expert is appointed:           (a) Timing. The expert shall be so appointed on condition that (i) he promptly fixes a reasonable time and place for receiving representations, submissions or information from the parties and that he issues such authorizations to the parties and any relevant third party for the proper conduct of his determination and any hearing and (ii) he renders his decision (with full reasons) within 15 Business Days (or such other date as the parties and the expert may agree) after receipt of all information requested by him pursuant to paragraph 3(b) hereof.           (b) Disclosure of Evidence. The parties undertake one to the other to provide to any expert all such evidence and information within their respective possession or control as the expert may reasonably consider necessary for determining the matter before him which they shall disclose promptly and in any event within five Business Days of a written request from the relevant expert to do so.           (c) Advisors. Each party may appoint such counsel, consultants and advisors as it feels appropriate to assist the expert in his determination and so as to present their respective cases so that at all times the parties shall co-operate and seek to narrow and limit the issues to be determined.           (d) Appointment of New Expert. If within the time specified in paragraph 3(a) above the expert shall not have rendered a decision in accordance with his appointment, a new expert may (at the request of either party) be appointed and the appointment of the existing expert shall thereupon cease for the purposes of determining the matter at issue between the   --------------------------------------------------------------------------------   parties save that if the existing expert renders his decision with full reasons prior to the appointment of the new expert, then such a decision shall have effect and the proposed appointment of the new expert shall be withdrawn.           (e) Final and Binding. The determination of the expert shall, save in the event of fraud or manifest error, be final and binding upon the parties.           (f) Costs. Each party shall bear its own costs in connection with any matter referred to an expert hereunder and, in the absence of express provision in the Agreement to the contrary, the costs and expenses of the expert shall be borne by the losing party. For greater certainty, the parties agree that the release of the Products for sale or distribution pursuant to the applicable marketing approval for such Products shall not by itself indicate compliance by Patheon with its obligations in respect of the Manufacturing Services and further that nothing in this Agreement (including this Schedule G) shall remove or limit the authority of the relevant qualified person (as specified by the Quality Agreement) to determine whether the Products are to be released for sale or distribution. - 2 - --------------------------------------------------------------------------------   Quality Agreement: February 1, 2006 SCHEDULE H QUALITY AGREEMENT THIS AGREEMENT made as of the 1st day of February 2006 BETWEEN: SOMAXON PHARMACEUTICALS, INC. a corporation existing under the laws of the State of Delaware, (the “Client”) - and- PATHEON PHARMACEUTICALS INC., a corporation existing under the laws of the State of Delaware, Specific sites covered by this Agreement: Patheon Pharmaceuticals Inc., 2110 East Galbraith Drive, Cincinnati, OH 45237-1625 (“Patheon”) BACKGROUND: Patheon and the Client entered into a manufacturing services agreement dated February 1, 2006 (the “MSA”) under which Patheon agreed to provide pharmaceutical manufacturing services involving the Products described in Schedule A hereto. Under the MSA Client must provide certain information to Patheon for Patheon to perform the services (the “Specifications”) and Patheon must operate within the Specifications. The parties want to allocate responsibility for procedures and specifications that impact the identity, strength, quality, and purity of the Products. AGREEMENT: In consideration of the rights conferred and the obligations assumed under the MSA and herein, and for other good and valuable consideration (the receipt and sufficiency of which are acknowledged by each party), the parties agree to be legally bound as follows:   --------------------------------------------------------------------------------   Quality Agreement: February 1, 2006 ARTICLE 1 RESPONSIBILITIES 1.1   Patheon is responsible for all the operations that are marked with “X” in the column titled “Patheon” and the Client is responsible for all the operations that are marked with “X” in the column titled “Client”. If marked with “(X)”, the designated party will cooperate.   (a)   General                       Client   Patheon 1.   Provide Specifications.   X   (X)               2.   Manufacture and package Product(s) according to the Specifications.       X               3.   Permit GMP audits of all relevant premises, procedures and documentation by Client, and permit inspection by regulatory authorities.       X               4.   Will not subcontract any of the work to a third party without prior written consent of Client.       X               5.   Provide copies of Annual Product Review reports when requested by Client.       X               6.   Provide copies of information and correspondence necessary to support the Annual Report when requested by Client.       X               7.   Notify and obtain written approval from the Client before initiating any proposed changes to the process, materials, testing, equipment or premises that may affect the Product(s). Client approval will not be unreasonably withheld.   (X)   X               8.   Notify the Client within one business day of receipt of any FDA Form 483’s, warning letters or the like from regulatory agencies relating to: (i) the Product(s); (ii) the supply of Product(s) or (iii) the facilities used to produce, test or package the Product(s). Client will review and approve in writing responses that relate directly to the Product(s) before submitting to the regulatory agency. Patheon   (X)   X - 2- --------------------------------------------------------------------------------   Quality Agreement: February 1, 2006                       Client   Patheon     reserves the right to respond to such regulatory agencies without approval, if, in the reasonable opinion of Patheon’s counsel, it is required to do so.                       9.   Notify the Client within one business day of any regulatory authority requests for samples, batch documentation, or other information related to the Product(s).       X               10.   Conduct operations in compliance with applicable federal, state and local environmental, occupational health and safety laws, and cGMP regulations.       X               11.   Investigate all medical and non-medical product complaints related to the manufacturing of the Product(s).   X   (X)               12.   Investigate all manufacturing Product complaints provided by Client.   (X)   X               13.   Notify other party within one business day of receipt of information meeting NDA Field Alert criteria as defined in 21 CFR 314.81(b)(l).   X   X               14.   Initiate NDA Field Alert reports.   X                   15.   Initiate and manage Product recalls.   X   (X)               16.   Timely liaise with Regulatory Authorities for approval, maintenance and updating of marketing approval.   X       (b)   Validation and Process Testing Activities                       Client   Patheon 1.   Establish applicable master validation plans and maintain a validation program for the Product(s).   X   X               2.   Qualify (IQ/OQ) facilities, utilities, laboratory equipment and process equipment.       X - 3- --------------------------------------------------------------------------------   Quality Agreement: February 1, 2006                               Client   Patheon 3.   Calibrate instrumentation and qualify computer systems used in the manufacture and testing of the Product(s).           X                   4.   Prepare all validation protocols and reports, for manufacturing, and packaging operations.       (X)   X                   5.   Review and approve master validation plan, and validation protocols and reports for manufacturing and packaging of the Product(s).       X   X                   6.   Maintain appropriate equipment cleaning procedures and cleaning validation program.           X                   7.   Provide toxicological information to be used in the development of a cleaning program.       X                       8.   Validate analytical test methods for finished Product(s).           X   (c)   Raw Materials                       Client   Patheon 1.   Provide the master formula including Bill of Materials.   X   (X)               2.   Provide approved supplier list. Client to audit and approve API suppliers and ensure cGMP compliance where Client stipulates the supplier. Client stipulated suppliers will be included on Client’s approved supplier list (attached hereto as Schedule D).   X                   3.   Client to qualify and approve product specific excipient suppliers and ensure cGMP compliance. Client stipulated suppliers will be included on Client’s approved supplier list (attached hereto as Schedule D).   X                   4.   Patheon to qualify and approve excipient suppliers and ensure cGMP compliance where Patheon stipulates the suppliers. Patheon stipulated suppliers will be included on the Patheon approved supplier list (Schedule C).       X               5.   Provide API specifications.   X     - 4- --------------------------------------------------------------------------------   Quality Agreement: February 1, 2006                       Client   Patheon 6.   Procure API (including Certificates of Analysis).       X               7.   Validate non-Compendial testing methods for API.   (X)   X               8.   Analyze and release API.       X               9.   Retain reference sample of API for one year past the expiration date of the last batch of Product(s) manufactured with that material in the Product(s) or such longer period required by law.       X               10.   Procure inactive ingredients (including Certificates of Analysis).       X               11.   Provide test methods and method validation for inactive ingredients (if non-Compendial).   X   (X)               12.   Analyze and release inactive ingredients.       X               13.   Retain reference samples of inactive ingredients for 3 years or such longer period as required by law.       X               14.   Maintain records and evidence on the testing of raw materials for five years after the materials were last used in the manufacture of the Product(s).       X               15.   At Client’s request, confirm that all bovine, caprine, or ovine derived raw materials purchased by Patheon for the manufacture of Product(s) have a BSE/TSE certificate of compliance from the raw material vendor.       X   (d)   Bulk Manufacture                       Client   Patheon 1.   Create, control, issue and execute master batch record.       X               2.   Approve master batch record.   X   X               3.   Document, investigate and resolve deviations from approved manufacturing instructions or specifications.   (X)   X - 5- --------------------------------------------------------------------------------   Quality Agreement: February 1, 2006   (e)   Packaging                       Client   Patheon 1.   Provide specifications for packaging components.   X   (X)               2.   Review and approve labelling proofs.   X                   3.   Provide artwork and labelling text (blister, carton, leaflet, label etc.) specifications.   X   (X)               4.   Create, control, issue and execute master packaging record.       X               5.   Approve master packaging record.   X   X               6.   Qualify and approve packaging component suppliers. Client to qualify and approve packaging component suppliers and ensure cGMP compliance where Client stipulates the supplier. Client stipulated suppliers will be included on its approved supplier list (attached hereto as Schedule D).   X   (X)               7.   Patheon to qualify and approve packaging component suppliers and ensure cGMP compliance where Patheon stipulates the supplier. Patheon stipulated suppliers will be included on its approved supplier list (Schedule C).       X               8.   Provide test methods for packaging components.   (X)   X               9.   Procure packaging components.       X               10.   Analyze and release packaging components.       X               11.   Maintain records and evidence on the testing of packaging/labelling materials for five years after the materials were last used in the packaging/labelling of the Product(s).       X               12.   Document, investigate and resolve any deviation from approved packaging instructions or specifications.       X - 6 - --------------------------------------------------------------------------------   Quality Agreement: February 1, 2006   (f)   Testing & Release of Finished Product                       Client   Patheon 1.   Provide finished product specifications.   X                   2.   Supply / develop analytical test methods for finished product.   X   (X)               3.   Test finished product.       X               4.   Maintain all batch records for a minimum of one year past Product(s) expiry date and supply copies of all such records to the Client upon request.       X               5.   Notify Client QA of Out-Of-Specification results within one business day of confirmation.       X               6.   Retain reference samples of finished product for one year past expiration date.       X               7.   Retain reserve sample of finished product as required by 21 CFR 211.170(b)(1).       X               8.   Release finished product to Client and provide C of A.       X   (g)   Stability Testing (if required)                       Client   Patheon 1.   Provide stability testing protocol for finished Product(s).   (X)   X               2.   Store stability samples.       X               3.   Develop and validate stability indicating assay.       X               4.   Perform stability testing.       X               5.   Notify the Client of any confirmed stability failure for Product(s) supplied to the Client within one business day.       X - 7 - --------------------------------------------------------------------------------   Quality Agreement: February 1, 2006 ARTICLE 2 COMPLIANCE BETWEEN PRODUCT REGISTRATION AND THE MANUFACTURING PROCESS 2.1   Technical Changes   (a)   In accordance with Patheon Standard Operating Procedures, Patheon will communicate all proposed process changes to the Client for prior review and written approval; the Client’s approval will not be unreasonably withheld. The Client will determine whether to initiate registration variation procedures and will maintain adequate control over the quality commitments of the marketing authorization for Product(s).     (b)   After validation of a process change and at Client’s request, Patheon will deliver a copy of the validation report and the associated stability data, if applicable, to the Client. 2.2   Labelling / Packaging Material Changes       The Client may initiate changes and will review and approve any changes proposed by Patheon to labelling or primary packaging, including a change in the supplier of any labelling or primary packaging materials, before any such change occurs.   2.3   Other Changes       Patheon will communicate any proposed changes in storage or shipping to the Client for prior review and written approval; the Client’s approval will not be unreasonably withheld. Patheon will also inform the Client of any planned changes in facilities or equipment directly related to the Product(s).   2.4   Regulatory Approvals       The Client will obtain and/or maintain all regulatory approvals for the Products and the Specifications, including, without limitation, all marketing and post-marketing approvals.   2.5   Field Alerts and Recalls       The Client will notify Patheon before filing any NDA Field Alert or initiating a Recall related to the Product(s). Patheon and the Client will work together to assure the accuracy of any NDA Field Alert or Recall related to the Product(s). The Client will have final authority to initiate a Product Recall or an NDA Field Alert. - 8 - --------------------------------------------------------------------------------   Quality Agreement: February 1, 2006 ARTICLE 3 BATCH RELEASE 3.1   Batch review and release to the Client will be the responsibility of Patheon who shall act in accordance with Patheon’s standard operating procedures. The Client will have sole responsibility for release of the Product(s) to the market.   3.2   For each batch released by Patheon for shipment to the Client, Patheon will deliver to the Client a certificate of analysis (C of A)/certificate of compliance (C of C), which will include a statement that the batch has been manufactured in accordance with cGMPs and the Specifications.   3.3   Patheon will notify the Client in the event of (i) any major deviation during manufacture which affects the quality or efficacy of the Product(s) or (ii) a confirmed out of specification (OOS) result. Patheon will provide a copy of the deviation investigation and/or OOS investigation report upon request. ARTICLE 4 BATCH DOCUMENTATION 4.1   Patheon will retain originals of all batch documentation for one year past the expiry date of the Product(s), or longer if required by law, after which Patheon shall provide written notice to the Client and offer the Client the opportunity to take possession of such documents. If the Client does not elect to take possession within 45 days of Patheon’s notice, Patheon may destroy such documents.   4.2   At the request of the Client, Patheon will provide a copy of any of the executed batch documents relating to Product(s) to the Client within two Business Days. ARTICLE 5 STABILITY 5.1   Patheon will perform such stability testing as described in a stability protocol developed by Patheon and agreed to in writing by the Client.   5.2   If a confirmed result indicates that a Product(s) failed to remain within stability specifications, Patheon will notify the Client within one Business Day. 5.3   Patheon will provide stability data to the Client on an ongoing basis as agreed to by both parties. - 9 - --------------------------------------------------------------------------------   Quality Agreement: February 1, 2006 5.4   If the MSA is terminated, Patheon will continue to provide the Client with stability data supporting the acceptability of the Product(s) until the Product(s) distributed by the Client reaches the end of its shelf life or such other date as may be required by applicable law. ARTICLE 6 VALIDATION 6.1   With assistance from Patheon, Client will ensure that analytical methods and manufacturing and packaging procedures for the Product(s) are validated.   6.2   Patheon is responsible for executing the approved validation protocols. ARTICLE 7 GENERAL 7.1   Any communications required under this Agreement will be directed to the person(s) identified in Schedule B.   7.2   Capitalized terms not otherwise defined herein will have the meaning specified in the MSA.   7.3   If any the terms of this Quality Agreement and the terms of the MSA conflict, the terms of the MSA will govern.   7.4   Any modification, amendment or supplement to this Quality Agreement must be in writing and signed by authorized representatives of Patheon and the Client. - 10 - --------------------------------------------------------------------------------   Quality Agreement: February 1, 2006                       SOMAXON PHARMACEUTICALS, INC.   PATHEON PHARMACEUTICALS INC.                       Name:   Doranne Frano   Name:   Jack Domet                               Signature :   /s/ Doranne Frano   Signature:   /s/ Jack Domet                               Title:   Sr. Director, Regulatory &   Title:   Director, Quality Operations             Quality Assurance                                       Date:   Feb 1, 2006   Date:   2/2/2006                                           (SEAL) [a20413a2041301.gif]         - 11 - --------------------------------------------------------------------------------   Quality Agreement: February 1, 2006 SCHEDULE A PRODUCT(S)           Product(s)   Dosage Form   Dosage (Strength)   Doxepin     [***]        [***] mg           Doxepin     [***]        [***] mg           Doxepin     [***]        [***] mg   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 12 - --------------------------------------------------------------------------------   Quality Agreement: February 1, 2006 SCHEDULE B QUALITY CONTACTS       [***]           [***]   [***]       [***]   [***]       [***]   [***]       [***]   [***]       [***]   [***]             [***]           [***]   [***]       [***]   [***]       [***]   [***]       [***]   [***]       [***]   [***] [***]   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 13 - --------------------------------------------------------------------------------   Patheon Cincinnati Quality Agreement: Last Revision January 17, 2006 SCHEDULE C PATHEON APPROVED SUPPLIER LIST             Excipient       Supplier   [***]   [***]   [***]               [***]   [***]   [***]               [***]   [***]   [***]                           [***]   [***]   [***]               [***]   [***]   [***]               [***]   [***]   [***]     ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 14 - --------------------------------------------------------------------------------   Patheon Cincinnati Quality Agreement: Last Revision January 17, 2006 SCHEDULE D CLIENT APPROVED SUPPLIER LIST Doxepin HC1 [***]   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. - 15 - --------------------------------------------------------------------------------   Patheon Cincinnati Quality Agreement: Last Revision January 17, 2006 Abbreviations and Definitions       API   Active Pharmaceutical Ingredient       BSE   Bovine Spongiform Encephalopathy       C of A   Certificate of Analysis       C of C   Certificate of Compliance       CFR   Code of Federal Regulations       CGMP/GMP   Current Good Manufacturing Practice as described in 21 CFR 210 and 211.       FDA   Food & Drug Administration       IQ   Installation Qualification       MSA   Manufacturing Services Agreement       NDA   New Drug Application       OOS   Out of Specification       OQ   Operational Qualification       Primary Packaging Materials   A component that is or maybe in direct contact with the dosage form       TSE   Transmissible Spongiform Encephalopathy - 16 - --------------------------------------------------------------------------------   SCHEDULE I PRODUCT BILL OF MATERIALS Product Name: DOXEPIN [***] MG TABLETS — [***] Product Code: [***] Theoretical Batch Size: [***] Formula:       [***]   [***] [***]   [***] [***]   [***] [***]   [***] [***]   [***] [***]   [***] [***]   [***]   ***   Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

  EXHIBIT 10.8 MANAGEMENT SERVICES AGREEMENT      THIS MANAGEMENT SERVICES AGREEMENT (the “Agreement”) is entered into this 12th day of May, 2006, by and between VV III Management, LLC, a Delaware limited liability company (“Contractor”) and OrthoLogic Corp., a Delaware corporation (the “Company”). RECITALS      WHEREAS, the Company wishes to engage Contractor to make available the services of John M. Holliman, III (“Executive”) to serve as the Company’s Executive Chairman and principal executive officer; and      WHEREAS, Contractor wishes to make available the services of Executive to the Company on the terms and conditions set forth in this Agreement.      NOW, THEREFORE, the parties agree as follows: AGREEMENT      1. Services. Pursuant to the terms of this Agreement, Contractor shall cause Executive to serve, and Executive shall serve as the Company’s Executive Chairman and principal executive officer with responsibility for corporate strategy, executive management, investor relations, financial reporting and compliance. Contractor shall cause Executive to (i) devote the time, attention, skill and efforts to the performance of such duties as are normal and customary to the position of principal executive officer and as reasonably requested by the Company’s Board of Directors (the “Board”); and (ii) comply with any and all rules of conduct established by the Company and to perform any and all assigned duties in a manner that is acceptable to the Company.      2. Management Fee; Bonus; Reimbursement.           (a) Compensation. Company shall pay Contractor a management fee at the rate of $200,000 per year (the “Management Fee”) payable on the first and fifteenth day of each calendar month, retroactive to April 5, 2006.           (b) Bonuses. Executive shall be entitled to participate in a discretionary bonus plan established for Executive from time to time by the Compensation Committee of the Board (the “Compensation Committee”). The target bonus will be 40% of the annual Management Fee upon the achievement by Executive of individual and corporate performance objectives established from time to time by the Compensation Committee. Such cash bonus, if earned, will be payable to Contractor annually on or before the first day of April immediately following the end of the calendar year for which it is earned. Any bonus will be paid in such manner so that it is not subject to the provisions of Section 409A of the Internal Revenue Code of 1986, as amended, and shall be interpreted in a manner consistent with that intention.   --------------------------------------------------------------------------------             (c) Reimbursement. In addition to the Management Fee provided above, the Company shall reimburse Executive, in accordance with the policies and practices of the Company in effect from time to time with respect to other members of senior management of the Company, for all reasonable and necessary traveling expenses and other disbursements incurred by him for or on behalf of the Company in connection with the performance of his duties to the Company upon presentation by Executive to the Company of appropriate documentation therefor.           (d) Fringe Benefits. Except as otherwise provided in this Section 2, Executive will not be entitled to participate in health, welfare, retirement or other similar benefit programs made available from time to time to other executives and employees of the Company.      3. Termination.           (a) This Agreement may be terminated at any time by Contractor or the Company with or without cause, notice or procedural formality. No individual or individuals associated with the Company, other than the Compensation Committee acting pursuant to the powers granted to it by the Company, has authority to make any agreement to the contrary, or any agreement for any specified period of time. Any such agreement must be in writing and approved by the Compensation Committee to be effective. The Company shall have no obligation to employ Executive after any such termination, and upon any termination hereof, Contractor shall cause Executive to tender his resignation to the Company.           (b) Upon the termination of this Agreement, neither Contractor, Executive nor Executive’s beneficiaries or estate shall have any further rights under this Agreement or any claims against the Company arising out of this Agreement, except that Contractor shall be entitled to receive accrued and unpaid Management Fees which are then due and owing as of the date of termination and, in the event of a termination by the Company without cause in connection with or following a Change of Control, as defined below, Contractor shall be entitled to a continuation of the semi-monthly payment of the Management Fee for a period of six months from the date of termination. For purposes of this Agreement, “cause” shall include Executive’s neglect of duties, willful failure to abide by instructions or policies from or set by the Board, commission of a felony or serious misdemeanor offense or pleading guilty or nolo contendere to same, Contractor’s breach of this Agreement or Contractor’s or Executive’s breach of any other material obligation to the Company.           (c) Upon the termination of this Agreement, Contractor shall, and shall cause Executive to promptly deliver to the Company all equipment, documents and other company property in their respective possession, custody or control.           (d) As used herein, the term “Change of Control” shall be defined as a change in ownership or control of the Company effected through any of the following transactions:                (i) a statutory share exchange, merger, consolidation or reorganization approved by the Company’s stockholders, unless securities representing more than 50% of the total combined voting power of the voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly, by the persons who beneficially owned the Company’s outstanding voting securities immediately prior to such transaction; 2 --------------------------------------------------------------------------------                  (ii) any stockholder approved transfer or other disposition of all or substantially all of the Company’s assets (whether held directly or indirectly through one or more controlled subsidiaries) except to or with a wholly-owned subsidiary of the Company); or                (iii) the acquisition, directly or indirectly by any person or related group of persons of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended), of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities pursuant to transactions with the Company’s stockholders and not solely by direct purchase from the Company.      4. Governing Law; Mediation. This Agreement is entered into in Arizona and shall in all respects be interpreted, construed and governed by and in accordance with the laws of the State of Arizona. The parties agree that any dispute between the parties relating to this Agreement shall be subject to mediation according to the mediation rules of the American Arbitration Association (the “AAA”) applicable to commercial disputes, such to be held at a mutually agreeable office of the AAA in Phoenix, Arizona. Mediation shall be a condition precedent to litigation and mediation shall in no way preclude either party from seeking and obtaining any prejudgment remedy against the other party. By signing this Agreement, the parties submit themselves to the jurisdiction of the courts of the State of Arizona, located in Maricopa County, for the purpose of resolving any and all disputes arising out of this Agreement subject to the mediation procedures set forth in this Section.      5. Whole Agreement. This Agreement embodies all of the representations, warranties, covenants and agreements between the parties and no other representations, warranties, covenants, understandings or agreements exist, provided that it is understood that Executive shall enter into an Indemnification Agreement and Intellectual Property, Confidentiality and Non-Competition Agreement with the Company.      6. Benefits of Agreement; Assignment. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, representatives, heirs and estate, as applicable. Anything contained herein to the contrary notwithstanding, this Agreement shall not be assignable by any party hereto without the consent of the other party hereto; provided, however, that the Company may assign this Agreement in connection with a sale of all or substantially all of its assets or a merger.      7. Amendment. This Agreement may not be amended orally but only by an instrument in writing executed by the Company and Contractor. SIGNATURE PAGE FOLLOWS 3 --------------------------------------------------------------------------------                         COMPANY:       CONTRACTOR:                                                 ORTHOLOGIC CORP.       VV III MANAGEMENT, LLC                           By:   /s/ Fredric J. Feldman, Ph.D.       By:   /s/ John M. Holliman, III                           Name:   Fredric J. Feldman, Ph.D.       Name:   John M. Holliman, III     Title:   Chair Compensation Committee       Title:   Executive Chairman     Date:   May 12, 2006       Date:   May 12, 2006     ACKNOWLEDGEMENT      Executive hereby acknowledges that he has read the foregoing Management Services Agreement and acknowledges and agrees that Executive shall have no rights to employment or other benefits in connection therewith, except as expressly provided therein. The Executive agrees that the termination by either party of the Management Services Agreement shall constitute the tender by Executive of his resignation from all positions held with the Company except, if applicable, as a Director of the Company. The Executive further agrees that so long as Executive is serving as an executive of the Company, Executive agrees that he shall: (i) devote the time, attention, skill and efforts to the performance of such duties as are normal and customary for such position and as reasonably requested by the Company’s Board of Directors; and (ii) use his best efforts to comply with any and all rules of conduct established by the Company and to perform any and all assigned duties in a manner that is acceptable to the Company. EXECUTIVE:           Signature:   /s/ John M. Holliman, III                   John M. Holliman, III               Date: May 12, 2006     4

  Exhibit 10.27 EXECUTION COPY FIRST AMENDMENT TO AMENDED AND RESTATED SECOND LIEN TERM LOAN AGREEMENT Dated Effective as of November 16, 2005 among PETROHAWK ENERGY CORPORATION, as Borrower, THE GUARANTORS, BNP PARIBAS, as Administrative Agent, and THE LENDERS PARTY HERETO   --------------------------------------------------------------------------------   FIRST AMENDMENT TO AMENDED AND RESTATED SECOND LIEN TERM LOAN AGREEMENT      THIS FIRST AMENDMENT TO AMENDED AND RESTATED SECOND LIEN TERM LOAN AGREEMENT (this “First Amendment”) dated effective as of November 16, 2005, is among PETROHAWK ENERGY CORPORATION, a Delaware corporation (the “Borrower”); each of the undersigned guarantors (the “Guarantors”, and together with the Borrower, the “Obligors”); BNP PARIBAS, as administrative agent (in such capacity, together with its successors in such capacity, the “Administrative Agent”) for the lenders party to the Credit Agreement referred to below (collectively, the “Lenders”); and each of the undersigned Lenders. R E C I T A L S      A. The Borrower, the Agents and the Lenders are parties to that certain Amended and Restated Second Lien Term Loan Agreement dated as of July 28, 2005 (the “Credit Agreement”) pursuant to which the Lenders have made that certain $150 million term loan to the Borrower.      B. The Borrower has requested and the Lenders have agreed to amend certain provisions of the Credit Agreement.      C. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:      Section 1. Defined Terms. Each capitalized term used herein but not otherwise defined herein has the meaning given such term in the Credit Agreement. Unless otherwise indicated, all section references in this First Amendment refer to sections of the Credit Agreement.      Section 2. Amendments to Credit Agreement.      2.1 Amendments to Section 1.02. The definition of “Agreement” is hereby amended in its entirety to read as follows:      “Agreement” means this Credit Agreement, as amended by the First Amendment, and as the same may from time to time be amended, modified, supplemented or restated.      2.2 Redemption of Senior Unsecured Notes. Clause (i) of Section 9.04(b) is hereby deleted and the following inserted in lieu thereof:      (i) call, make or offer to make any optional or voluntary Redemption of or otherwise optionally or voluntarily Redeem (whether in whole or in part) the Senior Unsecured Notes or any Permitted Refinancing Debt in respect thereof; provided that the Borrower may (1) prepay the Senior Unsecured Notes and any premiums relating thereto   --------------------------------------------------------------------------------   with the proceeds of any Permitted Refinancing Debt or with the Net Cash Proceeds of any sale of Equity Interests (other than Disqualified Capital Stock) of the Borrower, and/or (2) Redeem or otherwise purchase the Senior Unsecured Notes, provided that (A) the aggregate amount spent to Redeem or otherwise purchase such Senior Unsecured Notes does not exceed $25,000,000 and (B) after giving pro forma effect to any such Redemption or purchase, the Borrower would have at least $25,000,000 of unused availability under the Senior Revolving Credit Agreement; or      Section 3. Conditions Precedent. This First Amendment shall become effective as of November 16, 2005 on the date on which each of the following conditions is satisfied (or waived in accordance with Section 12.02 of the Credit Agreement):      3.1 The Administrative Agent shall have received from the Majority Lenders, the Borrower and each Guarantor, counterparts (in such number as may be requested by the Administrative Agent) of this First Amendment signed on behalf of such Persons.      3.2 All fees and other expenses required to be paid in connection with the First Amendment shall have been paid.      3.3 No Default shall have occurred and be continuing, after giving effect to the terms of this First Amendment.      Section 4. Miscellaneous.      4.1 Confirmation. The provisions of the Credit Agreement, as amended by this First Amendment, shall remain in full force and effect following the effectiveness of this First Amendment.      4.2 Ratification and Affirmation; Representations and Warranties. Each Obligor hereby (a) acknowledges the terms of this First Amendment; (b) ratifies and affirms its obligations under, and acknowledges, renews and extends its continued liability under, each Loan Document to which it is a party and agrees that each Loan Document to which it is a party remains in full force and effect, except as expressly amended hereby, notwithstanding the amendments contained herein and (c) represents and warrants to the Lenders that as of the date hereof, after giving effect to the terms of this First Amendment: (i) all of the representations and warranties contained in each Loan Document to which it is a party are true and correct in all material respects, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case, such representations and warranties shall continue to be true and correct as of such specified earlier date, (ii) no Default has occurred and is continuing and (iii) since December 31, 2004, there has been no event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect.      4.3 Loan Document. This First Amendment is a “Loan Document” as defined and described in the Credit Agreement and all of the terms and provisions of the Credit Agreement relating to Loan Documents shall apply hereto. -2- --------------------------------------------------------------------------------        4.4 Counterparts. This First Amendment may be executed by one or more of the parties hereto in any number of separate counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of this First Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof.      4.5 No Oral Agreement. This First Amendment, the Credit Agreement and the other Loan Documents executed in connection herewith and therewith represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous, or unwritten oral agreements of the parties. There are no subsequent oral agreements between the parties.      4.6 GOVERNING LAW. THIS FIRST AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. -3- --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed, to be effective as of November 16, 2005.               BORROWER:   PETROHAWK ENERGY CORPORATION                       By:      /s/ Floyd C. Wilson                  Floyd C. Wilson                President and Chief Executive Officer     S-1 --------------------------------------------------------------------------------                 GUARANTORS:   PETROHAWK OPERATING COMPANY                       P-H ENERGY, LLC                       PETROHAWK PROPERTIES, LP         By:     P-H Energy, LLC               Its General Partner                       BETA OPERATING COMPANY, L.L.C.         By:     PETROHAWK ENERGY CORPORATION                       Its Sole Member                       TCM, L.L.C.         By:     BETA OPERATING COMPANY, L.L.C.                       Its Sole Member                       By:     PETROHAWK ENERGY CORPORATION                       Its Sole Member                       RED RIVER FIELD SERVICES, L.L.C.         By:     BETA OPERATING COMPANY, L.L.C.                       Its Sole Member                       By:     PETROHAWK ENERGY CORPORATION                       Its Sole Member                       PROHAWK OIL & GAS CORPORATION                       PROHAWK OPERATING, LLC         By:     PROHAWK OIL & GAS CORPORATION                       Its Sole Member-Manager                       MISSION E&P LIMITED PARTNERSHIP         By:     BLACK HAWK OIL COMPANY               Its General Partner                       BLACK HAWK OIL COMPANY                       By:     /s/ Floyd C. Wilson                 Floyd C. Wilson               President and Chief Executive Officer     S-2 --------------------------------------------------------------------------------                     PETROHAWK HOLDINGS, LLC                       MISSION HOLDINGS LLC                       By:      /s/ Connie D. Tatum                  Connie D. Tatum                President     S-3 --------------------------------------------------------------------------------                 ADMINISTRATIVE AGENT:   BNP PARIBAS,         as Administrative Agent                       By:     /s/ Brian M. Malone         Name:       Brian M. Malone         Title:     Managing Director                       By:     /s/ Evans R. Swann         Name:       Evans R. Swann         Title:     Director                       BNP PARIBAS                       By:     /s/ Brian M. Malone         Name:       Brian M. Malone         Title:     Managing Director                       By:     /s/ Evans R. Swann         Name:       Evans R. Swann         Title:     Director     S-4

Exhibit 10.1   AGREEMENT   AGREEMENT made this 9th day of February 2006, by and between Capital Financial Media, LLC., with its principal offices at 103 NE 4th Street, Delray Beach, FL 33444 (“Capital”) and Advanced Cell Technology, Inc., with offices at 11100 Santa Monica Blvd, Suite 850, Los Angeles, CA 90025 (the “Company”).   WHEREAS, the Company is publicly held with a market for its securities; and   WHEREAS, the Company desires to publicize itself with the intention of making its name and business better known to potential shareholders and institutional investors; and   WHEREAS, Capital is preparing a direct mail piece to be distributed by Capital; and   WHEREAS, Capital is in the business of public relations, direct mail advertising and other related activities; and   WHEREAS, Capital is willing to assist the Company by creating and distributing the mail piece.   NOW THEREFORE, in conclusion of the mutual covenants herein contained, it is agreed:   1.             Engagement.  The Company hereby engages Capital to:   a)  Prepare a mailing package about the Company and to distribute the package to no less than 750,000 U.S. residents to states in which such mailing is permitted, based in part by material and information furnished by the Company.   b)  The Company represents that the information furnished to Capital is true, accurate and not misleading and can be substantiated by information in the Company’s public filings or on its website.   c)  Capital assumes no responsibility for the accuracy of the information furnished to it by the Company   --------------------------------------------------------------------------------   and is under no duty and is not being paid to verify that the information furnished is not false and misleading or omits to state any fact to ensure that the information distributed is not false, misleading or deceptive.   2.             Assistance.  The Company acknowledges Capital will create and distribute a report on the Company.  Capital agrees to assist in additional report mailings, as requested, based upon additional production budgets.  All mail package disseminations paid for by the Company will be fully disclosed (disclosing the amount and nature of compensation and associated costs of the program and, where feasible, the compensation to be received by Capital and/or any affiliate of Capital.)   3.             Preparation of Report.  The Company will cooperate fully and timely with Capital to supply all materials reasonably requested by Capital to enable it to create and disseminate the report.  Because Capital will rely upon this information in accepting the responsibility of distributing this mailing package, the Company represents to Capital that all such information provided by the Company shall be true, accurate, and complete and not misleading or deceptive, in any respect.   4.             Company Review.  No material about the Company shall be distributed by Capital unless and until the Company has reviewed all and only the factual information relating to the Company in the mail package.  The Company will act diligently and promptly in reviewing the factual information in the Direct Mail Package submitted to it by Capital to enhance timely distribution of the materials and will inform Capital in writing of any inaccuracies contained in the material prepared prior to the projected publication and/or delivery dates.  The Company will acknowledge in writing that certain factual information as it relates to the Company is correct.   5.             Program Cost.  In consideration of the services to be performed by Capital and various vendors and sub-contractors   --------------------------------------------------------------------------------   retained by it for printing, distributing, including the costs of renting mailing lists, copy writers, data processing, postage and other related costs, the Company agrees to pay Capital, which includes payment of Capital’s overhead incurred and profit in connection with performance of this Agreement, $690,000 as follows:   a)     a deposit of $100,000 to be paid on the signing of this Agreement; b)    $300,000 payable 2 weeks prior to first mail date. c)     $290,000 payable 3 days prior to first mail date.   See Exhibit A for funds delivery instructions and equity compensation.   6.             Disclaimer.  CAPITAL MAKES NO REPRESENTATION THAT: (A) THE PUBLICATION AND DISTRIBUTION OF THE COMPANY’S MATERIAL WILL RESULT IN ANY ENHANCEMENT TO THE COMPANY, (B) THE PRICE OF THE COMPANY’S PUBLICLY TRADED SECURITIES WILL INCREASE, (C) ANY PERSON WILL BECOME A SHAREHOLDER IN THE COMPANY AS A RESULT OF THE DISTRIBUTION, (D) ANY PERSON WILL LEND MONEY TO OR INVEST IN THE COMPANY OR (E) THAT IT HAS VERIFIED ANY OF THE FACTUAL CONTENT OF THE MAILING PACKAGE.   7.             Limitation of Capital’s Liability.  If Capital or its sub-contractors fails to perform its services hereunder, the entire liability of Capital and its sub-contractors to the Company shall not exceed the lesser of: (a) the amount of cash payment Capital has received from the Company, excluding any non-refundable deposits and or (b) the actual and direct damage to the Company as a result of such non-performance.  IN NO EVENT WILL CAPITAL OR ITS PRINCIPAL OR SUB-CONTRACTORS BE LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES NOR FOR ANY CLAIM AGAINST THE   --------------------------------------------------------------------------------   COMPANY BY ANY PERSON OR ENTITY ARISING FROM OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY. Notwithstanding the foregoing, the limitations discussed in this Section 7 shall not apply in the event of Capital’s gross negligence or gross misconduct.   8.             Ownership of Materials.  All right, title and interest in and to materials to be produced by Capital about the Company in connection with the services to be rendered under this Agreement shall be and remain the sole and exclusive property of Capital.   9.             Confidentiality.  Until such time as information or any non-public portion thereof becomes publicly available, Capital agrees that any information provided to it by the Company of a confidential nature will not be revealed or disclosed to any person or entity, except in the performance of this Agreement, and upon completion of its services and upon the written request to it.  Capital will use its best efforts to ensure that its sub-contractors are aware of this confidentiality provision and will request them to comply with it, even though they are not parties to this Agreement.   10.           Notices.  All notices hereunder shall be in writing and addressed to the party at the address set forth below, or at such address as to which written notice pursuant to this section may be given, and shall be given by personal delivery, by certified mail (return receipt requested), Express Mail, or by national overnight courier.  If the Company is a non-resident of the United States, the equivalent services of the postal system of the Company’s residence may be used.  Notices will be deemed given upon the earlier of actual receipt or three (3) business days after being mailed or delivered to such courier service.   --------------------------------------------------------------------------------   11.           Notice shall be addressed to Capital at:   Capital Financial Media, LLC. Attn: Brian Sodi, 103 NE 4th Street Delray Beach, FL 33444 (561) 272-0460 and to the Company at: Advanced Cell Technology, Inc. Attn:  James Stewart 11000 Santa Monica Blvd., Suite 850 Los Angeles, CA 90025   Such addresses and notices may be changed at any time by either party by utilizing the foregoing notice procedures.   12.           Compliance with Law.  Capital shall have no obligation to send any mailings to residents of states of the United States of America in which the common stock of the Company cannot be secondarily traded on a solicited basis.  The Company shall furnish a list of permissible states to Capital within ten (10) days of the furnishing of the initial retainer.  The Company can supplement this list at any time up until five (5) days before the initial mailing.  The Company and Capital will agree upon the states on that list to which the mailings will be directed.  Capital will receive from counsel a legal opinion stating that the mailing package and its disclaimer are in compliance with 17(b) of the Securities Act of 1933.  The legal opinion will also state that the Company could also rely on the opinion as it relates to 17(b) of the Securities Act of 1933.   --------------------------------------------------------------------------------   13.           Miscellaneous.   a)     Governing Law.  This agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Florida without regard to the principles of conflicts of law thereof.   b)    Arbitration and Venue in Florida.  The parties agree that any dispute arising out of this Agreement or other transactions contemplated thereby shall be arbitrated at the facilities of the American Arbitration Associate in Miami, Florida.  Each party hereby irrevocably submits to the non-exclusive jurisdiction of the State of Florida for any appeal of the arbitration award.   c)     Multiple Counterparts.  This Agreement, including the agreement to arbitrate, may be executed in multiple counterparts, each of which shall be deemed an original.  It shall not be necessary that each party execute each counterpart, or that any one counterpart be executed by more than one party, so long as each party executes at least one counterpart.   d)    Severability.  If any one or more of the provisions of this Agreement shall be held invalid, illegal, or unenforceable, and provided that such provision is not essential to the transaction provided for by this Agreement, such shall not affect any other provision hereof, and this Agreement shall be construed as is such provision had never been contained herein.   e)     Regulatory Acceptance.  If the stock of the Company is listed on a foreign exchange(s), this Agreement shall be subject to its acceptance by such exchange(s) to the extent required by the rules of such exchange(s).   f)     No Presumption Against Draftsman.  The parties acknowledge that each party and its counsel have   --------------------------------------------------------------------------------   participated in the negotiation and preparation of this Agreement.  This Agreement shall be construed without regard to any presumption or other rule requiring construction against the party causing the Agreement to be drafted.   EXECUTED as a sealed instrument as of the date and year first above written.     Capital Financial Media, LLC Advanced Cell Technology, Inc.         By: /s/ Brian Sodi   By: /s/ William M. Caldwell IV   Brian Sodi, Managing Member William M. Caldwell IV, Chief Executive Officer   --------------------------------------------------------------------------------   EXHIBIT A Equity Compensation/Funds Delivery Instructions   The equity compensation package to consist of 2 components:   1)     Issuance to Capital of a warrant to purchase 100,000 restricted common shares of the Company at a strike/exercise price of $2.54 for a period of 24-months from the date of distribution of the mailing packages. Option governed under the terms and conditions outlined below.   2)     Issuance to Capital of a warrant to purchase 100,000 restricted common shares of the Company at a strike/exercise price of $4.00 for a period of 24-months from the date of distribution of the mailing packages under the terms and conditions outlined below.   Capital may exercise the warrant in whole or in part and may pay the exercise price (a) in cash or (b) by cashless exercise, as follows:   Capital shall notify warrant issuer together with a notice of cashless exercise, in which event the warrant issuer shall issue to the warrant holder the number of shares to be determined as follows:   X = Y (A-B)/A Where: X = the number of shares to be issued to the option holder.   Y = the number of shares with respect to which this warrant is being exercised.   A = the average of the closing prices of the Common Stock for the five (5) Trading Days immediately prior to (but not including) the Date of Exercise.   B = the Exercise Price.     By Wire:   Wachovia Bank 1660 South Congress Avenue Delray Beach, FL 33445 ABA # 063000021 Swift # PNBPUS33 Customer Name: Capital Financial Media Customer Account #: 9986148113   --------------------------------------------------------------------------------   By Check:   Capital Financial Media, LLC Attn: Brian Sodi 103 NE 4th Street Delray Beach, FL 33444 (561) 272-0460   --------------------------------------------------------------------------------

  Exhibit 10.25.4 AMENDMENT # 2 TO THE MEDICAL SERVICES CONTRACT BETWEEN THE FLORIDA HEALTHY KIDS CORPORATION AND AMERIGROUP FLORIDA, INC. THIS AMENDMENT #2 is made and entered into this 12th day October, 2006 by and between THE FLORIDA HEALTHY KIDS CORPORATION (FHKC) and AMERIGROUP Florida, Inc. (AMERIGROUP).   1.   In accordance with Sections 3-17 and 3-18 of the current Medical Services Contract between FHKC and AMERIGROUP dated October 1, 2005 (Contract), it is agreed by the parties that Exhibit A, Sections I, II and II are amended to read: I. Premium Rate The Comprehensive Medical Care Services premium for the coverage period October 1, 2006 through September 30, 2007 shall be as follows: *************REDACTED*********** II. Additional Requirements for Premium Rates   A.   Minimum Medical Loss Ratio         The minimum medical loss ratio shall be eighty five (85%) percent.     B.   Maximum Administrative Component   FHKC Rate Adjustment Amendment 10-06                       FHKC       Page 1 of 3   AMERIGROUP   --------------------------------------------------------------------------------             The maximum administrative shall not exceed fifteen (15%) percent III. Experience Adjustment In the event that the medical loss ratio. for this Agreement is better than eighty five percent (85%) calculated in the same manner as the premium development and allocation methodology utilized in AMERIGROUP’s response to the Request for Proposals (RFP), AMERIGROUP shall share equally with FHKC the dollar difference between the actual loss ratio for said period and the predicted eighty five percent (85%). AMERIGROUP shall provide FHKC with a written copy of its findings for each Agreement year by February 1st (first). If any payments are due under this provision, AMERIGROUP shall forward such payment with its written notification. AMERIGROUP may be subject to audit or verification by FHKC or its designated agents. FHKC shall determine the adequacy of the information supplied under this section and whether or not the calculation has been accurately performed in the manner prescribed below. The Calculation shall be illustrated in the following manner:               A.   Total Premiums Paid During Agreement Year:   $                   B.   Target Incurred Claims':   85% of A               C.   Actual Incurred Claims for Contract Year:   $                   D.   Difference Between Target Incurred Claims and Actual Line B) Incurred Claims:   $          (Subtract Line C from                       Line B)                   E.   Amount Due FHKC (50% of Line D):   $     2. The effective date of this Amendment is October 1, 2006. All other provisions of Section 3-18 and the Contract in its entirety shall remain in full force and effect as executed by the Parties effective October 1, 2005. [SIGNATURE PAGE FOLLOWS]   ‘   The target medical loss ratio for this contract and for this calculation is 85%. FHKC Rate Adjustment Amendment 10-06   Page 2 of 3   /s/ AMERIGROUP   --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the Parties have caused this Contract, to be executed by their undersigned officials as duly authorized. DONE this 12th day of October, 2006.               AMERIGROUP Community Care:       Florida Healthy Kids Corporation:                           /s/ Rose M. Naff       Don Gilmore       Rose M. Naff,     CEO       Executive Director                   Subscribed and sworn to me, this 12th day of October 2006.            Subscribed and sworn to me, this                   [SEAL]           /s/ Amber N.Floyd   Notary Public     Notary                  My Commission Expires                                   [SEAL]       1. /s/ Dalene Cosby         /s/ Amber N.Floyd       WITNESS       WITNESS                   Dalene Cosby         Amber N.Floyd       PRINT NAME       PRINT NAME                   2. /s/ Shirley Locey         2. /s/ Jennifer K. Lloyd       WITNESS       WITNESS             12th day of October 2006.                   Shirley Lockey               PRINT NAME                     /s/ Jennifer K. Lloyd 10/18/06               Reviewed by: Jennifer K. Lloyd,             Director of External Affairs             /s/ [ILLEGIBLE]               Reviewed by:             Corporate Counsel, FL Bar # 460500     FHKC Rate Adjustment Amendment 10-06                        FHKC       Page 3 of 3   AMERIGROUP  

EXHIBIT 10.4   THIRD AMENDMENT TO THE HOMEBANC MORTGAGE CORPORATION 401(k) RETIREMENT PLAN   THIS THIRD AMENDMENT TO THE HOMEBANC MORTGAGE CORPORATION 401(k) RETIREMENT PLAN (the “Plan”) is made on the 13th day of December 2006, by HomeBanc Corp. (“HomeBanc Corp.”).   W I T N E S S E T H: WHEREAS, the Plan was adopted effective May 1, 2000 and amended and restated effective April 1, 2005; and WHEREAS, final Treasury Regulations under sections 401(k) and 401(m) of the Internal Revenue Code of 1986, as amended (the “Final Regulations”) have been issued, generally effective for plan years beginning on and after January 1, 2006; provided, however, that the Final Regulations can be adopted for any plan year that ends after December 29, 2004; and WHEREAS, HomeBanc Corp. elected to apply the Final Regulations to the Plan for the Plan year beginning January 1, 2005 and ending December 31, 2005 and Plan years thereafter; and WHEREAS, HomeBanc Corp. now desires to amend the Plan to reflect additional changes required by the Final Regulations effective January 1, 2005; and WHEREAS, HomeBanc Corp also desires to amend the Plan to reflect certain changes required by the Pension Protection Act of 2006 effective January 1, 2007; and NOW, THEREFORE, the Plan is hereby amended as follows: 1. Section 1.20 of the Plan is hereby amended, effective as of January 1, 2005, by adding at the end thereof, the following: “Earnings shall include Gap Period Income. “Gap Period Income” means an adjustment for income for the period between the end of the Plan Year and the distribution of Excess Contributions or Excess Aggregate Contributions that must be made for the Plan Years 2006 and 2007 (e.g., the Actual Deferral Percentage Test performed in 2007 for the 2006 Plan Year and the Actual Deferral Percentage test performed in 2008 for the 2007 Plan Year). The Employer may select any method of allocating Gap Period Income that satisfies the requirements of Treasury Regulation section 1.401(k)-2(b)(2)(iv)”     LEGAL02/30174949v2   --------------------------------------------------------------------------------     2. Effective as of January 1, 2005, Section 3.01(a) of the Plan is hereby amended by deleting it in its entirety and replacing it with the following: “(a)        In General. A Participant may elect, in a manner prescribed by the Administrator, to reduce his Compensation payable while an Employee by not less than 1% and not more than 45%, in multiples of 1%, and have that amount contributed to the Plan by the Employer as 401(k) Contributions in a manner to be determined by the Administrator. However, if the sum of the percentages of 401(k) Contributions and After-Tax Contributions elected by the Participant would exceed 50%, then the affected Participant must first reduce the Participant’s Contributions under Plan section 3.02 and then under this Plan section 3.01, so that such sum equals 50%. 401(k) Contributions shall be promptly paid to the Trustee and in no event later than the deadline set forth in Department of Labor Regulation 2510.3-102. 401(k) Contributions shall be made only after the Participant performs the services with respect to which the 401(k) Contributions are to be made (or after the date the Participant otherwise would have received in cash the Compensation being deferred as a 401(k) Contribution, if earlier), unless otherwise provided in the applicable regulations. 401(k) Contributions shall be limited as provided in Plan sections 3.08 and 3.09 and subsection (b) below.” 3. Section 3.01(b) of the Plan is hereby amended, effective as of January 1, 2005, to read as follows: “(b)        Limitations. In no event shall the Participant’s reduction in Compensation and the corresponding 401(k) Contributions made on his or her behalf by the Employer and the Affiliated Employers in any calendar year cause an Excess Deferral.” 4. Section 3.01(d) of the Plan is hereby amended, effective as of January 1, 2005, by adding the following paragraph to its end, as follows: “As of the last day of the Plan Year or other applicable times as determined by the Administrator, the Administrator may recharacterize Catch-Up Contributions as 401(k) Contributions or vice versa, to the extent necessary to satisfy the requirements of Code section 414(v). Necessary recharacterizations shall occur prior to performing discrimination testing required under Plan section 3.08. Note, if a 401(k) Contribution is recharacterized as a   -2- LEGAL02/30174949v2   --------------------------------------------------------------------------------   Catch-up Contribution, any Employer Matching Contribution on the recharacterized 401(k) Contribution shall be forfeited. Similarly, any Catch-up Contributions that are recharacterized as 401(k) Contributions shall be entitled to an Employer Matching Contribution to the extent provided under the Plan.” 5. The last paragraph of Section 3.08(b) of the Plan is hereby amended, effective as of January 1, 2005, by adding the following sentence to the end thereof, as follows: “If recharacterization of 401(k) Contributions as After-Tax Contributions is allowed, the Actual Deferral Percentage test of Plan section 3.08(a) and the Contribution Percentage test of Plan section 3.08(c) must be done using the same testing method (e.g., both tests must be completed using the prior year testing method or both tests must be completed using the current year testing method. See Treasury Regulation sections 1.401(k)-2(a)(2)(ii) and 1.401(m)-2(a)(2)(ii).)” 6. Section 3.08(f) is hereby amended, effective as of January 1, 2005, by revising the second sentence thereof, to read as follows: “Such contributions shall be allocated in such amounts as the Administrator shall determine, to Non-Highly Compensated Employees, in accordance with the applicable regulations.” 7. Section 9.08 of the Plan is hereby amended, effective as of January 1, 2007, by adding a new Subsection 9.08(f),s to read as follows: “(f)         Non-Spouse Beneficiary Rollovers: Effective January 1, 2007, a non-Spouse Beneficiary may elect, at the time and in the manner prescribed by the Administrator, to have any portion of a distribution from the Plan paid directly to an eligible retirement plan specified by the non-Spouse Beneficiary in a direct trustee-to-trustee transfer. For this purpose, the term “eligible retirement plan” shall mean an individual retirement account described in Code section 408(a) or an individual retirement annuity described in Code section 408(b) (other than an endowment contract) which is established for the purpose of receiving the distribution on behalf of an individual who is designated as a Beneficiary and who is not the surviving Spouse of the Participant. This transfer shall be treated as an eligible rollover distribution for purposes of Code section 402(c).”   -3- LEGAL02/30174949v2   --------------------------------------------------------------------------------     8. Except as specifically amended hereby, the Plan shall remain in full force and effect as prior to this Third Amendment.   -4- LEGAL02/30174949v2   --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the Board of Directors of HomeBanc Corp. has caused this Third Amendment to be duly executed as of the day and year first above written.   HOMEBANC CORP.       By: /s/ CHARLES W. McGUIRE   Its: Executive Vice President, General      Counsel and Secretary       -5- LEGAL02/30174949v2      

EXHIBIT 10.39   SYNOPSYS, INC.   2006 EMPLOYEE EQUITY INCENTIVE PLAN   ADOPTED BY THE BOARD OF DIRECTORS:  MARCH 3, 2006 APPROVED BY THE STOCKHOLDERS:  APRIL 25, 2006 TERMINATION DATE:  MARCH 3, 2016   1.                                      GENERAL.   (a)                                  Successor and Continuation of Prior Plans.  The Plan is intended as the successor and continuation of the (i) Synopsys, Inc. 1992 Stock Option Plan, (ii) Synopsys, Inc. 1998 Nonstatutory Stock Option Plan, and (iii) Synopsys, Inc. 2005 Assumed Stock Option Plan (collectively, the “Prior Plans”).  Following the Effective Date, no additional stock awards shall be granted under the Prior Plans.  Any shares remaining available for issuance pursuant to the exercise of options under the Prior Plans shall become available for issuance pursuant to Stock Awards granted hereunder.  Any shares subject to outstanding stock awards granted under the Prior Plans that expire or terminate for any reason prior to exercise or settlement shall become available for issuance pursuant to Stock Awards granted hereunder.  On the Effective Date, all outstanding stock options granted under the Prior Plans shall be deemed to be stock options granted pursuant to the Plan, but shall remain subject to the terms of the Prior Plans with respect to which they were originally granted.    (b)                                  Eligible Award Recipients.  The persons eligible to receive Awards are Employees and Consultants.  Non-employee Directors are not eligible to receive Awards under this Plan.    (c)                                  Available Awards.  The Plan provides for the grant of the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Restricted Stock Awards, (iv) Restricted Stock Unit Awards, (v) Stock Appreciation Rights, (vi) Performance Stock Awards, and (vii) Other Stock Awards.  The Plan also provides for the grant of Performance Cash Awards.    (d)                                  Purpose.  The Company, by means of the Plan, seeks to secure and retain the services of the group of persons eligible to receive Stock Awards as set forth in Section 1(b), to provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate and to provide a means by which such eligible recipients may be given an opportunity to benefit from increases in value of the Common Stock through the granting of Stock Awards.   2.                                      DEFINITIONS.   As used in the Plan, the following definitions shall apply to the capitalized terms indicated below:   1 --------------------------------------------------------------------------------   (a)                                  “Affiliate” means (i) any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, provided each corporation in the unbroken chain (other than the Company) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain, and (ii) any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.  The Board shall have the authority to determine (i) the time or times at which the ownership tests are applied, and (ii) whether “Affiliate” includes entities other than corporations within the foregoing definition.    (b)                                  “Award” means a Stock Award or a Performance Cash Award.    (c)                                  “Board” means the Board of Directors of the Company.   (d)                                  “Capitalization Adjustment” has the meaning ascribed to that term in Section 9(a).   (e)                                  “Cause” means, with respect to a Participant, the occurrence of any of the following: (i) the Participant commits an act of dishonesty in connection with the Participant’s responsibilities as an Employee or Consultant; (ii) the Participant commits a felony or any act of moral turpitude; (iii) the Participant commits any willful or grossly negligent act that constitutes gross misconduct and/or injures, or is reasonably likely to injure, the Company or any Affiliate; or (iv) the Participant willfully and materially violates (A) any written policies or procedures of the Company or any Affiliate, or (B) the Participant’s obligations to the Company or any Affiliate.  The determination that a termination is for Cause shall be made by the Company in its sole discretion.  Any determination by the Company that the Continuous Service of a Participant was terminated with or without Cause for the purposes of outstanding Awards held by such Participant shall have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose.   (f)                                    “Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:   (i)                                    any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction.  Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person from the Company in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (B) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a   2 --------------------------------------------------------------------------------   result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;   (ii)                                there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;   (iii)                            the stockholders of the Company approve or the Board approves a plan of complete dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company shall otherwise occur;   (iv)                               there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; or   (v)                                   individuals who, on the date this Plan is adopted by the Board, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board.   For avoidance of doubt, the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company.   Notwithstanding the foregoing or any other provision of this Plan, the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Stock Awards subject to such agreement; provided, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply.   3 --------------------------------------------------------------------------------   (g)                                 “Code” means the Internal Revenue Code of 1986, as amended.   (h)                                 “Committee” means a committee of one (1) or more members of the Board to whom authority has been delegated by the Board in accordance with Section 3(c).   (i)                                    “Common Stock” means the common stock of the Company.   (j)                                    “Company” means Synopsys, Inc., a Delaware corporation.   (k)                                “Consultant” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the Board of Directors of an Affiliate and is compensated for such services.  However, service solely as a Director, or payment of a fee for such service, shall not cause a Director to be considered a “Consultant” for purposes of the Plan.    (l)                                    “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated.  A change in the capacity in which the Participant renders service to the Company or an Affiliate from a Consultant to Employee shall not terminate a Participant’s Continuous Service. Furthermore, a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, shall not terminate a Participant’s Continuous Service. However, if the corporation for which a Participant is rendering service ceases to qualify as an Affiliate, as determined by the Board in its sole discretion, such Participant’s Continuous Service shall be considered to have terminated on the date such corporation ceases to qualify as an Affiliate.  A leave of absence shall be treated as Continuous Service for purposes of vesting in an Award to such extent as may be provided in the Company’s leave of absence policy or in the written terms of the Participant’s leave of absence.   (m)                              “Corporate Transaction” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:   (i)                                    a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;   (ii)                                a sale or other disposition of at least ninety percent (90%) of the outstanding securities of the Company;   (iii)                            the consummation of a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or   (iv)                               the consummation of a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.   4 --------------------------------------------------------------------------------   (n)                                 “Covered Employee” means the chief executive officer and the four (4) other highest compensated officers of the Company for whom total compensation is required to be reported to stockholders under the Exchange Act, as determined for purposes of Section 162(m) of the Code.   (o)                                  “Director” means a member of the Board.   (p)                                  “Disability” means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code.   (q)                                  “Effective Date” means the effective date of the Plan as specified in Section 12.   (r)                                  “Employee” means any person employed by the Company or an Affiliate.  However, service solely as a Director, or payment of a fee for such services, shall not cause a Director to be considered an “Employee” for purposes of the Plan.   (s)                                  “Entity” means a corporation, partnership or other entity.   (t)                                    “Exchange Act” means the Securities Exchange Act of 1934, as amended.   (u)                                 “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the effective date of the Plan as set forth in Section 12, is the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities.   (v)                                   “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:   (i)                                    If the Common Stock is listed on any established stock exchange or traded on any market system, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date in question, as reported in The Wall Street Journal or such other source as the Board deems reliable.  Unless otherwise provided by the Board, if there is no closing sales price (or closing bid if no sales were reported) for the Common Stock on the date in question, then the Fair Market Value shall be the closing sales price (or closing bid if no sales were reported) on the last preceding date for which such quotation exists.    5 --------------------------------------------------------------------------------   (ii)                                In the absence of such markets for the Common Stock, the Fair Market Value shall be determined by the Board in a manner that complies with Section 409A of the Code.   (w)                                “Incentive Stock Option” means an Option which qualifies as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.   (x)                                  “Non-Employee Director” means a Director who either (i) is not a current employee or officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)), does not possess an interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.   (y)                                  “Nonstatutory Stock Option” means an Option which does not qualify as an Incentive Stock Option.   (z)                                  “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.   (aa)                            “Option” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan.   (bb)                            “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant.  Each Option Agreement shall be subject to the terms and conditions of the Plan.   (cc)                            “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.   (dd)                            “Other Stock Award” means an award based in whole or in part by reference to the Common Stock which is granted pursuant to the terms and conditions of Section 7(e).   (ee)                            “Other Stock Award Agreement” means a written agreement between the Company and a holder of an Other Stock Award evidencing the terms and conditions of an Other Stock Award grant.  Each Other Stock Award Agreement shall be subject to the terms and conditions of the Plan.   (ff)                                “Outside Director” means a Director who either (i) is not a current employee of the Company or an “affiliated corporation” (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated corporation” who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the taxable year, has not been an officer of the Company or an “affiliated corporation,” and does not receive remuneration from the Company or an   6 --------------------------------------------------------------------------------   “affiliated corporation,” either directly or indirectly, in any capacity other than as a Director, or (ii) is otherwise considered an “outside director” for purposes of Section 162(m) of the Code.   (gg)                          “Own,” “Owned,” “Owner,” “Ownership”  A person or Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.   (hh)                          “Participant” means a person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Award.   (ii)                                “Performance Cash Award” means an award of cash granted pursuant to the terms and conditions of Section 7(d)(ii).   (jj)                                “Performance Criteria” means the one or more criteria that the Board shall select for purposes of establishing the Performance Goals for a Performance Period.  The Performance Criteria that shall be used to establish such Performance Goals may be based on any one of, or combination of, the following: (i) earnings per share; (ii) earnings before interest, taxes and depreciation; (iii) earnings before interest, taxes, depreciation and amortization (EBITDA); (iv) net earnings; (v) return on equity; (vi) return on assets, investment, or capital employed; (vii) operating margin; (viii) gross margin; (ix) operating income; (x) net income (before or after taxes); (xi) net operating income; (xii) net operating income after tax; (xiii) pre- and after-tax income; (xiv) pre-tax profit; (xv) operating cash flow; (xvi) orders and revenue; (xvii) orders quality metrics; (xviii) increases in revenue or product revenue; (xix) expenses and cost reduction goals; (xx) improvement in or attainment of expense levels; (xxi) improvement in or attainment of working capital levels; (xxii) market share; (xxiii) cash flow; (xxiv) cash flow per share; (xxv) share price performance; (xxvi) debt reduction; (xxvii) implementation or completion of projects or processes; (xxviii) customer satisfaction; (xxix) stockholders’ equity; (xxx) quality measures; and (xxxi) any other measures of performance selected by the Board.  Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in the Stock Award Agreement or the written terms of a Performance Cash Award.  The Board shall, in its sole discretion, define the manner of calculating the Performance Criteria it selects to use for such Performance Period.   (kk)                        “Performance Goals” means, for a Performance Period, the one or more goals established by the Board for the Performance Period based upon the Performance Criteria.  Performance Goals may be set on a Company-wide basis, with respect to one or more business units, divisions, Affiliates, or business segments, and in either absolute terms or relative to internally generated business plans, approved by the Board, the performance of one or more comparable companies or the performance of one or more relevant indices.  To the extent consistent with Section 162(m) of the Code and the regulations thereunder, the Board is authorized to make adjustments in the method of calculating the attainment of Performance Goals for a Performance Period as follows: (i) to exclude restructuring and/or other nonrecurring charges; (ii) to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings; (iii) to exclude the effects of changes to generally accepted accounting standards required by the Financial Accounting Standards Board; (iv) to exclude the   7 --------------------------------------------------------------------------------   effects of any statutory adjustments to corporate tax rates; (v) to exclude stock-based compensation expense determined under generally accepted accounting principles; (vi) to exclude any other unusual, non-recurring gain or loss or extraordinary item; (vii) to respond to, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development; (viii) to respond to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; (ix) to exclude the dilutive effects of acquisitions or joint ventures; (x) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture; (xi) to exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common shareholders other than regular cash dividends; (xii) to reflect a corporate transaction, such as a merger, consolidation, separation (including a spinoff or other distribution of stock or property by a corporation), or reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code); and (xiii) to reflect any partial or complete corporate liquidation.  The Board also retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals.   (ll)                                “Performance Period” means the one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Performance Stock Award or a Performance Cash Award.    (mm)                    “Performance Stock Award” means either a Restricted Stock Award or a Restricted Stock Unit Award granted pursuant to the terms and conditions of Section 7(d)(i).   (nn)                          “Plan” means this Synopsys, Inc. 2006 Employee Equity Incentive Plan.   (oo)                            “Prior Plans” means the Company’s 1992 Stock Option Plan, 1998 Nonstatutory Stock Option Plan, and 2005 Assumed Stock Option Plan as in effect immediately prior to the effective date of the Plan.   (pp)                            “Restricted Stock Award” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 7(a).   (qq)                            “Restricted Stock Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award grant.  Each Restricted Stock Award Agreement shall be subject to the terms and conditions of the Plan.   (rr)                            “Restricted Stock Unit Award” means a right to receive shares of Common Stock which is granted pursuant to the terms and conditions of Section 7(b).   (ss)                            “Restricted Stock Unit Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted Stock Unit Award grant.  Each Restricted Stock Unit Award Agreement shall be subject to the terms and conditions of the Plan.   8 --------------------------------------------------------------------------------   (tt)                                “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.   (uu)                          “Securities Act” means the Securities Act of 1933, as amended.   (vv)                              “Stock Appreciation Right” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 7(c).   (ww)                        “Stock Appreciation Right Agreement” means a written agreement between the Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation Right grant.  Each Stock Appreciation Right Agreement shall be subject to the terms and conditions of the Plan.   (xx)                            “Stock Award” means any right granted under the Plan, including an Option, a Stock Appreciation Right, a Restricted Stock Award, a Restricted Stock Unit Award, a Performance Stock Award, or an Other Stock Award.   (yy)                            “Stock Award Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of a Stock Award grant.  Each Stock Award Agreement shall be subject to the terms and conditions of the Plan.   (zz)                            “Subsidiary” means, with respect to the Company, (i) any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%).   (aaa)                      “Ten Percent Stockholder” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Affiliate.   3.                                      ADMINISTRATION.   (a)                                  Administration by Board.  The Board shall administer the Plan unless and until the Board delegates administration of the Plan to a Committee, as provided in Section 3(c).   (b)                                  Powers of Board.  The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:   (i)                                    To construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for its administration.  The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement or in the written terms of a Performance Cash Award, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.   9 --------------------------------------------------------------------------------   (ii)                                To determine from time to time (1) which of the persons eligible under the Plan shall be granted Awards; (2) when and how each Award shall be granted; (3) what type or combination of types of Award shall be granted; (4) the provisions of each Award granted (which need not be identical), including the time or times when a person shall be permitted to receive cash or Common Stock pursuant to a Award; and (5) the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such person.   (iii)                            To accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest.   (iv)                               To amend the Plan or an Award as provided in Section 10.   (v)                                   To terminate or suspend the Plan as provided in Section 11.   (vi)                               Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan.   (vii)                           To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by individuals who are foreign nationals or employed outside the United States.   (c)                                  Delegation to Committee.   (i)                                    General.  The Board may delegate some or all of the administration of the Plan to a Committee or Committees.  If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board.  The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.   (ii)                                Section 162(m) and Rule 16b-3 Compliance.  In the sole discretion of the Board, the Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, and/or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3.  In addition, the Board or the Committee, in its sole discretion, may (1) delegate to a committee of one or more members of the Board who need not be Outside Directors the authority to grant Awards to eligible persons who are either (a) not then Covered Employees and are not expected to be Covered Employees at the time of recognition of income resulting from such Award, or (b) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code, and/or (2) delegate to a committee of one or more members of the Board who need not be Non-Employee Directors the authority to grant Stock Awards to eligible persons who are not then subject to Section 16 of the Exchange Act.   10 --------------------------------------------------------------------------------   (d)                                  Delegation to an Officer.  The Board may delegate to one or more Officers of the Company the authority to do one or both of the following (i) designate Employees of the Company or any of its Subsidiaries to be recipients of Options and the terms thereof, and (ii) determine the number of shares of Common Stock to be subject to such Options granted to such Employees; provided, however, that the Board resolutions regarding such delegation shall specify the total number of shares of Common Stock that may be subject to the Options granted by such Officer.  Notwithstanding anything to the contrary in this Section 3(d), the Board may not delegate to an Officer authority to determine the Fair Market Value of the Common Stock pursuant to Section 2(v)(ii) above.    (e)                                  Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.   (f)                                    Cancellation and Re-Grant of Stock Awards.  Neither the Board nor any Committee shall have the authority to: (i) reprice any outstanding Stock Awards under the Plan, or (ii) cancel and re-grant any outstanding Stock Awards under the Plan, unless the stockholders of the Company have approved such an action within twelve (12) months prior to such an event, provided, however, that this provision shall not prevent cancellations of Stock Awards upon expiration or termination of such Stock Awards and the return of the underlying shares of Common Stock to the Plan for future issuance pursuant to Section 4(b) hereof.   4.                                      SHARES SUBJECT TO THE PLAN.   (a)                                  Share Reserve.  Subject to the provisions of Section 9(a) relating to Capitalization Adjustments, the number of shares of Common Stock that may be issued pursuant to Stock Awards shall not exceed Forty-Seven Million Four Hundred Ninety-Seven Thousand Two Hundred Forty-Eight (47,497,248) shares of Common Stock in the aggregate.  Such maximum number of shares reserved for issuance is approximately equal to the number of shares remaining available for issuance under the Prior Plans, including shares subject to outstanding stock awards under the Prior Plans as of the Effective Date.  Subject to Section 4(b), the number of shares available for issuance under the Plan shall be reduced by: (i) one (1) share for each share of stock issued pursuant to (A) an Option granted under Section 6, or (B) a Stock Appreciation Right granted under Section 7(c), and (ii) one and thirty-six hundredths (1.36) shares for each share of Common Stock issued pursuant to a Restricted Stock Award, Restricted Stock Unit Award, or Other Stock Award granted under Section 7.  Shares may be issued in connection with a merger or acquisition as permitted by NASD Rule 4350(i)(1)(A)(iii) or, if applicable, NYSE Listed Company Manual Section 303A(8) and such issuance shall not reduce the number of shares available for issuance under the Plan.    (b)                                  Reversion of Shares to the Share Reserve.    (i)                                    Shares Available For Subsequent Issuance.  If any (i) Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, (ii) shares of Common Stock issued to a Participant pursuant to a Stock Award are forfeited to or repurchased by the Company at their original exercise or purchase price pursuant to the Company’s reacquisition or repurchase rights under the Plan, including any   11 --------------------------------------------------------------------------------   forfeiture or repurchase caused by the failure to meet a contingency or condition required for the vesting of such shares, or (iii) Stock Award is settled in cash, then the shares of Common Stock not issued under such Stock Award, or forfeited to or repurchased by the Company, shall revert to and again become available for issuance under the Plan.  To the extent there is issued a share of Common Stock pursuant to a Stock Award that counted as one and thirty-six hundredths (1.36) shares against the number of shares available for issuance under the Plan pursuant to Section 4(a) and such share of Common Stock again becomes available for issuance under the Plan pursuant to this Section 4(b)(i), then the number of shares of Common Stock available for issuance under the Plan shall increase by one and thirty-six hundredths (1.36) shares.    (ii)                                Shares Not Available for Subsequent Issuance.  If any shares subject to a Stock Award are not delivered to a Participant because the Stock Award is exercised through a reduction of shares subject to the Stock Award (i.e., “net exercised”) or an appreciation distribution in respect of a Stock Appreciation Right is paid in shares of Common Stock, the number of shares subject to the Stock Award that are not delivered to the Participant shall not remain available for subsequent issuance under the Plan.  If any shares subject to a Stock Award are not delivered to a Participant because such shares are withheld in satisfaction of the withholding of taxes incurred in connection with the exercise of an Option, Stock Appreciation Right, or the issuance of shares under a Restricted Stock Award or Restricted Stock Unit Award, the number of shares that are not delivered to the Participant shall not remain available for subsequent issuance under the Plan.  If the exercise price of any Stock Award is satisfied by tendering shares of Common Stock held by the Participant (either by actual delivery or attestation), then the number of shares so tendered shall not remain available for subsequent issuance under the Plan.    (c)                                  Incentive Stock Option Limit.  Notwithstanding anything to the contrary in this Section 4, subject to the provisions of Section 9(a) relating to Capitalization Adjustments the aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be Forty-Seven Million Four Hundred Ninety-Seven Thousand Two Hundred Forty-Eight (47,497,248) shares of Common Stock.   (d)                                  Source of Shares.  The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market.   5.                                      ELIGIBILITY.   (a)                                  Eligibility for Specific Stock Awards.  Incentive Stock Options may be granted only to Employees.  Stock Awards other than Incentive Stock Options may be granted to Employees and Consultants.  Stock Awards under this Plan may not be granted to non-employee Directors.    (b)                                  Ten Percent Stockholders.  An Employee who is also a Ten Percent Stockholder shall not be granted an Incentive Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the date of grant and the Option has a term of no more than five (5) years from the date of grant and is not exercisable after the expiration of five (5) years from the date of grant.   12 --------------------------------------------------------------------------------   (c)                                  Section 162(m) Limitation on Annual Awards.  Subject to the provisions of Section 9(a) relating to Capitalization Adjustments no Employee shall be eligible to be granted Stock Awards whose value is determined by reference to an increase over an exercise or strike price of at least one hundred percent (100%) of the Fair Market Value of the Common Stock on the date the Stock Award is granted covering more than one million (1,000,000) shares of Common Stock during any calendar year.   6.                                      OPTION PROVISIONS.   Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate.  All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates shall be issued for shares of Common Stock purchased on exercise of each type of Option.  The provisions of separate Options need not be identical; provided, however, that each Option Agreement shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:   (a)                                  Term.  No Option shall be exercisable after the expiration of ten (10) years from the date of grant, or such shorter period specified in the Option Agreement; provided, however, that an Incentive Stock Option granted to a Ten Percent Stockholder shall be subject to the provisions of Section 5(b).   (b)                                  Exercise Price of an Incentive Stock Option.  Subject to the provisions of Section 5(b) regarding Ten Percent Stockholders, the exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted.  Notwithstanding the foregoing, an Incentive Stock Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner consistent with the provisions of Section 424(a) of the Code.   (c)                                  Exercise Price of a Nonstatutory Stock Option.  The exercise price of each Nonstatutory Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted.  Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner consistent with the provisions of Section 424(a) of the Code.   (d)                                  Consideration.  The purchase price of Common Stock acquired pursuant to the exercise of an Option shall be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below.  The Board shall have the authority to grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to utilize a particular method of payment.  The methods of payment permitted by this Section 6(d) are:   13 --------------------------------------------------------------------------------   (i)                                    by cash or check;   (ii)                                pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds;   (iii)                            by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock;   (iv)                               by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, the Company shall accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued; provided, however, that shares of Common Stock will no longer be outstanding under an Option and will not be exercisable thereafter to the extent that (i) shares are used to pay the exercise price pursuant to the “net exercise,” (ii) shares are delivered to the Participant as a result of such exercise, and (iii) shares are withheld to satisfy tax withholding obligations; or   (v)                                   in any other form of legal consideration that may be acceptable to the Board.    (e)                                  Transferability of Options.  The Board may, in its sole discretion, impose such limitations on the transferability of Options as the Board shall determine.  In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options shall apply:   (i)                                    Restrictions on Transfer.  An Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder.    (ii)                                Domestic Relations Orders.  Notwithstanding the foregoing, an Option may be transferred pursuant to a domestic relations order; provided, however, that if an Option is an Incentive Stock Option, such Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.    (iii)                            Beneficiary Designation.  Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company and any broker designated by the Company to effect Option exercises, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.  In the absence of such a designation, the executor or administrator of the Optionholder’s estate shall be entitled to exercise the Option.   (f)                                    Vesting of Options Generally.  The total number of shares of Common Stock subject to an Option may vest and therefore become exercisable in periodic installments that may or may not be equal.  The Option may be subject to such other terms and conditions on the time   14 --------------------------------------------------------------------------------   or times when it may or may not be exercised (which may be based on performance or other criteria) as the Board may deem appropriate.  The vesting provisions of individual Options may vary.  The provisions of this Section 6(f) are subject to any Option provisions governing the minimum number of shares of Common Stock as to which an Option may be exercised.   (g)                                 Termination of Continuous Service.  In the event that an Optionholder’s Continuous Service terminates (other than for Cause or upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement.  If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.    (h)                                 Extension of Termination Date.  An Optionholder’s Option Agreement may provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than upon the Optionholder’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of a period of three (3) months after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements, or (ii) the expiration of the term of the Option as set forth in the Option Agreement.   (i)                                    Disability of Optionholder.  In the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination of Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement.  If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.   (j)                                    Death of Optionholder.  In the event that (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death, or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the option upon the Optionholder’s death, but only within the period ending on the earlier of (i) the date twelve (12) months following the date of death (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of such Option as set forth in the Option Agreement.  If, after the   15 --------------------------------------------------------------------------------   Optionholder’s death, the Option is not exercised within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.   (k)                                Termination for Cause.  In the event that an Optionholder’s Continuous Service is terminated for Cause, the Option shall terminate immediately and cease to remain outstanding and the Option shall cease to be exercisable with respect to any shares of Common Stock (whether vested or unvested) at the time of such termination.   7.                                      PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.   (a)                                  Restricted Stock Awards.  Each Restricted Stock Award Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate.  To the extent consistent with the Company’s Bylaws, at the Board’s election, shares of Common Stock may be (i) held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock Award lapse; or (ii) evidenced by a certificate, which certificate shall be held in such form and manner as determined by the Board.  The terms and conditions of Restricted Stock Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Award Agreements need not be identical; provided, however, that each Restricted Stock Award Agreement shall include (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:   (i)                                    Consideration.  A Restricted Stock Award may be awarded in consideration for (i) past or future services rendered to the Company or an Affiliate, or (ii) any other form of legal consideration that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.   (ii)                                Vesting.  Shares of Common Stock awarded under a Restricted Stock Award Agreement may be subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the Board.    (iii)                            Termination of Participant’s Continuous Service.  In the event a Participant’s Continuous Service terminates, the Company may receive via a forfeiture condition, any or all of the shares of Common Stock held by the Participant which have not vested as of the date of termination of Continuous Service under the terms of the Restricted Stock Award Agreement.   (iv)                               Transferability.  Rights to acquire shares of Common Stock under the Restricted Stock Award Agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board shall determine in its sole discretion, so long as Common Stock awarded under the Restricted Stock Award Agreement remains subject to the terms of the Restricted Stock Award Agreement.   (b)                                  Restricted Stock Unit Awards.  Each Restricted Stock Unit Award Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate.  The terms and conditions of Restricted Stock Unit Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical; provided, however, that each Restricted Stock Unit Award   16 --------------------------------------------------------------------------------   Agreement shall include (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:   (i)                                    Consideration.  A Restricted Stock Unit Award may be awarded in consideration for (i) past or future services rendered to the Company or an Affiliate, or (ii) any other form of legal consideration that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.   (ii)                                Vesting.  At the time of the grant of a Restricted Stock Unit Award, the Board may impose such restrictions or conditions to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate.    (iii)                            Payment.  A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.   (iv)                               Termination of Participant’s Continuous Service.  Except as otherwise provided in the applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.   (c)                                  Stock Appreciation Rights.  Each Stock Appreciation Right Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate.  The terms and conditions of Stock Appreciation Right Agreements may change from time to time, and the terms and conditions of separate Stock Appreciation Right Agreements need not be identical; provided, however, that each Stock Appreciation Right Agreement shall include (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:   (i)                                    Term.  No Stock Appreciation Right shall be exercisable after the expiration of ten (10) years from the date of grant, or such shorter period specified in the Stock Appreciation Right Agreement.    (ii)                                Strike Price.  Each Stock Appreciation Right will be denominated in shares of Common Stock equivalents.  The strike price of each Stock Appreciation Right shall not be less than one hundred percent (100%) of the Fair Market Value of the Common Stock equivalents subject to the Stock Appreciation Right on the date of grant.   (iii)                            Calculation of Appreciation.  The appreciation distribution payable on the exercise of a Stock Appreciation Right will be not greater than an amount equal to the excess of (i) the aggregate Fair Market Value (on the date of the exercise of the Stock Appreciation Right) of a number of shares of Common Stock equal to the number of share of Common Stock equivalents in which the Participant is vested under such Stock Appreciation Right, and with respect to which the Participant is exercising the Stock Appreciation Right on such date, over (ii) the strike price that is determined by the Board on the date of grant of the Stock Appreciation Right.    17 --------------------------------------------------------------------------------   (iv)                               Vesting.  At the time of the grant of a Stock Appreciation Right, the Board may impose such restrictions or conditions to the vesting of such Stock Appreciation Right as it, in its sole discretion, deems appropriate.    (v)                                   Exercise.  To exercise any outstanding Stock Appreciation Right, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.    (vi)                               Payment.  The appreciation distribution in respect of a Stock Appreciation Right may be paid in Common Stock, in cash, in any combination of the two or in any other form of consideration, as determined by the Board and set forth in the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.   (vii)                           Termination of Continuous Service.  In the event that a Participant’s Continuous Service terminates (other than for Cause or upon the Participant’s death or Disability), the Participant may exercise his or her Stock Appreciation Right (to the extent that the Participant was entitled to exercise such Stock Appreciation Right as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the Stock Appreciation Right Agreement), or (ii) the expiration of the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement.  If, after termination of Continuous Service, the Participant does not exercise his or her Stock Appreciation Right within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.   (viii)                       Extension of Termination Date.  A Participant’s Stock Appreciation Right Agreement may provide that if the exercise of the Stock Appreciation Right following the termination of the Participant’s Continuous Service (other than upon the Participant’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Stock Appreciation Right shall terminate on the earlier of (i) the expiration of a period of three (3) months after the termination of the Participant’s Continuous Service during which the exercise of the Stock Appreciation Right would not be in violation of such registration requirements, or (ii) the expiration of the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement.   (ix)                              Disability of Participant.  In the event that a Participant’s Continuous Service terminates as a result of the Participant’s Disability, the Participant may exercise his or her Stock Appreciation Right (to the extent that the Participant was entitled to exercise such Stock Appreciation Right as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination of Continuous Service (or such longer or shorter period specified in the Stock Appreciation Right Agreement), or (ii) the expiration of the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement.  If, after termination of Continuous Service, the Participant does not exercise his or her Stock Appreciation Right within the time   18 --------------------------------------------------------------------------------   specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.   (x)                                  Death of Participant.  In the event that (i) a Participant’s Continuous Service terminates as a result of the Participant’s death, or (ii) the Participant dies within the period (if any) specified in the Stock Appreciation Right Agreement after the termination of the Participant’s Continuous Service for a reason other than death, then the Stock Appreciation Right may be exercised (to the extent the Participant was entitled to exercise such Stock Appreciation Right as of the date of death) by the Participant’s estate, by a person who acquired the right to exercise the Stock Appreciation Right by bequest or inheritance or by a person designated to exercise the Stock Appreciation Right upon the Participant’s death, but only within the period ending on the earlier of (i) the date twelve (12) months following the date of death (or such longer or shorter period specified in the Stock Appreciation Right Agreement), or (ii) the expiration of the term of such Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement.  If, after the Participant’s death, the Stock Appreciation Right is not exercised within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.   (xi)                              Termination for Cause.  In the event that a Participant’s Continuous Service is terminated for Cause, the Stock Appreciation Right shall terminate immediately and cease to remain outstanding and the Stock Appreciation Right shall cease to be exercisable with respect to any shares of Common Stock (whether vested or unvested) at the time of such termination.   (d)                                  Performance Awards.    (i)                                    Performance Stock Awards.  A Performance Stock Award is either a Restricted Stock Award or Restricted Stock Unit Award that may be granted, may vest, or may be exercised based upon the attainment during a Performance Period of certain Performance Goals.  A Performance Stock Award may, but need not, require the completion of a specified period of Continuous Service. The length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained shall be conclusively determined by the Committee in its sole discretion.  The maximum benefit to be received by any Participant in any calendar year attributable to Performance Stock Awards described in this Section 7(d)(i) shall not exceed the value of one million (1,000,000) shares of Common Stock.    (ii)                                Performance Cash Awards.  A Performance Cash Award is a cash award that may be granted upon the attainment during a Performance Period of certain Performance Goals.  A Performance Cash Award may also require the completion of a specified period of Continuous Service.  The length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained shall be conclusively determined by the Committee in its sole discretion.  The maximum benefit to be received by any Participant in any calendar year attributable to Performance Cash Awards described in this Section 7(d)(ii) shall not exceed two million dollars ($2,000,000).    19 --------------------------------------------------------------------------------   (e)                                  Other Stock Awards.  Other forms of Stock Awards valued in whole or in part by reference to, or otherwise based on, Common Stock may be granted either alone or in addition to Stock Awards provided for under Section 6 and the preceding provisions of this Section 7.  Subject to the provisions of the Plan, the Board shall have sole and complete authority to determine the persons to whom and the time or times at which such Other Stock Awards will be granted, the number of shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock Awards and all other terms and conditions of such Other Stock Awards.    8.                                      MISCELLANEOUS.   (a)                                  Use of Proceeds.  Proceeds from the sale of shares of Common Stock pursuant to Stock Awards shall constitute general funds of the Company.   (b)                                  Stockholder Rights.  No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award unless and until such Participant has exercised the Stock Award pursuant to its terms and the issuance of the Common Stock has been entered into the books and records of the Company.   (c)                                  No Employment or Other Service Rights.  Nothing in the Plan, any Stock Award Agreement or other instrument executed thereunder or in connection with any Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.   (d)                                  Incentive Stock Option $100,000 Limitation.  To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s).   (e)                                  Investment Assurances.  The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Stock Award for   20 --------------------------------------------------------------------------------   the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock.  The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (i) the issuance of the shares upon the exercise or acquisition of Common Stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act, or (ii) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws.  The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.   (f)                                    Securities Law Compliance.  The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award.  If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained.  A Participant shall not be eligible for the grant of a Stock Award or the subsequent issuance of Common Stock pursuant to the Stock Award if such grant or issuance would be in violation of any applicable securities laws.    (g)                                 Withholding Obligations.  To the extent provided by the terms of a Stock Award Agreement, the Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to a Stock Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Stock Award; provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of the Stock Award as a liability for financial accounting purposes); (iii) withholding payment from any amounts otherwise payable to the Participant; or (iv) by such other method as may be set forth in the Stock Award Agreement.   (h)                                 Electronic Delivery.  Any reference herein to a “written” agreement or document shall include any agreement or document delivered electronically or posted on the Company’s intranet.   9.                                      ADJUSTMENTS UPON CHANGES IN COMMON STOCK; CORPORATE TRANSACTIONS.   (a)                                  Capitalization Adjustments.  If any change is made in, or other events occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the effective date of the Plan set forth in Section 12 without the receipt of consideration by the   21 --------------------------------------------------------------------------------   Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company (each a “Capitalization Adjustment”)), the Board shall appropriately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 4(a), (ii) the class(es) and maximum number of securities that may be issued pursuant to the exercise of Incentive Stock Options pursuant to Section 4(c), (iii) the class(es) and maximum number of securities that may be awarded to any person pursuant to Sections 5(c) and 7(d)(i), and (iv) the class(es) and number of securities and price per share of stock subject to outstanding Stock Awards.  The Board shall make such adjustments, and its determination shall be final, binding and conclusive.  (Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company.)    (b)                                  Dissolution or Liquidation.  In the event of a dissolution or liquidation of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to the Company’s right of repurchase) shall terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase option may be repurchased by the Company notwithstanding the fact that the holder of such Stock Award is providing Continuous Service, provided, however, that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.   (c)                                  Corporate Transaction.  The following provisions shall apply to Stock Awards in the event of a Corporate Transaction unless otherwise provided in a written agreement between the Company or any Affiliate and the holder of the Stock Award:    (i)                                    Stock Awards May Be Assumed.  In the event of a Corporate Transaction, any surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue any or all Stock Awards outstanding under the Plan or may substitute similar stock awards for Stock Awards outstanding under the Plan (including, but not limited to, awards to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction), and any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to Stock Awards may be assigned by the Company to the successor of the Company (or the successor’s parent company, if any), in connection with such Corporate Transaction.  A surviving corporation or acquiring corporation may choose to assume or continue only a portion of a Stock Award or substitute a similar stock award for only a portion of a Stock Award.  The terms of any assumption, continuation or substitution shall be set by the Board in accordance with the provisions of Section 3(b).    (ii)                                Stock Awards Held by Current Participants.  In the event of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue any or all outstanding Stock Awards or substitute similar stock awards for such outstanding Stock Awards, then with respect to Stock Awards that have   22 --------------------------------------------------------------------------------   not been assumed, continued or substituted and that are held by Participants whose Continuous Service has not terminated prior to the effective time of the Corporate Transaction (referred to as the “Current Participants”), the vesting of such Stock Awards (and, if applicable, the time at which such Stock Awards may be exercised) shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated in full to a date prior to the effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five (5) days prior to the effective time of the Corporate Transaction), and such Stock Awards shall terminate if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction, and any reacquisition or repurchase rights held by the Company with respect to such Stock Awards shall lapse (contingent upon the effectiveness of the Corporate Transaction).  No vested Restricted Stock Unit Award shall terminate pursuant to this Section 9(c)(ii) without being settled by delivery of shares of Common Stock, their cash equivalent, any combination thereof, or in any other form of consideration, as determined by the Board, prior to the effective time of the Corporate Transaction.   (iii)                            Stock Awards Held by Former Participants.  In the event of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue any or all outstanding Stock Awards or substitute similar stock awards for such outstanding Stock Awards, then with respect to Stock Awards that have not been assumed, continued or substituted and that are held by persons other than Current Participants, the vesting of such Stock Awards (and, if applicable, the time at which such Stock Award may be exercised) shall not be accelerated and such Stock Awards (other than a Stock Award consisting of vested and outstanding shares of Common Stock not subject to the Company’s right of repurchase) shall terminate if not exercised (if applicable) prior to the effective time of the Corporate Transaction; provided, however, that any reacquisition or repurchase rights held by the Company with respect to such Stock Awards shall not terminate and may continue to be exercised notwithstanding the Corporate Transaction.  No vested Restricted Stock Unit Award shall terminate pursuant to this Section 9(c)(iii) without being settled by delivery of shares of Common Stock, their cash equivalent, any combination thereof, or in any other form of consideration, as determined by the Board, prior to the effective time of the Corporate Transaction.   (iv)                               Payment for Stock Awards in Lieu of Exercise.  Notwithstanding the foregoing, in the event a Stock Award will terminate if not exercised prior to the effective time of a Corporate Transaction, the Board may provide, in its sole discretion, that the holder of such Stock Award may not exercise such Stock Award but will receive a payment, in such form as may be determined by the Board, equal in value to the excess, if any, of (i) the value of the property the holder of the Stock Award would have received upon the exercise of the Stock Award, over (ii) any exercise price payable by such holder in connection with such exercise.    (d)                                  Change in Control.  A Stock Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant.  A Stock Award may vest as to all or any portion of the shares subject to the Stock Award (i) immediately upon the occurrence of a Change in Control, whether or not such Stock Award is assumed, continued, or substituted by a surviving or acquiring entity in the Change in Control, or (ii) in the event a Participant’s   23 --------------------------------------------------------------------------------   Continuous Service is terminated, actually or constructively, within a designated period following the occurrence of a Change in Control.  In the absence of such provisions, no such acceleration shall occur.    10.                               AMENDMENT OF THE PLAN AND STOCK AWARDS.   (a)                                  Amendment of Plan.  Subject to the limitations of applicable law, the Board at any time, and from time to time, may amend the Plan.  However, stockholder approval shall be required for any amendment of the Plan that either (i) materially increases the number of shares of Common Stock available for issuance under the Plan, (ii) materially expands the class of individuals eligible to receive Awards under the Plan, (iii) materially increases the benefits accruing to Participants under the Plan or materially reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (iv) materially extends the term of the Plan, or (v) expands the types of Awards available for issuance under the Plan, but only to the extent required by applicable law or listing requirements.   (b)                                  Stockholder Approval.  The Board, in its sole discretion, may submit any other amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to Covered Employees.   (c)                                  Contemplated Amendments.  It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options granted under it into compliance therewith.   (d)                                  Amendment of Awards.  The Board, at any time and from time to time, may amend the terms of any one or more Awards (either directly or by amending the Plan), including, but not limited to, amendments to provide terms more favorable than previously provided in the Stock Award Agreement or the written terms of a Performance Cash Award, subject to any specified limits in the Plan that are not subject to Board discretion; provided, however, that the rights under any Award outstanding at the time of such amendment shall not be impaired by any such amendment unless (i) the Company requests the consent of the affected Participant, and (ii) such Participant consents in writing.   11.                               TERMINATION OR SUSPENSION OF THE PLAN.   (a)                                  Plan Term.  The Board may suspend or terminate the Plan at any time.  Unless sooner terminated, the Plan shall terminate on the day before the tenth (10th) anniversary of the earlier of (i) the date the Plan is adopted by the Board, or (ii) the date the Plan is approved by the stockholders of the Company.  No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.   (b)                                  No Impairment of Rights.  Suspension or termination of the Plan shall not impair rights and obligations under any Award granted while the Plan is in effect except with the written consent of the affected Participant.   24 --------------------------------------------------------------------------------   12.                               EFFECTIVE DATE OF PLAN.   The Plan shall become effective upon approval by the stockholders at the 2006 Annual Meeting as of the Effective Date.    13.                               CHOICE OF LAW.   The law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.   25 --------------------------------------------------------------------------------

Exhibit 10.1 SEVERANCE PROTECTION AGREEMENT SEVERANCE PROTECTION AGREEMENT dated _______, ___ 2006, by and between SAIC, Inc., a Delaware corporation (the “Company”), and ______ (the “Executive”). PURPOSE The Board of Directors of the Company (the “Board”) recognizes that the possibility of a Change in Control (as hereinafter defined) of the Company exists and that the threat or occurrence of a Change in Control may result in the distraction of its key management personnel because of the uncertainties inherent in such a situation. The Board has determined that it is essential and in the best interests of the Company and its stockholders to retain the services of the Executive in the event of the threat or occurrence of a Change in Control and to ensure the Executive’s continued dedication and efforts in such event without undue concern for the Executive’s personal financial and employment security. In order to induce the Executive to remain in the employ of the Company, particularly in the event of the threat or occurrence of a Change in Control, the Company desires to enter into this Agreement to provide the Executive with certain benefits in the event the Executive’s employment is terminated as a result of, or in connection with, a Change in Control. NOW, THEREFORE, in consideration of the respective agreements of the parties contained herein, it is agreed as follows: SECTION 1. Definitions. For purposes of this Agreement, the following terms have the meanings set forth below: “Accrued Compensation” means an amount which includes all amounts earned or accrued by the Executive through and including the Termination Date but not paid to the Executive on or prior to such date, including (a) all base salary, (b) reimbursement for all reasonable and necessary expenses incurred by the Executive on behalf of the Company during the period ending on the Termination Date, (c) all vacation pay and (d) all bonuses and incentive compensation (other than the Pro Rata Bonus). “Base Salary Amount” means the greater of the Executive’s annual base salary (a) at the rate in effect on the Termination Date and (b) at the highest rate in effect at any time during the 180-day period prior to a Change in Control, and will include all amounts of the Executive’s base salary that are deferred under any qualified or non-qualified employee benefit plan of the Company or any other agreement or arrangement. “Beneficial Owner” has the meaning as used in Rule 13d-3 promulgated under the Securities Exchange Act. The terms “Beneficially Owned” and “Beneficial Ownership” each have a correlative meaning. “Board” means the Board of Directors of the Company. “Bonus Amount” means the greater of (a) the annual bonus paid or payable to the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of the fiscal year ending immediately prior to the fiscal year in which the Termination Date occurs, (b) the average of the annual bonus paid or payable to the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of each of the three fiscal years ending immediately prior to the fiscal year in which the Termination Date occurs (or, if higher, ending in respect of each of the three fiscal years ending immediately prior to the year in which the   1 -------------------------------------------------------------------------------- Change in Control occurs) or (c) in the event that the Executive was not employed by the Company for the entire fiscal year ending immediately prior to the fiscal year in which the Termination Date occurs, the annual target bonus established and payable to the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of the fiscal year ending during the fiscal year in which the Termination Date occurs. Bonus Amount includes only the short-term incentive portion of the annual bonus and does not include restricted stock awards, options or other long-term incentive compensation awarded to the Executive. “Cause” for the termination of the Executive’s employment with the Company will be deemed to exist if (a) the Executive has been convicted for committing an act of fraud, embezzlement, theft or other act constituting a felony (other than traffic related offenses or as a result of vicarious liability), (b) the Executive willfully engages in illegal conduct or gross misconduct that is significantly injurious to the Company; however, no act or failure to act, on the Executive’s part shall be considered “willful” unless done or omitted to be done, by the Executive not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company or (c) failure to perform his or her duties in a reasonably satisfactory manner after the receipt of a notice from the Company detailing such failure if the failure is incapable of cure, and if the failure is capable of cure, upon the failure to cure such failure within 30 days of such notice or upon its recurrence. “Change in Control” of the Company means, and shall be deemed to have occurred upon, any of the following events: (a) The acquisition by any Person of beneficial ownership (as defined in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act) of twenty-five percent (25%) or more of the outstanding voting securities; provided, however, that the following acquisitions shall not constitute a Change in Control for purposes of this subparagraph (a): (A) any acquisition directly from the Company; (B) any acquisition by the Company or any of its Subsidiaries; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Subsidiaries; or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subparagraph (c) below; or (b) Individuals who, as of July 14, 2006, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual who becomes a director of the Company subsequent to July 14, 2006 and whose election, or whose nomination for election by the Company’s stockholders, to the Board was either (i) approved by a vote of at least a majority of the directors then comprising the Incumbent Board or (ii) recommended by a nominating committee comprised entirely of directors who are then Incumbent Board members 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 either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act), other actual or threatened solicitation of proxies or consents or an actual or threatened tender offer; or (c) Consummation of a reorganization, merger, or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case unless following such Business Combination, (i) all or substantially all of the Persons who were the Beneficial Owners, respectively, of the outstanding shares and outstanding voting securities immediately prior to such Business Combination own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the Company, as the case may be, of the entity resulting from the Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the outstanding voting securities (provided, however, that for purposes of this clause (i) any shares of common stock or voting securities of such resulting entity received by such Beneficial Owners in such Business Combination other than as the result of such Beneficial Owners’ ownership of outstanding shares or outstanding voting securities immediately prior to such Business Combination shall not be considered to be   2 -------------------------------------------------------------------------------- owned by such Beneficial Owners for the purposes of calculating their percentage of ownership of the outstanding common stock and voting power of the resulting entity); (ii) no Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such entity resulting from the Business Combination) beneficially owns, directly or indirectly, twenty-five percent (25%) or more of the combined voting power of the then outstanding voting securities of such entity resulting from the Business Combination unless such Person owned twenty-five percent (25%) or more of the outstanding shares or outstanding voting securities immediately prior to the Business Combination; and (iii) at least a majority of the members of the Board of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or the action of the Board, providing for such Business Combination; or (d) Approval by the Company’s stockholders of a complete liquidation or dissolution of the Company. For purposes of clause (c), any Person who acquires outstanding voting securities of the entity resulting from the Business Combination by virtue of ownership, prior to such Business Combination, of outstanding voting securities of both the Company and the entity or entities with which the Company is combined shall be treated as two Persons after the Business Combination, who shall be treated as owning outstanding voting securities of the entity resulting from the Business Combination by virtue of ownership, prior to such Business Combination of, respectively, outstanding voting securities of the Company, and of the entity or entities with which the Company is combined. “Code” means the Internal Revenue Code of 1986, as amended. “Company” means SAIC, Inc., a Delaware corporation, provided that in recognition of the fact that the Executive may be employed by Science Applications International Corporation, a Delaware corporation and wholly-owned subsidiary of the Company (“SAIC”), or by another direct or indirect Subsidiary of SAIC, Inc., the term “Company” when referring to the employment relationship and the compensation or benefits related thereto shall include the employer of Executive as the context requires. “Continuation Period” has the meaning set forth in Section 3.1(b)(iii). “Disability” means the status of disability determined conclusively by the Company based upon certification of disability by the Social Security Administration or upon such other proof as the Company may reasonably require, effective upon receipt of such certification or other proof by the Company. “Full Release” means a written release, timely executed so that it is fully effective as of the date of payment pursuant to Section 3.1(b)(ii), in a form satisfactory to the Company (and similar to the Agreement set forth in Exhibit A) pursuant to which the Executive fully and completely releases the Company from all claims that the Executive may have against the Company (other than any claims that may or have arisen under this Agreement). “Good Reason” means the occurrence of any of the events or conditions described in clauses (a) through (g) hereof, without the Executive’s prior written consent: (a)(i) any material adverse change in the Executive’s status, position or responsibilities (including reporting responsibilities) from the Executive’s status, position or responsibilities as in effect at any time within 180 days preceding the date of the Change in Control or at any time thereafter, (ii) any assignment to the Executive of duties or responsibilities which are inconsistent with the Executive’s status, position or responsibilities as in effect at any time within 180 days preceding the date of the Change in Control or at any time thereafter or (iii) in the case of an Executive who is an executive officer of the Company a significant portion of whose responsibilities relate to the Company’s status as a public company, the failure of such Executive to continue to serve as an executive officer of a public company, in each case except in connection with the termination of the   3 -------------------------------------------------------------------------------- Executive’s employment for Disability, Cause, as a result of the Executive’s death or by the Executive other than for Good Reason; (b) a reduction in Executive’s base salary or any failure to pay the Executive any cash compensation to which the Executive is entitled within 15 days after the date when due; (c) the imposition of a requirement that the Executive be based (i) at any place outside a 50-mile radius from the Executive’s principal place of employment immediately prior to the Change in Control or (ii) at any location other than the Company’s corporate headquarters or, if applicable, the headquarters of the business unit by which he or she was employed immediately prior to the Change in Control, except, in each case, for reasonably required travel on Company business which is not materially greater in frequency or duration than prior to the Change in Control; (d) the insolvency or the filing (by any party, including the Company) of a petition for bankruptcy with respect to the Company, which petition is not dismissed within 60 days; (e) any material breach by the Company of any provision of this Agreement; (f) any purported termination of the Executive’s employment for Cause by the Company which does not comply with the terms of this Agreement; or (g) the failure of the Company to obtain, as contemplated in Section 7, an agreement, reasonably satisfactory to the Executive, from any Successor to assume and agree to perform this Agreement. Notwithstanding anything to the contrary in this Agreement, no termination will be deemed to be for Good Reason hereunder if it results from an isolated, insubstantial and inadvertent action not taken by the Company in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive. “Notice of Termination” means a written notice from the Company or the Executive of the termination of the Executive’s employment which indicates the specific termination provision in this Agreement relied upon and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated. “Person” has the meaning as defined in Section 3(a)(9) of the Securities Exchange Act and used in Section 13(d) or 14(d) of the Securities Exchange Act, and will include any “group” as such term is used in such sections. “Pro Rata Bonus” means an amount equal to the Bonus Amount multiplied by a fraction, the numerator of which is the number of days elapsed in the then fiscal year through and including the Termination Date and the denominator of which is 365. “Securities Exchange Act” means the Securities Exchange Act of 1934, as amended. “Subsidiary” means any corporation with respect to which another specified corporation has the power under ordinary circumstances to vote or direct the voting of sufficient securities to elect a majority of the directors. “Successor” means a corporation or other entity acquiring all or substantially all the assets and business of the Company, whether by operation of law, by assignment or otherwise. “Termination Date” means (a) in the case of the Executive’s death, the Executive’s date of death, (b) in the case of the termination of the Executive’s employment with the Company by the Executive for Good Reason,   4 -------------------------------------------------------------------------------- five days after the date the Notice of Termination is received by the Company, and (c) in all other cases, the date specified in the Notice of Termination; provided that if the Executive’s employment is terminated by the Company for Cause or due to Disability, the date specified in the Notice of Termination will be at least 30 days after the date the Notice of Termination is given to the Executive. SECTION 2. Term of Agreement. The term of this Agreement (the “Term”) will commence on the later of January 1, 2007 or the date of this Agreement, and will continue in effect until December 31, 2007; provided that on December 31, 2007 and each anniversary of such date thereafter, the Term shall automatically be extended for one additional year unless, not later than October 1 of such year, the Company or the Executive shall have given notice not to extend the Term; and further provided that in the event a Change in Control occurs during the Term, the Term will be extended to the date 24 months after the date of the occurrence of such Change in Control. Notwithstanding the foregoing and subject to Section 3.2, the Term shall be deemed to have immediately expired without any further action and this Agreement will immediately terminate and be of no further effect if any of the following events occurs prior to a Change in Control: (a) the Executive’s employment with the Company is terminated (whether by the Company or the Executive) for any reason; (b) the Executive’s employment is not terminated but there is a change in his or her status, position or responsibilities (including reporting responsibilities) from that which applied to Executive on the date of this Agreement; or (c) the Executive reaches the mandatory retirement age applicable to the Company’s executive officers under any stated policy of the Company, as may be adopted and revised from time to time by the Board. SECTION 3. Termination of Employment. 3.1 If, during the Term, the Executive’s employment with the Company is terminated within 24 months following a Change in Control, the Executive will be entitled to the following compensation and benefits: (a) If the Executive’s employment with the Company is terminated (i) by the Company for Cause or Disability, (ii) by reason of the Executive’s death or (iii) by the Executive other than for Good Reason, the Company will pay to the Executive the Accrued Compensation and, if such termination is other than by the Company for Cause, a Pro Rata Bonus. (b) If the Executive’s employment with the Company is terminated (whether by the Company or the Executive) for any reason other than as specified in Section 3.1(a), the Executive will be entitled to the following: (i) the Company will pay the Executive all Accrued Compensation and a Pro Rata Bonus; (ii) subject to the Executive providing the Company with a Full Release, the Company will pay the Executive as severance pay, and in lieu of any further compensation for periods subsequent to the Termination Date, in a single payment an amount in cash equal to two and one-half (2 1/2) times the sum of (A) the Base Salary Amount and (B) the Bonus Amount; (iii) subject to the Executive providing the Company with a Full Release and complying with his or her obligations under Section 6, the Company will, for a period of 36 months (the “Continuation Period”), at its expense provide to the Executive and the Executive’s dependents and beneficiaries the same or equivalent life insurance, disability, medical, dental, hospitalization, financial counseling and tax consulting benefits   5 -------------------------------------------------------------------------------- (the “Continuation Period Benefits”) provided to other similarly situated executives who continue in the employ of the Company during the Continuation Period (“similarly situated executives”). The obligations of the Company to provide the Executive and the Executive’s dependents and beneficiaries with the Continuation Period Benefits shall not restrict or limit the Company’s right to terminate or modify the benefits made available by the Company to its similarly situated executives or other employees and following any such termination or modification, the Continuation Period Benefits that Executive (and the Executive’s dependents and beneficiaries) shall be entitled to receive shall be so terminated or modified. The Company’s obligation hereunder with respect to the foregoing benefits will be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer’s benefit plans, in which case the Company may reduce the coverage of any benefits it is required to provide the Executive hereunder as long as the coverages and benefits of the combined benefit plans are no less favorable to the Executive than the coverages and benefits required to be provided hereunder. This Section 3.1(b)(iii) will not be interpreted so as to limit any benefits to which the Executive or the Executive’s dependents or beneficiaries may be entitled under any of the Company’s employee benefit plans, programs or practices following the Executive’s termination of employment; (iv) the Company shall provide the Executive with outplacement services suitable to the Executive’s position for a period of 12 months or, if earlier, until the first acceptance by the Executive of an offer of employment; and (v) such other acceleration of vesting and other benefits provided in other Company plans or agreements regarding options to purchase Company stock, restricted stock, deferral of stock or other equity compensation awards granted to or otherwise applicable to Executive. (c) The amounts provided for in Section 3.1(a) and Sections 3.1(b)(i) and (ii) will be paid in a single lump sum cash payment by the Company to the Executive within five days after the Termination Date. (d) The Executive will 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 will be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequent employment, except as specifically provided in Section 3.1(b)(iii) and 3.1(b)(iv). 3.2 Notwithstanding anything in this Agreement to the contrary, if, within the 30 days immediately preceding a Change in Control, (i) the Executive’s employment is terminated (whether by the Company or the Executive) for any reason other than as specified in Section 3.1(a), or (ii) (A) there is a material adverse change in the Executive’s status, position or responsibilities (including reporting responsibilities) from that which applied to Executive on the date of this Agreement, and (B) the Executive’s employment with the Company is subsequently terminated within 24 months following a Change in Control (whether by the Company or the Executive) for any reason other than as specified in Section 3.1(a), the Executive shall be entitled to receive the benefits provided in Section 3.1(b), provided that the amounts provided for in Sections 3.1(b)(i) and (ii) will be paid in a single lump sum cash payment by the Company to the Executive within five days after the later of the Termination Date or the Change in Control. 3.3 Except as otherwise noted herein, the compensation to be paid to the Executive pursuant to Sections 3.1(a), 3.1(b)(i) and 3.1(b)(ii) of this Agreement (whether by reason of Section 3.1(c) or Section 3.2) will be in lieu of any similar severance or termination compensation (i.e., compensation based directly on the Executive’s annual salary or annual salary and bonus) to which the Executive may be entitled under any other Company severance or termination agreement, plan, program, policy, practice or arrangement. With respect to any other compensation and benefit to be paid or provided to the Executive pursuant to this Section 3, the Executive will have the right to receive such compensation or benefit as herein provided or, if determined by the Executive to be more advantageous to the Executive, similar compensation or benefits to which the Executive may be entitled under any other Company severance or termination agreement, plan, program, policy, practice or arrangement. The Executive’s entitlement to any compensation or benefits of a type not provided in this Agreement will be   6 -------------------------------------------------------------------------------- determined in accordance with the Company’s employee benefit plans and other applicable programs, policies and practices as in effect from time to time. SECTION 4. Notice of Termination. Following a Change in Control, any purported termination of the Executive’s employment by the Company will be communicated by a Notice of Termination to the Executive. For purposes of this Agreement, no such purported termination will be effective without such Notice of Termination. SECTION 5. Excise Tax Adjustments. 5.1 In the event Executive becomes entitled to receive the benefits provided pursuant to Sections 3.1(b) or 3.2 herein, and the Company determines that such benefits (the “Total Payments”) will be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code, or any similar tax that may hereafter be imposed, the Company shall compute the “Net After-Tax Amount,” and the “Reduced Amount,” and shall adjust the Total Payments as described below. The Net After-Tax Amount shall mean the present value of all amounts payable to the Executive hereunder, net of all federal income, excise and employment taxes imposed on the Executive by reason of such payments. The Reduced Amount shall mean the largest aggregate amount of the Total Payments that if paid to the Executive would result in the Executive receiving a Net After-Tax Amount that is equal to or greater than the Net After-Tax Amount that the Executive would have received if the Total Payments had been made. If the Company determines that there is a Reduced Amount, the Total Payments will be reduced to the Reduced Amount. Such reduction shall be made by the Company with respect to benefits in the order and in the amounts suggested by the Executive, except to the extent that the Company determines that a different reduction or set of reductions would significantly reduce the costs or administrative burdens of the Company. 5.2 For purposes of determining whether the Total Payments will be subject to the Excise Tax and the amounts of such Excise Tax and for purposes of determining the Reduced Amount and the Net After-Tax Amount: (a) Any other payments or benefits received or to be received by the Executive in connection with a Change in Control of the Company or the Executive’s termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement with the Company, or with any individual, entity, or group of individuals or entities (individually and collectively referred to in this subsection (a) as “Persons”) whose actions result in a change in control of the Company or any Person affiliated with the Company or such Persons) shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of a tax advisor selected by the Company and reasonably acceptable to the Executive (“Tax Counsel”), such other payments or benefits (in whole or in part) should be treated by the courts as representing reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code), or otherwise not subject to the Excise Tax; (b) The amount of the Total Payments that shall be treated as subject to the Excise Tax shall be equal to the lesser of (i) the total amount of the Total Payments; or (ii) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying clause (a) above); (c) In the event that the Executive disputes any calculation or determination made by the Company, the matter shall be determined by Tax Counsel, the fees and expenses of which shall be borne solely by the Company; and (d) The Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made, and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive’s residence on the effective date of employment, net of the maximum reduction in federal income taxes which could be   7 -------------------------------------------------------------------------------- obtained from deduction of such state and local taxes, taking into account the reduction in itemized deduction under Section 68 of the Code. SECTION 6. Covenants of the Executive. During the Continuation Period following any Change in Control pursuant to which the Executive receives the benefits pursuant to Section 3.1(b)(iii), the Executive covenants and agrees as follows: (a) the Executive agrees to comply with his or her obligations under the Inventions, Copyright and Confidentiality Agreement that he or she entered into with the Company; and (b) the Executive acknowledges that the Executive has knowledge of confidential and proprietary information concerning the current salary, benefits, skills, and capabilities of Company employees and that it would be improper for the Executive to use such Company proprietary information in any manner adverse to the Company’s interests. The Executive agrees that he or she will not recruit or solicit for employment, directly or indirectly, any employee of the Company during the Continuation Period. SECTION 7. Successors; Binding Agreement. This Agreement will be binding upon and will inure to the benefit of the Company and its Successors, and the Company will require any Successors to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. Neither this Agreement nor any right or interest hereunder will be assignable or transferable by the Executive or by the Executive’s beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement will inure to the benefit of and be enforceable by the Executive’s legal representatives. SECTION 8. Fees and Expenses. The Company will pay as they become due all legal fees and related expenses (including the costs of experts) incurred by the Executive, in good faith, in (a) contesting or disputing, any such termination of employment and (b) seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by the Company under which the Executive is or may be entitled to receive benefits. If the dispute is resolved by a final decision of an arbitrator pursuant to Section 15 in the favor of the Company, the Executive shall reimburse the Company for all such legal fees and related expenses (including costs of experts) paid by the Company on behalf of the Executive. SECTION 9. Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement (including the Notice of Termination) will be in writing and will be deemed to have been duly given when personally delivered or sent by certified mail, return receipt requested, postage prepaid, addressed to the respective addresses last given by each party to the other, provided that all notices to the Company will be directed to the attention of the Board with a copy to the Secretary of the Company. All notices and communications will be deemed to have been received on the date of delivery thereof or on the third business day after the mailing thereof, except that notice of change of address will be effective only upon receipt. SECTION 10. Dispute Concerning Termination. If prior to the Date of Termination (as determined without regard to this Section 10), the party receiving the Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be extended until the earlier of (i) the date on which the Term ends or (ii) the date on which the dispute is finally resolved, either by mutual written agreement of the parties or by a final judgment, order or decree of an arbitrator or a court of competent jurisdiction (which is not appealable or with respect to which the   8 -------------------------------------------------------------------------------- time for appeal therefrom has expired and no appeal has been perfected); provided, however, that the Date of Termination shall be extended by a notice of dispute given by the Executive only if such notice is given in good faith and the Executive pursues the resolution of such dispute with reasonable diligence. SECTION 11. Compensation During Dispute. If a purported termination occurs following a Change in Control and during the Term and the Date of Termination is extended in accordance with Section 10 hereof, the Company shall continue to pay the Executive the full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, salary) and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the Notice of Termination was given, until the Date of Termination, as determined in accordance with Section 10 hereof. Amounts paid under this Section 11 are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement or otherwise. SECTION 12. Nonexclusivity of Rights. Nothing in this Agreement will prevent or limit the Executive’s continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company for which the Executive may qualify, nor will anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company (except for any severance or termination agreement). Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company will be payable in accordance with such plan or program, except as specifically modified by this Agreement. SECTION 13. No Set-Off. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder will not be affected by any circumstances, including any right of set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or others. SECTION 14. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto 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. No agreement or representation, oral or otherwise, express or implied, with respect to the subject matter hereof has been made by either party which is not expressly set forth in this Agreement. SECTION 15. Governing Law and Binding Arbitration. This Agreement will be governed by and construed and enforced in accordance with the laws of the State of Delaware without giving effect to the conflict of laws principles thereof. All disputes relating to this Agreement, including its enforceability, shall be resolved by final and binding arbitration before an arbitrator appointed by the Judicial Arbitration and Mediation Service (JAMS), in accordance with the rules and procedures of arbitration under the Company’s Dispute Resolution Program, attached hereto as Exhibit B, with the arbitration to be held in San Diego, California. Judgment upon the award may be entered in any court having jurisdiction thereof. SECTION 16. Severability. The provisions of this Agreement will be deemed severable and the invalidity or unenforceability of any provision will not affect the validity or enforceability of the other provisions hereof.   9 -------------------------------------------------------------------------------- SECTION 17. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to severance protection in connection with a Change in Control. To the extent that SAIC and the Executive have previously entered into a Severance Protection Agreement dated on or after September 1, 2005 and prior to the date hereof in substantially similar form as this Agreement (the “Prior Agreement”), the parties acknowledge and agree that, pursuant to notice duly delivered by SAIC and received by the Executive, the term of the Prior Agreement shall expire effective 11:59 p.m. on December 31, 2006 and the terms and provisions of this Agreement shall control effective 12:00 midnight on January 1, 2007. [Remainder of page intentionally left blank]   10 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written.   SAIC, INC.     K.C. Dahlberg Chairman and Chief Executive Officer     [Executive’s Signature]     [Executive’s Name]   11 -------------------------------------------------------------------------------- Exhibit A RELEASE OF ALL CLAIMS AND POTENTIAL CLAIMS 1. This Release of All Claims and Potential Claims (“Release”) is entered into by and between ______________________ (“________”) and SAIC, Inc. (hereinafter “SAIC”). _____________ and SAIC have previously entered into a Severance Protection Agreement dated _________ (“Severance Agreement”). In consideration of the promises made herein and the consideration due ____________ under the Severance Agreement, this Release is entered into between the parties. 2. (a) The purposes of this Release is to settle completely and release SAIC, its individual and/or collective officers, directors, stockholders, agents, parent companies, subsidiaries, affiliates, predecessors, successors, assigns, employees (including all former employees, officers, directors, stockholders and/or agents), attorneys, representatives and employee benefit programs (including the trustees, administrators, fiduciaries and insurers of such programs) (referred to collectively as “Releasees”) in a final and binding manner from every claim and potential claim for relief, cause of action and liability of any and every kind, nature and character whatsoever, known or unknown, that ________ has or may have against Releasees arising out of, relating to or resulting from any events occurring prior to the execution of this Release, including but not limited to any claims and potential claims for relief, causes of action and liabilities arising out of, relating to or resulting from the employment relationship between ________ and SAIC and its subsidiaries, affiliates and predecessors, and/or the termination of that relationship including any and all claims and rights under the Age Discrimination in Employment Act, and any personal gain with respect to any claim arising under the qui tam provisions of the False Claims Act, 31 U.S.C. 3730, but excluding any rights or benefits to which _______ is entitled under the Severance Agreement. (b) This is a compromise settlement of all such claims and potential claims, known or unknown, and therefore this Release does not constitute either an admission of liability on the part of ________ and SAIC or an admission, directly or by implication, that ________ and/or SAIC, its subsidiaries, affiliates or predecessors, have violated any law, rule, regulation, contractual right or any other duty or obligation. The parties hereto specifically deny that they have violated any law, rule, regulation, contractual right or any other duty or obligation. (c) This Release is entered into freely and voluntarily by ________ and SAIC solely to avoid further costs, risks and hazards of litigation and to settle all claims and potential claims and disputes, known or unknown, in a final and binding manner. 3. For and in consideration of the promises and covenants made by ________ to SAIC and SAIC to ________, contained herein, ________ and SAIC have agreed and do agree as follows: (a) ________ waives, releases and forever discharges Releasees from any claims and potential claims for relief, causes of action and liabilities, known or unknown, that [he/she] has or may have against Releasees arising out of, relating to or resulting from any events occurring prior to the execution of this Release, including but not limited to any claims and potential claims for relief, causes of action and liabilities of any and every kind, nature and character whatsoever, known or unknown, arising out of, relating to or resulting from the employment relationship between ________ and SAIC and its subsidiaries, affiliates and predecessors, and the termination of that relationship including any and all claims and rights under the Age Discrimination in Employment Act, and any personal gain with respect to any claim arising under the qui tam provisions of the False Claims Act, 31 U.S.C. 3730 but excluding any rights or benefits to which _______ is entitled under the Severance Agreement. (b) ________ agrees that [he/she] will not directly or indirectly institute any legal proceedings against Releasees before any court, administrative agency, arbitrator or any other tribunal or forum whatsoever by reason of any claims and potential claims for relief, causes of action and liabilities of any and every kind, nature and character whatsoever, known or unknown, arising out of, relating to or resulting from any events occurring prior to the execution of this Release, including but not limited to any claims and potential claims   12 -------------------------------------------------------------------------------- for relief, causes of action and liabilities arising out of, relating to or resulting from the employment relationship between ________ and SAIC and its subsidiaries, affiliates and predecessors, and/or the termination of that relationship including any and all claims and rights under the Age Discrimination in Employment Act. (c) ________ is presently unaware of any injuries that [he/she] may have suffered as a result of working at SAIC or its subsidiaries, affiliates or predecessors, and has no present intention of filing a workers’ compensation claim. Should any such claim arise in the future, ________ waives and releases any right to proceed against SAIC or its subsidiaries, affiliates or predecessors, for such a claim. ________ also waives any right to bring any disability claim against SAIC or its subsidiaries, affiliates or predecessors, or its or their carriers. 4. As a material part of the consideration for this Agreement, ________ and [his/her] agents and attorneys, agree to keep completely confidential and not disclose to any person or entity, except immediate family, attorney, accountant, or tax preparers, or in response to a court order or subpoena, the terms and/or conditions of this Release and/or any understandings, agreements, provisions and/or information contained herein or with regard to the employment relationship between ________ and SAIC and its subsidiaries, affiliates and predecessors. 5. Any dispute, claim or controversy of any kind or nature, including but not limited to the issue of arbitrability, arising out of or relating to this Release, or the breach thereof, or any disputes which may arise in the future, shall be settled in a final and binding before an arbitrator appointed by the Judicial Arbitration and Mediation Service in accordance with the rules and procedures of arbitration under the Company’s Dispute Resolution Program, attached hereto as Exhibit A. The prevailing party shall be entitled to recover all reasonable attorneys’ fees, costs and necessary disbursements incurred in connection with the arbitration proceeding. Judgment upon the award may be entered in any court having jurisdiction thereof. 6. It is further understood and agreed that ________ has not relied upon any advice whatsoever from SAIC and/or its attorneys individually and/or collectively as to the taxability, whether pursuant to Federal, State or local income tax statutes or regulations, or otherwise, of the consideration transferred hereunder and that [he/she] will be solely liable for all of [his/her] tax obligations. ________ understands and agrees that SAIC or its subsidiaries, affiliates or predecessors, may be required by law to report all or a portion of the amounts paid to [him/her] and/or [his/her] attorney in connection with this Release to federal and state taxing authorities. ________ waives, releases, forever discharges and agrees to indemnify, defend and hold SAIC harmless with respect to any actual or potential tax obligations imposed by law. 7. ________ acknowledges that [he/she] has read, understood and truthfully completed the Business Ethics and Conduct Disclosure Statement attached hereto as Exhibit B. 8. It is further understood and agreed that Releasees and/or their attorneys shall not be further liable either jointly and/or severally to ________ and/or [his/her] attorneys individually or collectively for costs and/or attorneys fees, including any provided for by statute, nor shall ________ and/or [his/her] attorneys be liable either jointly and/or severally to SAIC and/or its attorneys individually and/or collectively for costs and/or attorneys’ fees, including any provided for by statute. 9. ________ understands and agrees that if the facts with respect to which this Release are based are found hereafter to be other than or different from the facts now believed by [him/her] to be true, [he/she] expressly accepts and assumes the risk of such possible difference in facts and agrees that this Release shall be and remain effective notwithstanding such difference in facts. 10. ________ understands and agrees that there is a risk that the damage and/or injury suffered by ________ may become more serious than [he/she] now expects or anticipates. ________ expressly accepts and assumes this   13 -------------------------------------------------------------------------------- risk, and agrees that this Release shall be and remains effective notwithstanding any such misunderstanding as to the seriousness of said injuries or damage. 11. ________ understands and agrees that if [he/she] hereafter commences any suit arising out of, based upon or relating to any of the claims and potential claims for relief, cause of action and liability of any and every kind, nature and character whatsoever, known or unknown, [he/she] has released herein, ________ agrees to pay Releasees, and each of them, in addition to any other damages caused to Releasees thereby, all attorneys’ fees incurred by Releasees in defending or otherwise responding to said suit. 12. It is further understood and agreed that this Release shall be binding upon and will inure to the benefit of ________’s spouse, heirs, successors, assigns, agents, employees, representatives, executors and administrators and shall be binding upon and will inure to the benefit of the individual and/or collective successors and assigns of Releasees and their successors, assigns, agents and/or representatives. 13. This Release shall be construed in accordance with and governed for all purposes by the laws of the State of California. 14. ________ agrees that [he/she] will not seek future employment with, nor need to be considered for any future openings with SAIC, any division thereof, or any subsidiary or related corporation or entity. 15. ________ and Releasees waive all rights under Section 1542 of the California Civil Code, which section has been fully explained to them by their respective legal counsel and which they fully understand, and any other similar provision or the law of any other state or jurisdiction. Section 1542 provides as follows: A general release does not extend to claims which the creditor does not know or suspect to exist in [his/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. 16. Notwithstanding anything in this Agreement to the contrary, ________ does not waive, release or discharge any rights to indemnification for actions occurring through [his/her] affiliation with SAIC or its subsidiaries, affiliates or predecessors, whether those rights arise from statute, corporate charter documents or any other source nor does __________ waive, release or discharge any right ________ may have pursuant to any insurance policy or coverage provided or maintained by SAIC or its subsidiaries, affiliates or predecessors. 17. If any part of this Agreement is found to be either invalid or unenforceable, the remaining portions of this Agreement will still be valid. 18. This Agreement is intended to release and discharge any claims of __________ under the Age Discrimination and Employment Act. To satisfy the requirements of the Older Workers’ Benefit Protection Act, 29 U.S.C. section 626(f), the parties agree as follows:     A. _________ acknowledges that [he/she] has read and understands the terms of this Agreement.     B. __________ acknowledges that [he/she] has been advised in writing to consult with an attorney, if desired, concerning this Agreement and has received all advice [he/she] deems necessary concerning this Agreement.     C. __________ acknowledges that [he/she] has been given twenty-one (21) days to consider whether or not to enter into this Agreement, has taken as much of this time as necessary to consider whether to enter into this Agreement, and has chosen to enter into this Agreement freely, knowingly and voluntarily.     D. For a seven day period following the execution of this Agreement, _________ may revoke this Agreement by delivering a written revocation to at SAIC. This Agreement shall not become effective and enforceable until the revocation period has expired.   14 -------------------------------------------------------------------------------- 19. ________ acknowledges that [he/she] has been encouraged to seek the advice of an attorney of [his/her] choice with regard to this Release. Having read the foregoing, having understood and agreed to the terms of this Release, and having had the opportunity to and having been advised by independent legal counsel, the parties hereby voluntarily affix their signatures. 20. This Agreement is to be interpreted without regard to the draftsperson. The terms and intent of the Agreement shall be interpreted and construed on the express assumption that all parties participated equally in its drafting. 21. This Release constitutes a single integrated contract expressing the entire agreement of the parties hereto. Except for the Severance Agreement, which defines certain obligations on the part of both parties, and this Release, there are no agreements, written or oral, express or implied, between the parties hereto, concerning the subject matter herein.   Dated: ____________________, 20__     [Signature]     [Print Name]   SAIC, Inc. By:      Name:      Its:        15 -------------------------------------------------------------------------------- BUSINESS ETHICS AND CONDUCT DISCLOSURE STATEMENT Are you aware of any illegal or unethical practices or conduct anywhere within SAIC, Inc. or its subsidiaries, affiliates or predecessors (“SAIC”) (including, but not limited to, improper charging practices, or any violations of SAIC’s Standards of Business Ethics and Conduct)? Yes ¨                                                                      No ¨ (Your answer to all questions on this form will not have any bearing on the fact or terms of your Release with SAIC.) If the answer to the preceding question is “yes,” list here, in full and complete detail, all such practices or conduct. (Use additional pages if necessary.)     --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Have any threats or promises been made to you in connection with your answers to the questions on this form? Yes ¨                                                                      No ¨ If “yes,” please identify them in full and complete detail. Also, notify SAIC’s General Counsel at (858) 826-7325 immediately.   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- I declare under penalty of perjury, under the laws of the State of California and of the United States, that the foregoing is true and correct. Executed this ____ of ___________________, 20__, at ___________________.       [Signature]   16

Exhibit 10.28     HILTON HOTELS 2005 EXECUTIVE DEFERRED COMPENSATION PLAN   (As Amended and Restated Effective as of January 1, 2005)   --------------------------------------------------------------------------------   HILTON HOTELS EXECUTIVE DEFERRED COMPENSATION PLAN   TABLE OF CONTENTS     Page     ARTICLE I TITLE AND DEFINITIONS 1     1.1 – Title 1     1.2 - Definitions 1     ARTICLE II PARTICIPATION 6     ARTICLE III DEFERRAL ELECTIONS 7     3.1 - Elections to Defer Compensation 7     3.2 – Distribution Elections 9     3.3 - Investment Elections 12     3.4 – Subsequent Elections 13     3.5 – Cancellation of Elections 14     3.6 – New Payment Elections 14     ARTICLE IV DISTRIBUTION OPTION ACCOUNTS 15     4.1 - Compensation Deferrals 15     4.2 - Company Contribution 15     4.3 - Investment Return 17     ARTICLE V VESTING 17     5.1 - Compensation Deferral 17     5.2 - Company Contribution 17     ARTICLE VI DISTRIBUTIONS 18     6.1 – Form and Timing of Distribution 18     6.2 – Small Benefit Cashout 19     6.3 – Payout 20     6.4 – Distributions to Key Employees 21     6.5 – Financial Hardship of Participant 21     6.6 – Permissible Distribution Event 22     6.7 - Payment by Trust 22     6.8 - Inability to Locate Participant 23     ARTICLE VII CHANGE IN CONTROL 23   i --------------------------------------------------------------------------------     Page     ARTICLE VIII DEATH BENEFITS 24     ARTICLE IX CLAIMS PROCEDURES 24     9.1 – Claims 24     9.2 – Appeal 24     9.3 – Authority 25     ARTICLE X ADMINISTRATION 26     10.1 - Committee 26     10.2 - Committee Action 26     10.3 - Powers and Duties of the Committee 26     10.4 - Construction and Interpretation 27     10.5 - Information 28     10.6 - Compensation, Expenses and Indemnity 28     10.7 - Quarterly Statements 29     ARTICLE XI MISCELLANEOUS 29     11.1 - Unsecured General Creditor 29     11.2 - Restriction Against Assignment 29     11.3 - Withholding 30     11.4 - Amendment, Modification, Suspension or Termination 30     11.5 - Governing Law 31     11.6 - Receipt or Release 31     11.7 - Payments on Behalf of Persons Under Incapacity 31     11.8 - Headings 31   ii --------------------------------------------------------------------------------   HILTON HOTELS   2005 EXECUTIVE DEFERRED COMPENSATION PLAN   WHEREAS, Hilton Hotels Corporation (the “Company”) hereby establishes a deferred compensation plan (the “Plan”), effective as of November 12, 2004 for deferrals with respect to Compensation (as defined below) to be earned or to be otherwise paid on or after January 1, 2005, to provide supplemental retirement income benefits for a select group of management and highly compensated employees through deferrals of base salary and bonus compensation and Company contributions.   NOW, THEREFORE, the Plan is hereby established, on the terms and conditions hereinafter set forth:   ARTICLE I TITLE AND DEFINITIONS   1.1 – Title.   This Plan shall be known as the Hilton Hotels 2005 Executive Deferred Compensation Plan.   1.2 - Definitions.   Whenever the following words and phrases are used in this Plan, with the first letter capitalized, they shall have the meanings specified below.   “Base Salary Deferral” shall mean that portion of Base Salary as to which an Eligible Employee has made an irrevocable election to defer receipt of until the date specified under the In-Service Distribution Option and/or as otherwise specified under this Plan.   “Beneficiary” or “Beneficiaries” shall mean the person or persons, including a trustee, personal representative or other fiduciary, last designated in writing by a Participant in accordance with procedures established by the Committee to receive all of the benefits specified   1 --------------------------------------------------------------------------------   hereunder in the event of the Participant’s death. No Beneficiary designation shall become effective until it is filed with the Committee. If there is no Beneficiary designation in effect, or if there is no surviving designated Beneficiary, then the Participant’s surviving spouse shall be the Beneficiary. If there is no surviving spouse to receive any benefits payable in accordance with the preceding sentence, the duly appointed and currently acting personal representative of the Participant’s estate (which shall include either the Participant’s probate estate or living trust) shall be the Beneficiary. In any case where there is no such personal representative of the Participant’s estate duly appointed and acting in that capacity within 90 days after the Participant’s death (or such extended period as the Committee determines is reasonably necessary to allow such personal representative to be appointed, but not to exceed 180 days after the Participant’s death), then Beneficiary shall mean the person or persons who can verify by affidavit or court order to the satisfaction of the Committee that they are legally entitled to receive the benefits specified hereunder. In the event any amount is payable under the Plan to a minor, payment shall not be made to the minor, but instead be paid (i) to that person’s living parent(s) to act as custodian, (ii) if that person’s parents are then divorced, and one parent is the sole custodial parent, to such custodial parent, or (iii) if no parent of that person is then living, to a custodian selected by the Committee to hold the funds for the minor under the Uniform Transfers or Gifts to Minors Act in effect in the jurisdiction in which the minor resides. If no parent is living and the Committee decides not to select another custodian to hold the funds for the minor, then payment shall be made to the duly appointed and currently acting guardian of the estate for the minor or, if no guardian of the estate for the minor is duly appointed and currently acting within 60 days after the date the amount becomes payable, payment shall be deposited with the court having jurisdiction over the estate of the minor.   2 --------------------------------------------------------------------------------   “Board” shall mean the Board of Directors of Hilton Hotels Corporation.   “Bonus Compensation Deferral” shall mean that portion of Bonus Compensation as to which an Eligible Employee has made an irrevocable election to defer receipt of until the date specified under the In-Service Distribution Option and/or as otherwise specified under this Plan.   “Change in Control” shall have the same meaning ascribed to the term “change in control” under the Treasury regulations to be issued under section 409A of the Code.   “Code” shall mean the Internal Revenue Code of 1986, as amended.   “Committee” shall mean the Committee appointed by the Board to administer the Plan in accordance with Article X, or its delegate.   “Company” shall mean Hilton Hotels Corporation, any successor corporation and each corporation which is a member of a controlled group of corporations (within the meaning of section 414(b) of the Code) of which Hilton Hotels Corporation is a component member.   “Company Contribution” shall equal the amount described in Section 4.2.   “Compensation” shall mean the total salary paid to the Eligible Employee, including cash bonuses, in a Plan Year. An Eligible Employee’s “Compensation” shall consist of the Eligible Employee’s “Base Salary” as in effect from time to time during a Plan Year and the Eligible Employee’s “Bonus Compensation” which shall equal the amount of any cash incentive to be paid to an Eligible Employee under an incentive plan maintained by the Company and, effective January 1, 2006, any other cash bonus of any kind.   “Compensation Deferral” means that portion of Compensation as to which a Participant has made an irrevocable election to defer receipt until the date specified under the In-Service Distribution Option and/or as otherwise specified under this Plan.   3 --------------------------------------------------------------------------------   “Disabled” or “Disability” shall mean that a Participant is disabled due to sickness or injury which qualifies the Participant for disability payments under the Company’s long term disability plan. A Participant shall be considered totally and permanently disabled on the date he qualifies for such long term disability payments.   “Distribution Option” shall mean the two distribution options which are available under the Plan, consisting of the Separation Distribution Option and the In-Service Distribution Option.   “Distribution Option Account” or “Accounts” shall mean, with respect to a Participant, the Separation Distribution Account and/or the In-Service Distribution Account(s) established on the books of account of the Company, pursuant to Article IV, for each Participant.   “Effective Date” shall mean November 12, 2004.   “Eligible Employee” shall mean (i) officers of Hilton Hotels Corporation at the Vice President level or higher, (ii) hotel managers who are employed by the Company and selected by the Committee to participate in the Plan pursuant to Article II, or (iii) Highly Compensated Employees who are selected by the Committee to participate in the Plan pursuant to Article II.   “Enrollment Agreement” shall mean the authorization form which an Eligible Employee files with the Committee to participate in the Plan.   “Fund” or “Funds” shall mean one or more of the investments selected by the Committee pursuant to Section 3.3(a).   “Highly Compensated Employee” shall mean an employee of the Company who the Committee, in its discretion, anticipates will receive Compensation in excess of the salary limitation contained in section 401(a)(17) of the Code for the applicable Plan Year or who the Committee otherwise determines to be a highly compensated employee or member of a select group of management within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.   4 --------------------------------------------------------------------------------   “In-Service Distribution Account or Accounts” shall mean the Account(s) maintained for a Participant to which Compensation Deferrals and Company Contributions are credited pursuant to the In-Service Distribution Option.   “In-Service Distribution Option” shall mean the Distribution Option pursuant to which benefits are payable in accordance with Article VI.   “Investment Return” shall mean, for each Fund, an amount equal to the net investment performance of such Fund on a given day, as determined by the Committee.   “Key Employee” shall mean (i) officers of the Company having annual compensation greater than $130,000 (adjusted for inflation and limited to 50 employees), (ii) five percent owners, and (iii) one percent owners having annual compensation from the employer greater than $150,000, all as determined by the Committee in a manner consistent with the regulations issues under section 409A of the Code.   “Participant” shall mean any Eligible Employee who elects to defer Compensation in accordance with Section 3.1.   “Plan” shall mean the Hilton Hotels 2005 Executive Deferred Compensation Plan set forth herein, in effect as of the Effective Date, or as amended from time to time.   “Plan Year” shall mean the 12 consecutive month period beginning on a January 1.   “Prior Plan” shall mean the Hilton Hotels Executive Deferred Compensation Plan, as amended.   “Retirement” shall mean a Participant’s Separation from Service (for reasons other than death) on or after the combination of the Participant’s age and Years of Vesting Service equals at least 55.   “Separation Date” shall mean the date a Participant incurs a Separation from Service.   5 --------------------------------------------------------------------------------   “Separation Distribution Account” shall mean the Account maintained for a Participant to which Compensation Deferrals and Company Contributions are credited pursuant to the Separation Distribution Option.   “Separation Distribution Option” shall mean the Distribution Option pursuant to which benefits are payable in accordance with Article VI.   “Separation from Service” shall mean a Participant’s separation from service with the Company within the meaning of section 409A of the Code and the regulations issued thereunder.   “Unvested Company Contribution” shall mean that portion of the Company Contributions (as defined in the Prior Plan) credited to a participant under the Prior Plan that are not earned and vested for purposes of Section 409A of the Code as of December 31, 2004.   “Year of Vesting Service” shall mean a “Year of Vesting Service” as defined in the Hilton Hotels 401(k) Savings Plan.   ARTICLE II PARTICIPATION   Prior to December 31 of each Plan Year, the Committee shall designate which hotel managers and which Highly Compensated Employees shall become Eligible Employees for the following Plan Year. An Eligible Employee designated as a Participant shall thereafter, unless otherwise determined by the Committee, be eligible to make a Compensation Deferral for each Plan Year. Participation in the Plan shall be made conditional upon an Eligible Employee’s acknowledgement, in writing or by making a deferral election under the Plan, that all decisions and determinations of the Committee shall be final and binding on the Participant, his or her beneficiaries and any other person having or claiming an interest under the Plan.   6 --------------------------------------------------------------------------------   ARTICLE III DEFERRAL ELECTIONS   3.1 - Elections to Defer Compensation.   (a)                                  Each Eligible Employee may elect to make a Compensation Deferral by filing with the Committee an election that conforms to the requirements set forth in this Article III, on an Enrollment Agreement provided by the Committee, no later than December 31 of the Plan Year preceding the Plan Year for which the Compensation is to be earned and specifying whether the Participant elects a Base Salary Deferral or a Bonus Compensation Deferral or a combination, the Distribution Option Accounts to which such amounts will be credited, the form and timing of distribution and such other information as the Committee shall require.                   (i)                                     Notwithstanding (a) above, if an Eligible Employee’s Bonus Compensation is “performance-based compensation” as contemplated by section 409A of the Code and related regulations, the Committee may allow the Eligible Employee to elect to defer all or a portion of his Bonus Compensation for a Plan Year at a time determined by the Committee, which may be no less than six months before the end of the applicable Plan Year in which such Bonus Compensation is to be earned.                   (ii)                                  The Eligible Employee shall elect to allocate his or her Compensation Deferrals (and any Company Contributions that may be credited with respect thereto) between the Distribution Options in whole percentage increments; provided that 100 percent of such Deferrals (and Company Contributions) may be allocated to one or the other of the Distribution Options.                   (iii)                               The Committee may establish minimum or maximum amounts that may be deferred under this Section and may change such standards from time to time. Any such limits shall be communicated by the Committee to the Plan Administrator and by the Plan   7 --------------------------------------------------------------------------------   Administrator to the Participants prior to the commencement of a Plan Year. No Participant may have more than one Separation Distribution Account.   (b)                                 Notwithstanding anything herein to the contrary, no Eligible Employee shall be permitted to defer Compensation which the Committee reasonably determines is required to pay the Eligible Employee’s portion of payroll taxes and contributions towards benefits (including, but not limited to, medical, life, dental and disability) provided to the Eligible Employee and his or her dependents.   (c)                                  Any Compensation Deferral made under Section 3.1(a) above shall remain in effect and be irrevocable, notwithstanding any change in a Participant’s Compensation, for the entire Plan Year for which it is effective and for all subsequent Plan Years unless the Participant files a new Enrollment Agreement changing his or her Compensation Deferral election for a subsequent Plan Year in accordance with Section 3.1(a) above. If a Participant elects to allocate all or a portion of his Compensation Deferrals to an In-Service Distribution Account, that election will remain effective only for the Plan Year to which the Enrollment Agreement relates. If the Participant does not elect an in-service distribution date for deferrals to the In-Service Distribution Account in a subsequent Plan Year, such deferrals shall automatically be allocated to the Participant’s Separation Distribution Account. Compensation Deferral elections shall be made on an Enrollment Agreement filed with the Committee by December 31 of a Plan Year (or such earlier date as may be designated by the Committee) to make a Compensation Deferral for Compensation to be earned on or after January 1 of the immediately following Plan Year.   (d)                                 The Committee may, in its discretion, permit Employees who first become Eligible Employees after the beginning of a Plan Year, including Employees who become Eligible Employees because they are promoted or hired by the Company on or after January 1 of   8 --------------------------------------------------------------------------------   a Plan Year to a position of Vice President or as a hotel manager designated by the Committee as an Eligible Employee, to enroll in the Plan for that Plan Year by filing a completed and fully executed Enrollment Agreement as soon as practicable following the date the Employee becomes an Eligible Employee but, in any event, within 30 days after such date. Notwithstanding the foregoing, however, any Enrollment Agreement executed by an Eligible Employee, pursuant to this Section, to make a Compensation Deferral shall apply only to Compensation earned by the Eligible Employee after the date on which such Enrollment Agreement is filed.   (e)                                  All deferral elections under the Plan shall be made in accordance with section 409A of the Code, and the regulations thereunder.   3.2 – Distribution Elections.   Subject to Section 3.4, in the Enrollment Agreement, each Eligible Employee shall select the form and the timing of payment with respect to the Eligible Employee’s Compensation Deferral. An Eligible Employee’s deferral election under this Article III shall not be effective unless and until the Eligible Employee makes the required distribution elections under this Section 3.2. Each Eligible Employee shall make the following form and timing of payment elections:   (a)                                  Retirement. An Eligible Employee shall elect the form of payment in which amounts credited to the Eligible Employee’s Distribution Option Accounts shall be paid where (i) the Eligible Employee’s Separation Date occurs on or after eligibility for Retirement and (ii) the amount to be distributed from all of the Eligible Employee’s Distribution Option Accounts exceeds $100,000 (taking into account all deferrals made to all of the Eligible Employee’s Distribution Option Accounts). The Eligible Employee may elect a lump sum, or quarterly, semi-annual or annual installments payable over 5, 10, 15 or 20 years. This form of payment   9 --------------------------------------------------------------------------------   election shall apply to all Compensation Deferrals credited on behalf of the Eligible Employee to his Separation Distribution Account in any Plan Year in which the Eligible Employee makes Compensation Deferrals under this Plan, subject to change only in accordance with Section 3.4 below. In the event the amount to be distributed from a Participant’s Distribution Option Accounts upon a Separation from Service after eligibility for Retirement does not exceed $100,000 (taking into account all deferrals made to all of the Eligible Employee’s Distribution Option Accounts) as determined under Section 6.2, the Participant’s Distribution Option Accounts shall be paid in a lump sum in accordance with Section 6.2 without regard to the Participant’s actual form of payment election.   (b)                                 In-Service Distribution. An Eligible Employee shall elect (i) the form of payment in which amounts credited to the Eligible Employee’s In-Service Distribution Account, if applicable, shall be paid where the amount to be distributed exceeds $25,000 and (ii) the Plan Year in which such payment shall commence; provided that the Plan Year selected in (ii) may not be prior to the third Plan Year following the Plan Year in which the Compensation Deferral is made, except as permitted under Section 3.6. The Eligible Employee may elect a lump sum, or quarterly, semi-annual or annual installments payable over 2, 3, 4 or 5 years. This election shall apply only to the Compensation Deferrals credited on behalf of the Eligible Employee to the In-Service Distribution Account created pursuant to the Enrollment Form to which such Compensation Deferrals relate, except to the extent changed pursuant to a subsequent election in accordance with Section 3.4 below. In the event the amount to be distributed from a Participant’s In-Service Distribution Account does not exceed $25,000 as of the applicable distribution date, the Participant’s In-Service Distribution Account shall be paid in a lump sum in accordance with Section 6.2 without regard to the Participant’s actual form of payment   10 --------------------------------------------------------------------------------   election(s). If a Participant incurs a Separation from Service prior to the in-service distribution date elected by the Participant with respect to the Participant’s In-Service Distribution Account, the Participant’s distribution election with respect to such In-Service Distribution Account shall become invalid and distribution shall instead be made in accordance with the Participant’s elections under Sections 3.2(a), 3.2(c) or 3.4, as applicable.   (c)                                  Separation from Service.   An Eligible Employee shall elect the form of payment in which amounts credited to the Eligible Employee’s Separation Distribution Account, if applicable, shall be paid where (i) the Eligible Employee’s Separation Date occurs prior to eligibility for Retirement, and (ii) the amount to be distributed from all of the Eligible Employee’s Distribution Option Accounts exceeds $100,000 (taking into account all deferrals made to all of the Eligible Employee’s Distribution Option Accounts). The Eligible Employee may elect a lump sum, or annual installments payable over 5 years. This election shall apply to all Compensation Deferrals credited on behalf of the Eligible Employee to his Separation Distribution Account in any Plan Year in which Compensation Deferrals are made under this Plan., subject to change only in accordance with Section 3.4 below. In the event the amount to be distributed from a Participant’s Distribution Option Accounts upon a Separation from Service before eligibility for Retirement does not exceed $100,000 (taking into account all deferrals made to all of the Eligible Employee’s Distribution Option Accounts) as determined under Section 6.2, the Participant’s Distribution Option Accounts shall be paid in a lump sum in accordance with Section 6.2 without regard to the Participant’s actual form of payment election.   11 --------------------------------------------------------------------------------   3.3 - Investment Elections.   (a)                                  At the time of making the deferral elections described in Section 3.1 and the distribution elections described in Section 3.2, the Participant shall designate, in a manner prescribed by the Committee, which Funds the Participant’s Accounts will be deemed to be invested in for purposes of determining the Investment Return to be credited to those Accounts. The Funds shall be as selected by the Committee from time to time and the Committee may add, change, or delete Funds at any time. In making the designation pursuant to this Section 3.3, the Participant may specify that all or any whole percentage of his Accounts be deemed to be invested in one or more of the Funds. A Participant may change the designation made under this Section 3.3, in a manner prescribed by the Committee, on any business day. Such change shall be effective as soon as administratively feasible after it is received.   (b)                                 If a Participant fails to elect a type of Fund under this Section 3.3, he or she shall be deemed to have elected an S & P 500 Index Fund (or, if no such Fund exists, the Fund designated by the Committee).   (c)                                  Although the Participant may designate the Funds according to Section 3.3(a) above, the Committee shall select from time to time, in its sole discretion, for each of the Funds described in Section 3.3(a) above, a commercially available mutual fund or contract or an investment fund established with and administered by an investment manager selected by the Committee. The Investment Return of each such commercially available mutual fund, contract or investment fund shall be used to determine the amount of earnings to be credited to Participants’ Accounts under Article IV although nothing set forth in this Plan shall require an actual investment of monies in any such mutual fund or in any other Fund designated as a deemed investment vehicle for Compensation Deferrals.   12 --------------------------------------------------------------------------------   3.4 – Subsequent Elections.   The Committee may establish rules allowing a Participant to make a subsequent election to postpone payment of Compensation Deferrals under his In-Service Distribution Account(s) and/or his Separation Distribution Account, in accordance with the rules in this Section 3.4; provided that any such subsequent election shall be made in accordance with the requirements of section 409A of the Code and the regulations thereunder and that no subsequent election may result in an impermissible acceleration of payment as described in section 409A of the Code and the regulations thereunder. The following rules shall apply to subsequent elections under the Plan:   (a)                                  With respect to Compensation Deferrals under an In-Service Distribution Account, a Participant may make a subsequent election to defer the payment to a later Plan Year or to change the form of payment applicable to such In-Service Distribution Account; provided that (i) the subsequent election must be made at least 12 months prior to the January in which the first scheduled payment was to occur, (ii) the subsequent election may not take effect until at least 12 months after the date on which the election is made, and (iii) except with respect to an election related to payment upon an unforeseeable emergency, the first payment with respect to which such election is made must be deferred for a period of not less than five years from the date such payment would otherwise have been made.   (b)                                 A Participant may make a subsequent election to change the form or time at which Compensation Deferrals credited to a Participant’s Separation Distribution Account will be paid, provided that (i) the subsequent election may not take effect until at least 12 months after the date on which the election is made, and (ii) except with respect to an election related to payment upon an unforeseeable emergency or death, the first payment with respect to which   13 --------------------------------------------------------------------------------   such election is made must be deferred for a period of five years from the date such payment would have otherwise have been made. Participants shall be permitted to make only one subsequent election to change the form or time of payment of their Separation Distribution Account, excluding any changes made pursuant to Section 3.6. .   3.5 - Cancellation of Elections.   To the extent permitted under Section 409A of the Code and the regulations issued thereunder, the Committee may permit Participants during all or part of calendar year 2005 to cancel their deferral elections, in whole or in part, with respect to any amounts deferred under this Plan on or after January 1, 2005, on such terms as shall be determined by the Committee. If a deferral election is cancelled, the full amount of the distribution shall be included in the Participant’s income in calendar year 2005, or if later, the Participant’s taxable year in which the amount is earned and vested.   3.6 - New Payment Elections.   To the extent permitted under Section 409A of the Code and the regulations issued thereunder, the Committee may permit Participants to make new payment elections on or before December 31, 2006 with respect to the time and/or form of payment of amounts deferred hereunder on or after January 1, 2005, on such terms as shall be determined by the Committee, provided that a Participant shall not be permitted in calendar year 2006 (i) to change payment elections with respect to amounts that the Participant would otherwise receive in 2006 or (ii) to cause payments to be made in 2006.   14 --------------------------------------------------------------------------------   ARTICLE IV DISTRIBUTION OPTION ACCOUNTS   4.1 - Compensation Deferrals.   The Committee shall establish and maintain separate Distribution Option Accounts with respect to a Participant. A Participant’s Distribution Option Accounts may consist of a Separation Distribution Account and/or one or more In-Service Distribution Account(s), as elected by the Participant. Each Participant’s Distribution Option Accounts shall be further divided into separate subaccounts (“subaccounts”), each of which corresponds to a Fund elected by the Participant pursuant to Section 3.3(a). A Participant’s Distribution Option Account shall be credited as follows:   As soon as practicable after the end of each calendar month, the Committee shall credit the subaccounts of the Participant’s Distribution Option Account with an amount equal to the Base Salary and/or Bonus Compensation that would otherwise have been earned for such calendar month in accordance with the Distribution Option irrevocably elected by the Participant in the Enrollment Agreement and in accordance with the Participant’s investment elections under Section 3.3(a). Any amount once taken into account as Base Salary and/or Bonus Compensation for purposes of this Plan shall not be taken into account thereafter. The Participant’s Distribution Option Accounts shall be reduced by the amount of payments made by the Company to the Participant or the Participant’s Beneficiary pursuant to this Plan.   4.2 - Company Contribution.   A Participant’s Distribution Option Account shall be further credited with the Company Contribution for that Participant as follows:   15 --------------------------------------------------------------------------------   (a)                                  As soon as practicable after the end of each calendar month, the Committee shall credit the subaccounts of the Participant’s Distribution Option Account with an amount equal to the portion of the Company Contribution, if any, which the Participant elected to be deemed to be invested in a certain type of Fund. A Participant’s Company Contribution for any payroll period shall be equal to 50% of the Compensation Deferral by the Participant during such payroll period in accordance with the Participant’s election under Section 3.1(a), disregarding any such deferral in excess of 10% of the Participant’s Compensation for such payroll period. Company Contributions, when credited, are credited to the Distribution Option Accounts in the same proportion as the Base Salary and/or Bonus Compensation they match;   (b)                                 As of the last day of each month, forfeitures that occur under Section 5.2 during such month shall be returned to the Company for its unrestricted use; and   (c)                                  Notwithstanding Sections 4.2(a) and (b) above, from time-to-time and in its sole discretion, the Board may provide that additional Company Contributions be credited to some or all Participants, according to the terms and conditions determined by the Board.   (d)                                 Effective as of January 1, 2005, all Unvested Company Contributions under the Prior Plan shall be credited to this Plan and shall be governed by the terms and provisions of this Plan in all respects. Whether or not an employee is a Participant in this Plan, the value of the employee’s Unvested Company Contributions, as of December 31, 2004, shall be credited to a Separation Distribution Account under this Plan, effective as of January 1, 2005. If the employee is not a Participant in this Plan, the employee shall be required to make the distribution elections required under Sections 3.2(a) and 3.2(c) with respect to such amount no later than December 31, 2005. If the employee is a Participant in this Plan, such amount shall   16 --------------------------------------------------------------------------------   automatically become subject to the Participant’s distribution elections under Sections 3.2 and 3.4 for the Participant’s Separation Distribution Account.   4.3 - Investment Return.   Each subaccount of a Participant’s Distribution Option Account shall, as of each business day, be credited with earnings and debited with losses in an amount equal to that determined by multiplying the balance credited to such subaccount as of the previous day by the Investment Return for the corresponding Fund pursuant to Section 3.3(a).   ARTICLE V VESTING   5.1 - Compensation Deferral.   A Participant’s Compensation Deferral credited to his or her Distribution Option Account shall be 100% vested at all times.   5.2 - Company Contribution.   (a)                                  All Company Contributions credited to a Participant’s Distribution Option Account shall become nonforfeitable in the following increments:  (i) 25% upon the Participant’s completion of two Years of Vesting Service, (ii) an additional 25% (50% total) upon completion of three Years of Vesting Service, (iii) an additional 25% (75% total) upon completion of four Years of Vesting Service, and (iv) the Distribution Option Account balance shall be fully nonforfeitable in its entirety on and after the Participant’s completion of five Years of Vesting Service.   (b)                                 Notwithstanding Section 5.2(a) above, a Participant’s Distribution Option Account balance shall be fully nonforfeitable in its entirety should:  (i) the Participant die while providing service to the Company, (ii) the Participant become Disabled while providing service to the Company, or (iii) there occur a Change in Control.   17 --------------------------------------------------------------------------------   (c)                                  When a Participant incurs a Separation Date, the portion of the Company Contribution credited to his or her Distribution Option Account which is not vested shall immediately be forever forfeited to the Company, and the Company shall have no obligation to the Participant (or Beneficiary) with respect to such forfeited amount.   ARTICLE VI DISTRIBUTIONS   6.1 – Form and Timing of Distribution.   (a)                                  Subject to Section 6.2, in the case of a Participant whose Separation Date occurs on or after eligibility for Retirement and the vested portion of the Participant’s Separation Distribution Account exceeds $100,000 (taking into account all deferrals made to the Participant’s Separation Distribution Account), the Participant’s Separation Distribution Account shall be distributed in the form elected by the Participant pursuant to Sections 3.2 and 3.4, as applicable, and shall be paid, or commence to be paid, as soon as reasonably practicable following the end of the twelfth full calendar month after the Participant has a Separation from Service, unless payment is deferred pursuant to Section 3.4.   (b)                                 Subject to Section 6.2 and to (i) and (ii) below, in the case of a Participant who continues to provide service to the Company and the vested portion of a Participant’s In-Service Distribution Account exceeds $25,000 (applied on an Account by Account basis), the vested portion of the Participant’s In-Service Distribution Account shall be paid to the Participant as soon as reasonable practicable following the date elected by the Participant pursuant to Sections 3.2 and 3.4, as applicable; provided that if the amount to be distributed does not exceed $25,000, distribution shall be made in a lump sum in accordance with Section 6.2.   18 --------------------------------------------------------------------------------   (i)                                     If the Participant is not fully vested when the In-Service Distribution Account is to be paid, the non-vested portion at the date of first payment will automatically be transferred to the Participant’s Separation Distribution Account.   (ii)                                  If the Participant incurs a Separation from Service after distribution has commenced in accordance with this Section 6.1(b) but prior to the date on which the Participant’s In-Service Distribution Account(s) is fully distributed, distribution of the remaining amounts shall be governed by the Participant’s distribution elections under Section 3.2(a) or 3.2(c), as applicable, and shall be distributed in accordance with Section 6.1(a) or 6.1(c), as applicable.   (c)                                  In the case of a Participant whose Separation Date occurs prior to the earliest date on which the Participant is eligible for Retirement, other than by reason of death, and the vested portion of the Participant’s Distribution Option Accounts exceeds $100,000 (taking into account all deferrals made to the Participant’s Distribution Option Accounts), the vested portion of a Participant’s Distribution Option Accounts shall be distributed in the form elected by the Participant pursuant to Sections 3.2 and 3.4, as applicable, and shall be paid or commence to be paid as soon as reasonably practicable following the end of the twelfth full calendar month after the Participant has a Separation from Service, unless payment is deferred pursuant to Section 3.4. The unvested portion of any Distribution Option Account shall be forfeited in accordance with Section 5.2.   6.2 – Small Benefit Cashout.   (a)                                  Notwithstanding any provision of the Plan or election by a Participant to the contrary, in the event the value of the vested portion of a Participant’s Separation Distribution Account does not exceed $100,000 (taking into account all deferrals made to the Eligible   19 --------------------------------------------------------------------------------   Employee’s Separation Distribution Account) as of the date the Participant’s Account becomes distributable, then the vested portion of the Participant’s Account shall be paid in a lump sum as soon as reasonably practicable following the date the Participant’s Account becomes distributable. For purposes of the foregoing, the Participant’s Account shall be valued as of the last business day of the month following the month in which the Participant’s Separation Date occurs. If the value at such time does not exceed $100,000, the Participant’s Account shall be distributed in a lump sum as soon as reasonably practicable thereafter.   (b)                                 Notwithstanding any provision of the Plan or election by a Participant to the contrary, in the event the value of the vested portion of a Participant’s In-Service Distribution Account does not exceed $25,000 (applied on an Account by Account basis) as of the date the Participant’s Account becomes distributable, then the vested portion of the Participant’s Account shall be paid in a lump sum as soon as reasonably practicable following the date the Participant’s Account becomes distributable.   6.3 – Payout.   (a)                                  Any lump sum benefit payable under this Article VI shall be paid in January of the Plan Year elected by the Participant pursuant to Sections 3.2(b) and 3.4as applicable, or otherwise at the time specified for payment under Sections 6.1(a) or 6.1(c), as applicable, in an amount equal to the vested value of the portion of such Distribution Option Account being distributed as of the business day the Funds are deemed to be liquidated to make the payment.   (b)                                 Installment payments, if any, payable under this Article VI shall commence in January of the Plan Year elected by the Participant pursuant to Sections 3.2(b) and 3.4, as applicable, or otherwise at the time specified for payment under Sections 6.1(a) or 6.1(c), as applicable, in an amount equal to (i) the vested value of such portion of such Distribution Option   20 --------------------------------------------------------------------------------   Account being distributed as of the business day the Funds are deemed to be liquidated to make the payment, divided by (ii) the number of installment payments elected by the Participant in the applicable Enrollment Agreement with respect to an In-Service Distribution Account or in the distribution election form filed pursuant to Section 3.2 or 4.2(d) with respect to the Separation Distribution Account.. The remaining installments shall be paid in an amount equal to (i) the vested value of such portion of the Distribution Option Account being distributed as of the business day the Funds are deemed to be liquidated to make the payment divided by (ii) the number of installments remaining.   6.4 – Distributions to Key Employees.   Notwithstanding any provision of the Plan to the contrary, distributions under Sections 6.1(a) and 6.1(c) to Participants who are Key Employees shall be postponed to a date that is not less than 6 months following the Participant’s Separation Date.   6.5 – Financial Hardship of Participant.   (a)                                  At any time prior to commencement of payment pursuant to this Article VI, a Participant may request payment to him or her of all or a portion of the amounts that the Participant has deferred under the Plan. The decision to approve or deny such a request shall be in the absolute discretion of the Committee. However, such a request shall be approved only upon a finding that the Participant has suffered a severe financial hardship which has resulted from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in section 152(a) of the Code) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant’s control, and then only in an amount necessary to eliminate such hardship plus amounts necessary to pay taxes reasonably anticipated as a result of the   21 --------------------------------------------------------------------------------   distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship). In the event such a request is approved, payment of all or a portion of the amounts previously deferred by the Participant, with credited interest, to the extent approved by the Committee, shall be made as soon as practicable to the Participant. Amounts otherwise payable to a Participant hereunder shall be adjusted (as determined by the Committee in its absolute discretion) to take into account such financial hardship payment. The Committee shall administer hardship distribution requests consistently with section 409A of the Code and the regulations thereunder.   (b)                                 If a Participant elects to take a hardship distribution prior to June 30 of any Plan Year, the Participant’s deferral election shall be cancelled for the Plan Year in which the distribution occurs with respect to all salary and bonuses not yet earned.. If a Participant elects to take a hardship distribution on or after June 30 of any Plan Year, the Participant’s deferral election shall be cancelled for the Plan Year in which the hardship distribution occurs with respect to all salary and bonuses not yet earned, and the Participant shall be suspended from participation in the Plan for the following Plan Year.   6.6 – Permissible Distribution Event.   Notwithstanding any provision of the Plan to the contrary, no distributions shall be made except upon a specified date or event as permitted pursuant to section 409A of the Code and the regulations thereunder.   6.7 - Payment by Trust.   The Company may cause the payment of benefits under this Plan to be made in whole or in part by the trustee of a trust designated by the Committee (the “Trust”). The Committee may   22 --------------------------------------------------------------------------------   direct the Trustee to pay the Participant’s or Beneficiary’s benefit at the time and in the amount described herein. In the event the amounts allocated to the Participant under the Trust are not sufficient to provide the full amount of benefit payable to the Participant, the Company shall pay the remainder of such benefit.   6.8 - Inability to Locate Participant.   In the event that the Committee is unable to locate a Participant or Beneficiary within two years following the date the Participant was to commence receiving payment, the entire amount allocated to the Participant’s Deferral Account and Company Contribution Account shall be forfeited. If, after such forfeiture, the Participant or Beneficiary later claims such benefit, such benefit shall be reinstated without interest or earnings from the date payment was to commence pursuant to the Participant’s elections under Sections 3.2 and 3.4, as applicable.   ARTICLE VII CHANGE IN CONTROL   In the event of a Change in Control, any Participant shall receive a distribution of 100% of the value of the Participant’s Distribution Option Accounts at the time of the distribution. Such distribution shall be made in a lump sum within 30 days following the date the Change in Control is consummated, in an amount equal to the value of such Distribution Option Accounts as of the business day the Funds are deemed to be liquidated to make the payment.   ARTICLE VIII DEATH BENEFITS   Upon the death of a Participant before his or her Distribution Option Account(s) has been paid in full (either in a lump sum or installment payments), his or her Beneficiary shall receive the balance of the Participant’s vested Account as of the date of death, as adjusted by subsequent gains or losses prior to distribution, in the form of a lump sum payment as soon as reasonably practicable following the date of the Participant’s death.   23 --------------------------------------------------------------------------------   ARTICLE IX CLAIMS PROCEDURES   9.1 – Claims.   A Participant or, following the Participant’s death, a Beneficiary (collectively referred to in this section as “Claimant”) may submit a claim for benefits under the Plan. Any claim for benefits under this Plan shall be made in writing to the Committee. If such claim for benefits is wholly or partially denied, the Committee shall, within 90 days after receipt of the claim, notify the Claimant of the denial of the claim unless special circumstances require an extension of time for processing the claim, which extension shall not exceed 180 days from receipt of the claim. If such extension is required, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 90-day period and shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render a final decision. A notice of denial shall be in writing, shall be written in a manner calculated to be understood by the Claimant, and shall contain the specific reason or reasons for denial of the claim, a specific reference to the pertinent Plan provisions upon which the denial is based, a description of the additional material or information (if any) necessary to perfect the claim, together with an explanation of why such material or information is necessary, and an explanation of the claims review procedure set forth below, including a statement of the Claimant’s right to bring a civil action under section 502(a) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) following an adverse benefit determination on review.   9.2 – Appeal.   Within 60 days after the receipt by a Claimant of a written notice of denial of a claim, the Claimant may file a written request with the Committee that it conduct a full and fair review of   24 --------------------------------------------------------------------------------   the denial of the claim for benefits. The Claimant, or duly authorized representative, shall 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. The Claimant, or duly authorized representative may also submit written comments, documents, records and other information relating to the claim for benefits, and the review will take into account such items whether or not they were considered in the initial benefit determination.   The Committee shall deliver to the Claimant, or authorized representative, a written decision on the claim within 60 days after the receipt of the request for review, except that if there are special circumstances that require an extension of time, the 60-day period may be extended to 120 days. If such extension is required, written notice shall be furnished to the Claimant, or authorized representative, prior to the termination of the initial 60-day period and shall indicate the special circumstances requiring an extension of time and the date by which the final decision will be rendered. The decision shall be written in a manner calculated to be understood by the Claimant, include the specific reason or reasons for the decision, include a statement that the Claimant is entitled to receive upon request and free of charge, access to and copies of all documents and other information relevant to the claim, contain a specific reference to the pertinent Plan provisions upon which the decision is based, and include a statement describing any voluntary appeal procedures offered by the Plan and a statement of the Claimant’s right to bring an action under section 502(a) of ERISA.   9.3 – Authority.   The Committee, in determining claims for benefits, shall have the complete discretion to review and determine related factual questions, to construe the terms of the Plan, and to bind the Company with respect to the Plan.   25 --------------------------------------------------------------------------------   ARTICLE X ADMINISTRATION   10.1 - Committee.   A committee shall be appointed by, and serve at the pleasure of, the Board. The number of members comprising the Committee shall be determined by the Board which may from time to time vary the number of members. A member of the Committee may resign by delivering a written notice of resignation to the Board. The Board may remove any member by delivering a certified copy of its resolution of removal to such member. Vacancies in the membership of the Committee shall be filled promptly by the Board.   10.2 - Committee Action.   The Committee shall act at meetings by affirmative vote of a majority of the members of the Committee. Any action permitted to be taken at a meeting may be taken without a meeting if, prior to such action, a written consent to the action is signed by all members of the Committee and such written consent is filed with the minutes of the proceedings of the Committee. A member of the Committee shall not vote or act upon any matter which relates solely to himself or herself as a Participant. The Chairman or any other member or members of the Committee designated by the Chairman may execute any certificate or other written direction on behalf of the Committee.   10.3 - Powers and Duties of the Committee.   (a)                                  The Committee, on behalf of the Participants and their Beneficiaries, shall enforce the Plan in accordance with its terms, shall be charged with the general administration of the Plan, and shall have all powers necessary to accomplish its purposes, including, but not by way of limitation, the following:   26 --------------------------------------------------------------------------------   (i)                                     To select the mutual funds, contracts or investment funds to be the Funds in accordance with Section 3.3(b) hereof;   (ii)                                  To construe and interpret the terms and provisions of this Plan and to make factual determinations;   (iii)                               To compute and certify to the amount and kinds of benefits payable to Participants and their Beneficiaries;   (iv)                              To maintain all records that may be necessary for the administration of the Plan;   (v)                                 To provide for the disclosure of all information and the filing or provision of all reports and statements to Participants, Beneficiaries or governmental agencies as shall be required by law;   (vi)                              To make and publish such rules for the regulation of the Plan and procedures for the administration of the Plan as are not inconsistent with the terms hereof; and   (vii)                           To appoint a plan administrator or any other agent, and to delegate to them such powers and duties in connection with the administration of the Plan as the Committee may from time to time prescribe.   (viii)                        On behalf of the Company, to select those Highly Compensated Employees who shall be Eligible Employees.   10.4 - Construction and Interpretation.   (a)                                  The Committee shall have full discretion to construe and interpret the terms and provisions of this Plan, which interpretation or construction shall be final and binding on all parties, including but not limited to, the Company and any Participant or Beneficiary. The   27 --------------------------------------------------------------------------------   Committee shall administer such terms and provisions in a uniform and nondiscriminatory manner and in full accordance with any and all laws applicable to the Plan.   (b)                                 Nothing contained in the Plan shall be construed to prevent the Company from taking any action which is deemed by it to be appropriate or in its best interest. No Participant, Beneficiary, or other person shall have any claim against the Company as a result of such action. Any decisions, actions or interpretations to be made under the Plan by the Company or the Board, or the Committee acting on behalf of the Company, shall be made in its respective sole discretion, not as a fiduciary, need not be uniformly applied to similarly situated individuals and shall be final, binding and conclusive on all persons interested in the Plan.   10.5 - Information.   To enable the Committee to perform its functions, the Company shall supply full and timely information to the Committee on all matters relating to the Compensation of all Participants, their death, Disability, or other cause of termination, and such other pertinent facts as the Committee may require.   10.6 - Compensation, Expenses and Indemnity.   (a)                                  The Committee is authorized at the expense of the Company to employ such legal counsel as it may deem advisable to assist in the performance of its duties hereunder. Expenses and fees in connection with the administration of the Plan shall be paid by the Company.   (b)                                 To the extent permitted by applicable state law, the Company shall indemnify and save harmless the Committee and each member thereof, the Board and any delegate of the Committee who is an employee of the Company against any and all expenses, liabilities and claims, including legal fees to defend against such liabilities and claims arising out of their discharge in good faith of responsibilities under or incident to the Plan, other than expenses and   28 --------------------------------------------------------------------------------   liabilities arising out of willful misconduct. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Company or provided by the Company under any bylaw, agreement or otherwise, as such indemnities are permitted under state law.   10.7 -  Quarterly Statements.   Under procedures established by the Committee, a Participant shall receive a statement with respect to such Participant’s Accounts on a quarterly basis as of each March 31, June 30, September 30 and December 31.   ARTICLE XI MISCELLANEOUS   11.1 - Unsecured General Creditor.   Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or assets of the Company. No assets of the Company shall be held under any trust, or held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and all of the Company’s assets shall be, and remain, the general unpledged, unrestricted assets of the Company. The Company’s obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Company to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors.   11.2 - Restriction Against Assignment.   The Company shall pay all amounts payable hereunder only to the person or persons designated by the Plan and not to any other person or corporation. No part of a Participant’s Accounts shall be liable for the debts, contracts, or engagements of any Participant, his or her Beneficiary, or successors in interest, nor shall a Participant’s Accounts be subject to execution   29 --------------------------------------------------------------------------------   by levy, attachment, or garnishment or by any other legal or equitable proceeding, nor shall any such person have any right to alienate, anticipate, commute, pledge, encumber, or assign any benefits or payments hereunder in any manner whatsoever. If any Participant, Beneficiary or successor in interest is adjudicated bankrupt or purports to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any distribution or payment from the Plan, voluntarily or involuntarily, the Committee, in its discretion, may cancel such distribution or payment (or any part thereof) to or for the benefit of such Participant, Beneficiary or successor in interest in such mariner as the Committee shall direct.   11.3 - Withholding.   There shall be deducted from each payment made under the Plan or any other compensation payable to the Participant (or Beneficiary) all taxes which are required to be withheld by the Company in respect to such payment or this Plan. The Company shall have the right to reduce any payment (or compensation) by the amount of cash sufficient to provide the amount of said taxes.   11.4 - Amendment, Modification, Suspension or Termination.   It is the intention of the Company to continue the Plan and to distribute benefits to Participants in accordance with Article 6 in the absence of the development of circumstances concerning construction or operation of the Plan which are materially adverse to the Company or the Participants. However, the Committee or the Board may at any time, or from time to time, in its sole discretion amend or terminate the Plan in any manner that the Committee or Board deems appropriate, including amending or terminating outstanding deferral elections, if necessary or appropriate to comply with changes to applicable law, without the consent of any Participant. In the event the Committee or the Board acts to terminate the Plan, distribution to Participant shall   30 --------------------------------------------------------------------------------   be made in accordance with Article 6, unless an alternative method of distribution is permitted under applicable law.   11.5 - Governing Law.   This Plan shall be construed, governed and administered in accordance with the laws of the State of California.   11.6 - Receipt or Release.   Any payment to a Participant or the Participant’s Beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims against the Committee, the Company and the Trustee. The Committee may require such Participant or Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect.   11.7 - Payments on Behalf of Persons Under Incapacity.   In the event that any amount becomes payable under the Plan to a person who, in the sole judgement of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefore, the Committee may direct that such payment be made to any person found by the Committee, in its sole judgement, to have assumed the care of such person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Committee and the Company.   11.8 - Headings.   Headings and subheadings in this Plan are inserted for convenience of reference only and are not to be considered in the construction of the provisions hereof.   31 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the Company has caused this document to be executed by its duly authorized officer to be effective on this 20th day of December, 2005.     HILTON HOTELS CORPORATION           By: /s/ Molly McKenzie Swarts           Its:    Senior Vice President     32 --------------------------------------------------------------------------------  

  Exhibit 10.1   EXECUTION VERSION         TAX MATTERS AGREEMENT     by and between     Viacom Inc.   and   New Viacom Corp.     Dated as of December 30, 2005       --------------------------------------------------------------------------------   TABLE OF CONTENTS       Page       ARTICLE I DEFINITIONS 2 Section 1.1 Certain Defined Terms 2 Section 1.2 Additional Definitions 9       ARTICLE II TAX RETURN FILINGS 9 Section 2.1 Filing of Federal Consolidated Tax Returns 9 Section 2.2 Allocation of Responsibility for Federal Income Taxes for Pre-Separation Periods 9 Section 2.3 The 2005 Federal Consolidated Income Tax Return 9 Section 2.4 Tax Returns for Taxable Periods Beginning After the Separation Date 11 Section 2.5 Amended Returns; Refunds; Carrybacks 12       ARTICLE III TAX CONTEST 13 Section 3.1 Tax Contest 13 Section 3.2 Notice and Overriding Elections; Freezing Liability with Respect to a Tax Contest; Assuming Control of a Tax Contest; Correlative Adjustments. 14 Section 3.3 Recalculation of the Share of Liability to Reflect Adjustments 15 Section 3.4 Interest Netting 16 Section 3.5 Certain Dutch Tax Return Filings 16       ARTICLE IV SPIN-OFF DISQUALIFICATION AND OTHER TAXES ARISING FROM SEPARATION TRANSACTIONS 17 Section 4.1 Indemnification by New Viacom 17 Section 4.2 Indemnification by CBS 17 Section 4.3 Treatment of Other Income Tax Items Attributable to the Separation Transactions 18 Section 4.4 Dual Consolidated Losses. 18       ARTICLE V PAYMENTS MADE UNDER THIS AGREEMENT 19 Section 5.1 Interest 19 Section 5.2 Tax Treatment of Payments Made Under This Agreement 19 Section 5.3 Tax Effecting Obligations Under This Agreement 19 Section 5.4 Direct Payments to the IRS 20       ARTICLE VI STATE, LOCAL AND FOREIGN INCOME TAXES 20 Section 6.1 State, Local and Foreign Income Taxes; Capital Taxes 20 Section 6.2 Certain Transfer Taxes 21       ARTICLE VII DISPUTE RESOLUTION 21   --------------------------------------------------------------------------------   ARTICLE VIII CONFIDENTIALITY; EXCHANGE OF INFORMATION 21 Section 8.1 Ownership of Income Tax Information 21 Section 8.2 Restrictions on Disclosure of Income Tax Information 22 Section 8.3 Disclosure of Income Tax Information 22 Section 8.4 Access to Income Tax Information 23 Section 8.5 Record Retention 24 Section 8.6 Income Tax Information Relating to Non-Income Taxes 25 Section 8.7 Witness Services 25 Section 8.8 Privileged Matters 26 Section 8.9 Tax Library 28       ARTICLE IX MISCELLANEOUS 28 Section 9.1 Termination 28 Section 9.2 Effect of Termination 28 Section 9.3 Amendments 28 Section 9.4 Waiver 28 Section 9.5 Limitation of Liability 29 Section 9.6 Expenses 29 Section 9.7 Counterparts 29 Section 9.8 Notices 29 Section 9.9 Severability 30 Section 9.10 Entire Agreement; Assignment 31 Section 9.11 Parties in Interest 31 Section 9.12 Governing Law 31 Section 9.13 Waiver of Jury Trial 31 Section 9.14 Headings 32 Section 9.15 Survival of Covenants 32   ii --------------------------------------------------------------------------------   TAX MATTERS AGREEMENT   THIS TAX MATTERS AGREEMENT (the “Agreement”), dated as of December 30, 2005 is entered into by and between Viacom Inc., a Delaware corporation (“Viacom”), and New Viacom Corp., a Delaware corporation (“New Viacom”).   WHEREAS, Viacom, directly and through its various subsidiaries, is engaged in the CBS Business and the New Viacom Business;   WHEREAS, the Board of Directors of Viacom has determined that it is in the best interests of Viacom and its stockholders to separate Viacom into two separate, publicly traded companies, which will operate the CBS Business and the New Viacom Business, respectively;   WHEREAS, in order to effect such separation, (i) Viacom will, and will cause its Subsidiaries to, transfer to New Viacom and to the New Viacom Subsidiaries all of the Subsidiaries, assets and liabilities of Viacom and its Subsidiaries that relate primarily to the New Viacom Business and that are not already owned or otherwise held by New Viacom and the New Viacom Subsidiaries, (ii) New Viacom will, and will cause the New Viacom Subsidiaries to, transfer to Viacom and the CBS Subsidiaries all of the Subsidiaries, assets and liabilities of New Viacom and the New Viacom Subsidiaries that relate primarily to the CBS Business and that are not already owned or otherwise held by Viacom and the CBS Subsidiaries, in each case in the manner set forth and except as otherwise provided in the Separation Agreement and the Ancillary Agreements and (iii) Viacom and Viacom Merger Sub Inc., a Delaware corporation, will consummate the Merger (the transactions described in clauses (i), (ii) and (iii) collectively, the “Separation Transactions”);   WHEREAS, prior to consummation of the Separation Transactions, Viacom is the common parent corporation of an affiliated group of corporations within the meaning of Section 1504 of the Code;   WHEREAS, in the Merger, Viacom will be renamed “CBS Corporation” (“CBS”) and New Viacom will be renamed “Viacom Inc.” and, after the Separation Date, CBS and its Subsidiaries will conduct the CBS Business and New Viacom and its Subsidiaries will conduct the New Viacom Business;   WHEREAS, in the Merger, each share of stock of Viacom outstanding immediately prior to the Effective Time (as defined in the Merger Agreement) shall be canceled and shall be converted automatically into the right to receive 0.5 shares of common stock of New Viacom, and 0.5 shares of common stock of CBS.   WHEREAS, the distribution of stock in New Viacom to the shareholders of Viacom is intended to qualify as a tax-free reorganization under Section 368(a)(1)(D) of the Code and as tax-free under Sections 355 and 361 of the Code;   --------------------------------------------------------------------------------   WHEREAS, Viacom and New Viacom wish to allocate and settle among themselves in an equitable manner, among other things, all applicable federal, state, local and foreign Income Taxes for all taxable periods that include or end prior to the Separation Date; and   WHEREAS, it is appropriate and desirable for Viacom and New Viacom to set forth the principles and responsibilities of the parties to this Agreement with respect to indemnification for Income Taxes, proceedings and other matters relating to Income Taxes, Capital Taxes and Transfer Taxes.   NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereby agree as follows:   ARTICLE I DEFINITIONS   Section 1.1                                      Certain Defined Terms.  For purposes of this Agreement:   “2005 Consolidated Tax Return” means the U.S. federal consolidated Income Tax Return for the Old Viacom Group for the 2005 calendar year.   “Actually Received” has the following meaning:  an Income Tax benefit shall be treated as Actually Received by any Person at the time at which and to the extent that (i) a cash payment is received from the appropriate taxing authority in respect of such Income Tax benefit or (ii) the amount of Income Taxes payable by such Person is reduced below the amount of Income Taxes that such Person would be required to pay but for such incremental Income Tax benefit.   “Adjusted Swap Rate” means the bid-side quote for U.S. dollar interest rate swaps, plus 50 basis points, as shown on Bloomberg page IRSB as of the close of business on the date as of which the determination is to be made for swaps with a maturity closest to the average life of the payments being discounted.   “Capital Tax” and “Capital Taxes” means (i) any and all state and local taxes imposed on capital, net worth or equity, (ii) any and all interest, penalties, additions to tax, or additional amounts imposed by any taxing authority in connection with (A) any item described in clause (i) or this clause (ii) or (B) the failure to comply with any requirement imposed with respect to any Tax Return relating to any Capital Tax, and (iii) any obligation with respect to any item described in clause (i) and/or (ii) above payable by reason of contract, assumption, transferee or successor liability, operation of Law, or otherwise.   “Carryback” has the meaning set forth in Section 2.5(c).   2 --------------------------------------------------------------------------------   “CBS Adjusted Tax Liability” means, with respect to any taxable period (or portion thereof) ending on or before the Separation Date, the sum of (i) the CBS Business Tax and (ii) the product of (x) 0.5 and (y) the amount equal to the Old Viacom Tax Liability minus the sum of the CBS Business Tax and the New Viacom Business Tax; in each case, with respect to such taxable period.  For the avoidance of doubt, the amount described in clause (ii)(y) of this definition may be a negative number.   “CBS Business” has the meaning set forth in the Separation Agreement, except, for purposes of this Agreement, without regard to whether such business is conducted before or after consummation of the Separation Transactions.   “CBS Business Tax” means, with respect to any taxable period (or portion thereof) ending on or before the Separation Date, the federal Income Tax liability that the Old Viacom Group would have if (i) during the entirety of the particular taxable period (or portion thereof), it owned only the assets and conducted only the activities and operations of the CBS Business and the CBS Discontinued Operations, (ii) any and all carryforwards and Carrybacks of tax attributes of the Old Viacom Group arising on or before the Separation Date (regardless of whether originating from a segment of the CBS Business, the CBS Discontinued Operations, the New Viacom Business or the New Viacom Discontinued Operations) actually available in such taxable period (or portion thereof) were taken into account, (iii) any and all Carrybacks of tax attributes of any CBS Entity arising after the Separation Date actually available in such taxable period (or portion thereof) were taken into account, (iv) solely for purposes of applying Section 2.5(c) to a CBS Carryback, taking into account any New Viacom Carryback arising in earlier taxable periods, (v) any tax attribute generated in the same taxable period (or portion thereof) but not absorbed in the computation of the New Viacom Business Tax for the same taxable period (or portion thereof) were taken into account, and (vi) items relating to the issues described in the Schedule resulting from a Resolution of such issues were taken into account in the percentages allocated to CBS therein.  For the avoidance of doubt, for purposes of this definition, the definition of New Viacom Business Tax and the calculations relating thereto, the same carryforward or carryback tax attribute may be used in computing the CBS Business Tax and the New Viacom Business Tax.   “CBS Carryback” means a Carryback with respect to a net operating loss, a net capital loss or any other tax attribute incurred by CBS after the Separation Date.   “CBS Discontinued Operations” means any terminated, divested or discontinued business the assets and liabilities of which are allocated to CBS pursuant to the Separation Agreement and not included in the CBS Business.   “CBS Entities” or the “CBS Group” means, collectively, CBS and the CBS Subsidiaries; “CBS Entity” means CBS or any CBS Subsidiary.   “CBS Estimated Tax Payments” means, with respect to any taxable period (or portion thereof) ending on or before the Separation Date, the sum of (i) the total amount of estimated federal Income Tax payments made on or prior to the Separation Date multiplied by the CBS Original Tax Percentage and (ii) the total amount for which   3 --------------------------------------------------------------------------------   CBS is responsible and paid to the taxing authorities pursuant to Section 2.3(b)(i) with respect to estimated federal Income Tax payments made after the Separation Date.   “CBS Original Tax Percentage” means a percentage equal to the CBS Adjusted Tax Liability for any taxable period (or portion thereof) ending on or before the Separation Date divided by the Old Viacom Tax Liability for such taxable period, as the amount of those liabilities were determined based on the original federal consolidated Income Tax Return actually filed for such taxable period, provided, however, that, for purposes of this definition, (i) the CBS Adjusted Tax Liability will be calculated without taking into account any contribution made in December 2005 or later to a qualified benefit plan that is allocated to CBS pursuant to the Separation Agreement and (ii) the Old Viacom Tax Liability will be calculated without taking into account any contribution made in December 2005 or later to a qualified benefit plan that is allocated to CBS or New Viacom, as the case may be, pursuant to the Separation Agreement.  For the avoidance of doubt, adjustments made to the CBS Adjusted Tax Liability or to the Old Viacom Tax Liability after such original filing (or such finalization) shall not, for purposes of this Agreement, change the CBS Original Tax Percentage.   “CBS Tax Packages” means, collectively, all Tax Packages for a particular taxable period (or portion thereof) with respect to the CBS Business and the CBS Discontinued Operations.  A “CBS Tax Package” means a Tax Package with respect to a part of the CBS Business and/or the CBS Discontinued Operations.   “Code” means the Internal Revenue Code of 1986, as amended.   “Confidential Income Tax Information” has the meaning set forth in Section 8.2(a).   “Current Practices” means of the current practices, tax accounting methods, and positions used by the members of the Old Viacom Group as of the Separation Date in connection with any and all Income Tax matters, including the preparation of Tax Packages and the preparation and filing of Tax Returns, revised as appropriate to take into account (i) changes in the applicable Law after the Separation Date, (ii) good faith resolutions of Tax Contests after the Separation Date and (iii) methods or positions adopted in the preparation of Income Tax Returns previously filed (after the Separation Date) in accordance with this Agreement.   “DCL” has the meaning set forth in Section 4.4(a).   “DCL Closing Agreement” has the meaning set forth in Section 4.4(a).   “Deviation” has the meaning set forth in Section 2.3(a)(ii).   “Dispute” has the meaning set forth in Section 2.3(a)(ii).   “Electing Party” has the meaning set forth in Section 3.2(a).   4 --------------------------------------------------------------------------------   “Election” has the meaning set forth in Section 3.2(a).   “Governmental Authority” has the meaning set forth in the Separation Agreement.   “Income Tax Information” means any and all records, documents, data and other information relating to Income Taxes, including, without limitation, Income Tax Returns and Tax Packages.   “Income Tax Returns” means any Tax Return relating to Income Taxes.   “Income Taxes” means (i) any and all federal, state, local and foreign taxes based upon, measured by, or computed by reference to net income or profits (including alternative minimum tax), (ii) any and all interest, penalties, additions to tax, or additional amounts imposed by any taxing authority in connection with (A) any item described in clause (i) or this clause (ii) or (B) the failure to comply with any requirement imposed with respect to any Income Tax Return, and (iii) any obligation with respect to Income Taxes described in clause (i) and/or (ii) above payable by reason of contract, assumption, transferee or successor liability, operation of Law, Treasury Regulation section 1.1502-6(a) or 1.1502-78 (or predecessor or successor thereof or any analogous or similar provisions under Law) or otherwise.   “Interest Netting Rules” means Section 6621(d) of the Code and any similar provision of state, local or foreign Law.   “IRS” means the U.S. Internal Revenue Service.   “IRS Private Letter Ruling” means the federal income tax rulings issued to Old Viacom on November 22, 2005 by the IRS in connection with the Separation Transactions.   “Joint Owner” has the meaning set forth in Section 8.3.   “New Viacom Adjusted Tax Liability” means, with respect to any taxable period (or portion thereof) ending on or before the Separation Date, the sum of (i) the New Viacom Business Tax and (ii) the product of (x) 0.5 and (y) the amount equal to the Old Viacom Tax Liability minus the sum of the CBS Business Tax and the New Viacom Business Tax; in each case, with respect to such taxable period.  For the avoidance of doubt, the amount described in clause (ii)(y) of this definition may be a negative number.   “New Viacom Business” has the meaning set forth in the Separation Agreement, except, for purposes of this Agreement, without regard to whether such business is conducted before or after consummation of the Separation Transactions.   “New Viacom Business Tax” means, with respect to any taxable period (or portion thereof) ending on or before the Separation Date, the federal Income Tax liability that the Old Viacom Group would have if (i) during the entirety of the particular   5 --------------------------------------------------------------------------------   taxable period (or portion thereof), it owned only the assets and conducted only the activities and operations of the New Viacom Business and/or the New Viacom Discontinued Operations, (ii) any and all carryforwards and Carrybacks of tax attributes of the Old Viacom Group arising on or before the Separation Date (regardless of whether originating from a segment of the CBS Business, the CBS Discontinued Operations, the New Viacom Business or the New Viacom Discontinued Operations) actually available in such taxable period (or portion thereof) were taken into account, (iii) any and all Carrybacks of tax attributes of any New Viacom Entity arising after the Separation Date actually available in such taxable period (or portion thereof) were taken into account, (iv) solely for purposes of applying Section 2.5(c) to a New Viacom Carryback, taking into account any CBS Carryback arising in earlier taxable periods, (v) any tax attribute generated in the same taxable period (or portion thereof) but not absorbed in the computation of the CBS Business Tax for the same taxable period (or portion thereof) were taken into account, and (vi) items relating to the issues described in the Schedule resulting from a Resolution of such issues were taken into account in the percentages allocated to New Viacom therein.  For the avoidance of doubt, for purposes of this definition, the definition of CBS Business Tax and the calculations relating thereto, the same carryforward or carryback tax attribute may be used in computing the CBS Business Tax and the New Viacom Business Tax.   “New Viacom Carryback” means a Carryback with respect to a net operating loss, a net capital loss or any other tax attribute incurred by New Viacom after the Separation Date.   “New Viacom Discontinued Operations” means any terminated, divested or discontinued business the assets and liabilities of which are allocated to New Viacom pursuant to the Separation Agreement and not included in the New Viacom Business.   “New Viacom Entities” or the “New Viacom Group” means, collectively, New Viacom and the New Viacom Subsidiaries; “New Viacom Entity” means New Viacom or any New Viacom Subsidiary.   “New Viacom Estimated Tax Payments” means, with respect to any taxable period (or portion thereof) ending on or before the Separation Date, the sum of (i) the total amount of estimated payments made on or prior to the Separation Date multiplied by the New Viacom Original Tax Percentage and (ii) the total amount for which New Viacom is responsible and paid to CBS pursuant to Section 2.3(b)(i) with respect to estimated payments made after the Separation Date.   “New Viacom Original Tax Percentage” means a percentage equal to the New Viacom Adjusted Tax Liability for any taxable period (or portion thereof) ending on or before the Separation Date divided by the Old Viacom Tax Liability for such taxable period, as the amount of those liabilities were determined based on the original federal consolidated Income Tax Return actually filed for such taxable period, provided, however, that, for purposes of this definition, (i) the New Viacom Adjusted Tax Liability will be calculated without taking into account any contribution made in December 2005 or later to a qualified benefit plan that is allocated to New Viacom pursuant to the   6 --------------------------------------------------------------------------------   Separation Agreement and (ii) the Old Viacom Tax Liability will be calculated without taking into account any contribution made in December 2005 or later to a qualified benefit plan that is allocated to CBS or New Viacom, as the case may be, pursuant to the Separation Agreement.  For the avoidance of doubt, adjustments made to the New Viacom Adjusted Tax Liability or to the Old Viacom Tax Liability after such original filing (or such finalization) shall not, for purposes of this Agreement, change the New Viacom Original Tax Percentage.   “New Viacom Tax Packages” means, collectively, all Tax Packages for a particular taxable period (or portion thereof) with respect to the New Viacom Business and the New Viacom Discontinued Operations.  A “New Viacom Tax Package” means a Tax Package with respect to a part of the New Viacom Business and/or the New Viacom Discontinued Operations.   “Non-Settling Party” has the meaning set forth in Section 3.2(b).   “Old Viacom Group” means the affiliated group of corporations (within the meaning of Section 1504 of the Code) of which the common parent is Viacom for taxable periods (or portions thereof) ending on or before the Separation Date.   “Old Viacom Return” means the U.S. federal consolidated income Tax Return for the Old Viacom Group for any taxable period ending on or prior to December 31, 2005.   “Old Viacom Tax Liability” means, with respect to any taxable period (or portion thereof) ending on or before the Separation Date, the federal Income Tax liability of the Old Viacom Group.   “Overriding Party” has the meaning set forth in Section 3.2(a).   “Payment” has the meaning set forth in Section 5.3.   “Person” has the meaning set forth in the Separation Agreement.   “Post-Separation Date Interest” has the meaning set forth in the Separation Agreement.   “Pre-Separation Liability” has the meaning set forth in the Separation Agreement.   “Pre-Separation Period” means any taxable period (or portion thereof) ending on or before the Separation Date.   “Providing Party” has the meaning set forth in Section 8.4(a).   “Records” has the meaning set forth in the Separation Agreement.   7 --------------------------------------------------------------------------------   “Refund” means, with respect to any Person, any refund of Income Taxes including any reduction of Income Tax liabilities by means of a credit, offset or otherwise, but excluding any interest payable by the appropriate taxing authority.   “Related Party” has the meaning set forth in Section 8.4(a).   “Representative” has the meaning set forth in the Separation Agreement.   “Requesting Party” has the meaning set forth in Section 8.4(a).   “Section 3.2 Settlement Amount” has the meaning set forth in Section 3.2(d).   “Separation Agreement” means the Separation Agreement by and between Viacom and New Viacom, dated as of December 19, 2005, and thereafter as amended.   “Separation Transactions” has the meaning set forth in the Recitals.   “Settling Party” has the meaning set forth in Section 3.2(d).   “Special Committee” means a committee whose members are the chair of the audit committee of CBS and the chair of the audit committee of New Viacom.   “Spin-Off Disqualification” means the failure of any of the transactions taken in connection with the Separation Transactions from qualifying for tax-free treatment, where tax-free treatment was intended by the parties as reflected in the IRS Private Letter Ruling.   “Tax Basis” has the meaning set forth in Section 5.3.   “Tax Contest” has the meaning set forth in Section 3.1.   “Tax Opinion” means the opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP to Old Viacom, dated December 30, 2005, addressing the federal income tax treatment of certain components of the Separation Transactions.   “Tax Package” means all of the information necessary to prepare a Tax Return for a particular taxable period (or portion thereof) with respect to an activity or operation conducted by Old Viacom or any direct or indirect Subsidiary of Old Viacom.   “Tax Return” means any returns, reports, declarations, elections, notices, designations, filings, statements, forms, and information returns and reports filed or required to be filed with any taxing authority in respect of Taxes, including any schedules thereto.   “Transfer Taxes” shall mean any Taxes (other than Income Taxes and Capital Taxes) that the parties have agreed to share under the Separation Agreement.   8 --------------------------------------------------------------------------------   Section 1.2                                      Additional Definitions.  Capitalized terms not defined in this Agreement shall have the meaning ascribed to them in the Separation Agreement.   ARTICLE II TAX RETURN FILINGS   Section 2.1                                      Filing of Federal Consolidated Tax Returns.  New Viacom and CBS shall cause the New Viacom Entities and the CBS Entities to be included in the Old Viacom Group through the Separation Date to the extent permitted under federal Income Tax Law.   Section 2.2                                      Allocation of Responsibility for Federal Income Taxes for Pre-Separation Periods.  With respect to the Old Viacom Tax Liability for each Pre-Separation Period, (i) New Viacom will be responsible for the portion equal to New Viacom Adjusted Tax Liability for such taxable period and (ii) CBS will be responsible for the portion equal to the CBS Adjusted Tax Liability for such taxable period.   Section 2.3                                      The 2005 Federal Consolidated Income Tax Return.   (A)                                  PREPARATION AND FILING OF THE 2005 FEDERAL CONSOLIDATED INCOME TAX RETURN.   (I)                                     NEW VIACOM SHALL PROVIDE CBS, NO LATER THAN APRIL 30, 2006, WITH THE NEW VIACOM TAX PACKAGES WITH RESPECT TO THE 2005 CALENDAR YEAR IN A CORPTAX FORMAT CURRENTLY IN USE BY THE EXISTING TAX DEPARTMENT.  CBS SHALL PREPARE THE CBS TAX PACKAGES WITH RESPECT TO THE SAME TAXABLE YEAR.  NEW VIACOM AND CBS SHALL (1) COOPERATE WITH EACH OTHER IN PREPARING TAX PACKAGES FOR ENTITIES THAT CONDUCT PART OF THE NEW VIACOM BUSINESS OR THE NEW VIACOM DISCONTINUED OPERATIONS ON THE ONE HAND AND PART OF THE CBS BUSINESS OR THE CBS DISCONTINUED OPERATIONS ON THE OTHER HAND, AND (2) JOINTLY PREPARE TAX PACKAGES WITH RESPECT TO ASSETS, LIABILITIES, ACTIVITIES OR OPERATIONS THAT DO NOT CONSTITUTE PART OF THE NEW VIACOM BUSINESS, THE NEW VIACOM DISCONTINUED OPERATIONS, THE CBS BUSINESS, OR THE CBS DISCONTINUED OPERATIONS.  THE TAX PACKAGES FOR THE 2005 CALENDAR YEAR SHALL BE PREPARED ON A BASIS CONSISTENT WITH CURRENT PRACTICES.  NEW VIACOM SHALL ALSO PROMPTLY PROVIDE CBS WITH ANY INFORMATION REASONABLY REQUESTED TO PREPARE THE 2005 CONSOLIDATED TAX RETURN AND TO DETERMINE ESTIMATED INCOME TAX PAYMENTS, CURRENT AND DEFERRED INCOME TAX LIABILITIES, AND INCOME TAX RESERVE ITEMS.   (II)                                  CBS SHALL HAVE PRIMARY RESPONSIBILITY FOR PREPARING THE 2005 CONSOLIDATED TAX RETURN (INCLUDING REQUESTS FOR EXTENSIONS THEREOF).  CBS SHALL   9 --------------------------------------------------------------------------------   PREPARE SUCH TAX RETURN IN A MANNER CONSISTENT WITH CURRENT PRACTICES AND SHALL REPORT ON SUCH TAX RETURN THE INFORMATION AND POSITIONS PROPERLY CONTAINED IN THE TAX PACKAGES EXCEPT TO THE EXTENT CBS DETERMINES THAT A DEVIATION IS APPROPRIATE AS A RESULT OF (I) CONSOLIDATING THE VARIOUS TAX PACKAGES OR (II) INFORMATION OR A POSITION CONTAINED IN A NEW VIACOM TAX PACKAGE BEING INCONSISTENT WITH INFORMATION OR A POSITION CONTAINED IN A CBS TAX PACKAGE (A “DEVIATION”).  CBS SHALL DELIVER TO NEW VIACOM FOR ITS REVIEW A FINAL DRAFT OF THE 2005 CONSOLIDATED TAX RETURN AT LEAST THIRTY (30) DAYS PRIOR TO THE DATE (WITH EXTENSIONS) SUCH TAX RETURN IS REQUIRED TO BE FILED.  IF NEW VIACOM BELIEVES THAT SUCH TAX RETURN IS INCONSISTENT WITH THE SECOND PRECEDING SENTENCE OR CONTAINS A DEVIATION WITH WHICH IT DISAGREES, NEW VIACOM MAY PROVIDE CBS COMMENTS TO THAT EFFECT NO LATER THAN FIFTEEN (15) DAYS AFTER RECEIPT OF THE DRAFT TAX RETURN AND SUCH COMMENTS SHALL SPECIFY WHICH POSITIONS IN SUCH DRAFT, IF ANY, NEW VIACOM BELIEVES ARE INCONSISTENT WITH THE PRINCIPLES CONTAINED IN THE SECOND PRECEDING SENTENCE AND WITH WHICH DEVIATIONS IT DISAGREES (“DISPUTES”).  DISPUTES THAT ARE NOT PROMPTLY RESOLVED SHALL BE RESOLVED BY AN ARBITRATOR IN ACCORDANCE WITH ARTICLE VII.  CBS SHALL TIMELY FILE SUCH TAX RETURN, AS MODIFIED TO REFLECT THE RESOLUTION OF ANY DISPUTE.  IF ANY DISPUTE REMAINS UNRESOLVED SEVEN (7) DAYS BEFORE THE DUE DATE (WITH EXTENSIONS) FOR FILING SUCH TAX RETURN (REGARDLESS OF WHETHER THE DISPUTE HAS BEEN SUBMITTED TO AN ARBITRATOR), SUCH DISPUTE SHALL BE SUBMITTED TO THE SPECIAL COMMITTEE, WHICH SHALL DECIDE HOW, FOR PURPOSES OF FILING SUCH TAX RETURN, THE ITEMS THAT ARE THE SUBJECT OF THE DISPUTE WILL BE REPORTED ON SUCH TAX RETURN IF THE PARTIES DO NOT AGREE AND NO DECISION HAS BEEN MADE BY THE ARBITRATOR PRIOR TO THE DUE DATE OF SUCH TAX RETURN (WITH EXTENSIONS).  CBS SHALL TIMELY FILE SUCH TAX RETURN, PROPERLY REFLECTING THEREON THE AGREEMENT OF THE PARTIES, THE DECISION OF THE SPECIAL COMMITTEE OR THE DECISION OF THE ARBITRATOR, AS APPLICABLE, ON THE DATE SUCH TAX RETURN IS REQUIRED TO BE FILED (WITH EXTENSIONS).  IF THE DISPUTE IS SUBSEQUENTLY RESOLVED BY THE PARTIES OR BY AN ARBITRATOR IN ACCORDANCE WITH ARTICLE VII IN A MANNER CONTRARY TO THE 2005 CONSOLIDATED TAX RETURN AS FILED, THEN, IN ACCORDANCE WITH THE PROCEDURES CONTAINED IN THIS SECTION 2.3(A)(II), CBS SHALL PREPARE AN AMENDED 2005 CONSOLIDATED TAX RETURN IN A MANNER NECESSARY TO EFFECTUATE SUCH RESOLUTION AND FILE SUCH AMENDED TAX RETURN.  IF EITHER PARTY DESIRES THE FILING OF A REQUEST FOR AN EXTENSION OF TIME WITHIN WHICH TO FILE THE 2005 CONSOLIDATED TAX RETURN, THEN CBS SHALL PREPARE ANY TAX RETURN NECESSARY TO OBTAIN SUCH EXTENSION AND FILE SUCH TAX RETURN.  CBS SHALL PAY ANY AND ALL THIRD-PARTY COSTS AND EXPENSES INCURRED BY CBS, AND NEW VIACOM SHALL PAY ANY AND ALL THIRD-PARTY COSTS AND EXPENSES INCURRED BY NEW VIACOM, IN CONNECTION WITH THE PREPARATION OF THE 2005 CONSOLIDATED TAX RETURN.   (B)                                 PAYMENTS OF THE 2005 OLD VIACOM GROUP TAX LIABILITY.   (I)                                     IF ONE OR MORE ESTIMATED FEDERAL INCOME TAX PAYMENTS ARE REQUIRED TO BE MADE WITH RESPECT TO THE OLD VIACOM TAX LIABILITY FOR THE 2005 CALENDAR YEAR AFTER THE SEPARATION DATE, THEN NEW VIACOM AND CBS SHALL EACH FUND 50% OF SUCH ESTIMATED PAYMENTS.  AMOUNTS PAYABLE AFTER THE SEPARATION DATE AS ESTIMATED PAYMENTS WITH RESPECT TO THE OLD VIACOM TAX LIABILITY FOR THE 2005 CALENDAR YEAR SHALL BE DETERMINED IN GOOD FAITH BY NEW VIACOM AND CBS AND, ANY DISAGREEMENT RELATING THERETO SHALL BE REFERRED TO, AND RESOLVED BY, THE SPECIAL COMMITTEE.   10 --------------------------------------------------------------------------------   (II)                                  IF A PAYMENT IS REQUIRED TO BE MADE (OTHER THAN BY REASON OF A TAX CONTEST OR FOR ESTIMATED INCOME TAXES) WITH RESPECT TO THE OLD VIACOM TAX LIABILITY FOR THE 2005 CALENDAR YEAR AFTER THE SEPARATION DATE AND AFTER SUCH OLD VIACOM TAX LIABILITY HAS BEEN DETERMINED IN ACCORDANCE WITH THIS AGREEMENT, THEN (1) NEW VIACOM SHALL BEAR THE PORTION OF SUCH PAYMENT OBLIGATION EQUAL TO THE EXCESS, IF ANY, OF THE NEW VIACOM ADJUSTED TAX LIABILITY OVER THE NEW VIACOM ESTIMATED TAX PAYMENTS, AND (2) CBS SHALL BEAR THE PORTION OF SUCH PAYMENT OBLIGATION EQUAL TO THE EXCESS, IF ANY, OF THE CBS ADJUSTED TAX LIABILITY OVER THE CBS ESTIMATED TAX PAYMENTS, IN EACH CASE, FOR SUCH TAXABLE PERIOD.   (III)                               WHERE, PURSUANT TO THIS SECTION 2.3(B), NEW VIACOM IS REQUIRED TO BEAR A PORTION OF ANY PAYMENT MADE AFTER THE SEPARATION DATE WITH RESPECT TO THE OLD VIACOM TAX LIABILITY FOR THE 2005 CALENDAR YEAR, THEN NEW VIACOM SHALL REMIT ITS SHARE TO CBS TWO (2) BUSINESS DAYS BEFORE THE DUE DATE FOR SUCH PAYMENT.  CBS SHALL TIMELY REMIT THE ENTIRE AMOUNT OF THE PAYMENT OBLIGATION TO THE IRS AND SHALL THEREAFTER PROMPTLY PROVIDE NEW VIACOM WITH DOCUMENTATION EVIDENCING ITS PAYMENT TO THE IRS.   (IV)                              WHERE ONE PARTY HAS PAID MORE, AND THE OTHER PARTY HAS PAID LESS, THAN THE AMOUNT FOR WHICH IT IS RESPONSIBLE UNDER THIS SECTION 2.3(B) WITH RESPECT TO THE OLD VIACOM TAX LIABILITY FOR THE 2005 CALENDAR YEAR, THEN THE OTHER PARTY SHALL REMIT TO SUCH PARTY THE AMOUNT OF SUCH OVERPAYMENT WITHIN FIVE (5) BUSINESS DAYS AFTER THE 2005 CONSOLIDATED TAX RETURN HAS BEEN FILED.   Section 2.4                                      Tax Returns for Taxable Periods Beginning After the Separation Date.   (A)                                  THE NEW VIACOM ENTITIES SHALL BE SOLELY RESPONSIBLE FOR PREPARING AND FILING ALL FEDERAL INCOME TAX RETURNS RELATING TO THE NEW VIACOM ENTITIES FOR TAXABLE PERIODS BEGINNING AFTER THE SEPARATION DATE.  THE NEW VIACOM ENTITIES SHALL BE SOLELY RESPONSIBLE FOR ANY INCOME TAXES DUE WITH RESPECT TO THE NEW VIACOM ENTITIES ATTRIBUTABLE TO ANY AND ALL TAXABLE PERIODS (OR PORTION THEREOF) BEGINNING AFTER THE SEPARATION DATE.   (B)                                 THE CBS ENTITIES SHALL BE SOLELY RESPONSIBLE FOR PREPARING AND FILING ALL FEDERAL INCOME TAX RETURNS RELATING TO THE CBS ENTITIES FOR TAXABLE PERIODS BEGINNING AFTER THE SEPARATION DATE.  THE CBS ENTITIES SHALL BE SOLELY RESPONSIBLE FOR ANY INCOME TAXES DUE WITH RESPECT TO THE CBS ENTITIES ATTRIBUTABLE TO ANY AND ALL TAXABLE PERIODS (OR PORTIONS THEREOF) BEGINNING AFTER THE SEPARATION DATE.   (C)                                  NONE OF THE NEW VIACOM ENTITIES NOR THE CBS ENTITIES SHALL BE OBLIGATED TO CBS OR NEW VIACOM, RESPECTIVELY, FOR USING ANY TAX ATTRIBUTES AFTER THE SEPARATION DATE, WHICH AROSE IN A TAXABLE PERIOD (OR PORTION THEREOF) BEGINNING ON OR BEFORE THE SEPARATION DATE.   11 --------------------------------------------------------------------------------   Section 2.5                                      Amended Returns; Refunds; Carrybacks.   (A)                                  AMENDED RETURNS.   (I)                                     SUBJECT TO SECTION 3.2 AND ACTING IN GOOD FAITH, NEW VIACOM SHALL HAVE THE RIGHT TO REQUIRE CBS TO FILE, AND CBS SHALL HAVE THE RIGHT TO FILE, AN AMENDED OLD VIACOM RETURN FOR ANY TAXABLE PERIOD ENDING ON OR PRIOR TO DECEMBER 31, 2005 IF AND ONLY IF THE NEW POSITIONS DESIRED TO BE REFLECTED ON SUCH AMENDED TAX RETURN COULD HAVE BEEN REPORTED ON THE ORIGINAL TAX RETURN HAD THEY BEEN INCLUDED IN THE ORIGINAL TAX PACKAGE AND PREPARED IN A MANNER CONSISTENT WITH CURRENT PRACTICES.  CBS SHALL PROMPTLY FILE AMENDED TAX RETURNS, WHICH SATISFY THE REQUIREMENTS OF THE PREVIOUS SENTENCE, THAT ARE REQUESTED TO BE FILED BY NEW VIACOM.  EXCEPT AS PROVIDED IN THE SECOND PRECEDING SENTENCE, CBS SHALL NOT BE PERMITTED TO FILE, AND NEW VIACOM SHALL NOT HAVE THE RIGHT TO CAUSE TO BE FILED, AN AMENDED OLD VIACOM RETURN FOR ANY TAXABLE PERIOD ENDING ON OR PRIOR TO DECEMBER 31, 2005.  EITHER PARTY, ACTING IN GOOD FAITH, SHALL BE ENTITLED TO EXTEND, OR CAUSE TO BE EXTENDED, THE APPLICABLE STATUTE OF LIMITATIONS FOR ANY TAXABLE PERIOD THAT INCLUDES OR ENDS PRIOR TO THE SEPARATION DATE IF SUCH EXTENSION IS REASONABLY NECESSARY IN CONNECTION WITH FILING AN AMENDED OLD VIACOM RETURN IN ACCORDANCE WITH THIS SECTION 2.5(A).   (II)                                  CBS SHALL HAVE PRIMARY RESPONSIBILITY FOR PREPARING ANY AMENDED TAX RETURN PERMITTED TO BE AMENDED AND FILED IN ACCORDANCE WITH SECTION 2.5(A)(I).  THE PARTY REQUESTING THE FILING OF AN AMENDED TAX RETURN SHALL PREPARE AND DELIVER A NEW TAX PACKAGE TO CBS, WHICH SHALL BE PREPARED IN A MANNER CONSISTENT WITH CURRENT PRACTICES.  ALL AMENDED TAX RETURNS SHALL BE PREPARED IN A MANNER CONSISTENT WITH THE SECOND SENTENCE IN SECTION 2.3(A)(II) AND SHALL BE SUBJECT TO THE PROCEDURES SPECIFIED IN SECTION 2.3(A)(II) (INCLUDING THIRD-PARTY COSTS AND EXPENSES).   (B)                                 REFUNDS.  EXCEPT AS PROVIDED IN SECTION 2.5(C), ANY REFUNDS FOR ANY PRE-SEPARATION PERIOD SHALL BE ALLOCATED BETWEEN NEW VIACOM AND CBS IN ACCORDANCE WITH THIS SECTION 2.5(B).  THE OLD VIACOM TAX LIABILITY, THE NEW VIACOM ADJUSTED TAX LIABILITY, AND CBS ADJUSTED TAX LIABILITY, EACH FOR THE TAXABLE PERIOD TO WHICH THE REFUND RELATES, SHALL BE RECOMPUTED TO TAKE INTO ACCOUNT THE REFUND AND THE UNDERLYING INCOME TAX ITEMS.  NEW VIACOM’S SHARE OF THE REFUND SHALL BE EQUAL TO THE EXCESS, IF ANY, OF THE NEW VIACOM ADJUSTED TAX LIABILITY, AS ORIGINALLY COMPUTED (OR PREVIOUSLY RECOMPUTED IN ACCORDANCE WITH THIS AGREEMENT, AS THE CASE MAY BE), OVER NEW VIACOM ADJUSTED TAX LIABILITY, AS RECOMPUTED IN ACCORDANCE WITH THIS SECTION 2.5(B).  CBS’S SHARE OF THE REFUND SHALL BE EQUAL TO THE EXCESS, IF ANY, OF THE CBS ADJUSTED TAX LIABILITY, AS ORIGINALLY COMPUTED (OR PREVIOUSLY RECOMPUTED IN ACCORDANCE WITH THIS AGREEMENT, AS THE CASE MAY BE), OVER THE CBS ADJUSTED TAX LIABILITY, AS RECOMPUTED IN ACCORDANCE WITH THIS SECTION 2.5(B).  SUBJECT TO SECTION 3.4, ANY INTEREST PAID OR PAYABLE BY THE IRS WITH RESPECT TO A REFUND DESCRIBED IN THIS SECTION 2.5(B) SHALL BE ALLOCATED BETWEEN NEW VIACOM AND CBS BY DETERMINING THE AMOUNT OF INTEREST THAT ACCRUED ON A YEAR-BY-YEAR BASIS AND, THEN, ALLOCATING EACH YEAR’S ACCRUED INTEREST BETWEEN NEW VIACOM AND CBS IN THE SAME PROPORTION AS THE REFUND TO WHICH SUCH INTEREST   12 --------------------------------------------------------------------------------   RELATES IS ALLOCATED.  IF NEW VIACOM OR CBS RECEIVES ANY REFUND AND INTEREST RELATED THERETO DESCRIBED IN THIS SECTION 2.5(B) TO WHICH THE OTHER PARTY IS ENTITLED (EITHER IN WHOLE OR IN PART), THEN NEW VIACOM OR CBS, AS THE CASE MAY BE, SHALL REMIT TO THE OTHER PARTY THAT OTHER PARTY’S SHARE OF SUCH REFUND, NET OF ANY NET INCOME TAXES IMPOSED ON SUCH SHARE OF THE REFUND AND INTEREST RELATED THERETO AND OF ANY THIRD-PARTY COSTS AND EXPENSES RELATED THERETO, WITHIN FIVE (5) BUSINESS DAYS AFTER THE DATE SUCH REFUND IS ACTUALLY RECEIVED.   (C)                                  CARRYBACKS.  IF NEW VIACOM AND/OR CBS INCURS A NET OPERATING LOSS, A NET CAPITAL LOSS OR OTHER TAX ATTRIBUTE AFTER THE SEPARATION DATE WHICH MAY BE CARRIED BACK (A “CARRYBACK”) TO GENERATE A REFUND FOR THE OLD VIACOM GROUP FOR ANY PRE-SEPARATION PERIOD, THEN SUCH REFUND SHALL BE ALLOCATED IN ACCORDANCE WITH THE PROCEDURE SET FORTH IN SECTION 2.5(B).  FOR PURPOSES OF THIS SECTION 2.5(C), CARRYBACKS OF TAX ATTRIBUTES ARISING IN EARLIER TAXABLE PERIODS SHALL BE CONSIDERED BEFORE CARRYBACKS OF TAX ATTRIBUTES ARISING IN SUBSEQUENT TAXABLE PERIODS.  AT THE GOOD FAITH REQUEST OF THE PARTY DESIRING TO CARRYBACK ITS TAX ATTRIBUTE, CBS SHALL PREPARE AND FILE THE APPROPRIATE TAX RETURN TO CLAIM THE REFUND ARISING FROM THE CARRYBACK.  ALL SUCH TAX RETURNS SHALL BE PREPARED IN A MANNER CONSISTENT WITH THE SECOND SENTENCE IN SECTION 2.3(A)(II) AND SHALL BE SUBJECT TO THE PROCEDURES SPECIFIED IN SECTION 2.3(A)(II).  THE PARTIES SHALL COOPERATE WITH EACH OTHER TO EFFECTUATE ANY CLAIM FOR SUCH REFUND.  CBS SHALL (I) PAY TO NEW VIACOM THE AMOUNT OF SUCH REFUND AND INTEREST RELATED THERETO, NET OF ANY NET INCOME TAXES IMPOSED ON THE REFUND AND INTEREST RELATED THERETO (OTHER THAN POST-SEPARATION DATE INTEREST) AND OF ANY THIRD-PARTY COSTS AND EXPENSES RELATED THERETO, TO WHICH NEW VIACOM IS ENTITLED IN ACCORDANCE WITH THIS SECTION 2.5(C) WITHIN FIVE (5) BUSINESS DAYS AFTER THE DATE SUCH REFUND IS ACTUALLY RECEIVED, AND (II) BE ENTITLED TO RETAIN THE AMOUNT OF SUCH REFUND TO WHICH IT IS ENTITLED IN ACCORDANCE WITH THIS SECTION 2.5(C).   ARTICLE III TAX CONTEST   Section 3.1                                      Tax Contest.   (A)                                  CONTROL.  NEW VIACOM AND CBS SHALL JOINTLY CONTROL THE CONDUCT, SETTLEMENT, COMPROMISE OR OTHER RESOLUTION OF ANY NOTICE OF DEFICIENCY, PROPOSED ADJUSTMENT, ASSESSMENT, INQUIRY, AUDIT, EXAMINATION, OR ANY ADMINISTRATIVE OR JUDICIAL PROCEEDING INVOLVING ANY MATTER RELATING TO INCOME TAXES OF THE OLD VIACOM GROUP FOR ANY TAXABLE PERIOD (OR PORTION THEREOF) ENDING ON OR PRIOR TO DECEMBER 31, 2005 (A “TAX CONTEST”); PROVIDED, HOWEVER, THAT IF THE POTENTIAL ADVERSE EFFECT (INCLUDING COLLATERAL EFFECTS) ON ONE PARTY WITH RESPECT TO A PARTICULAR ISSUE RAISED IN A TAX CONTEST IS DE MINIMIS, THEN SUCH PARTY SHALL ONLY HAVE THE RIGHT TO PARTICIPATE IN, AND SHALL NOT SHARE IN THE CONTROL OF, SUCH ISSUE.  NEW VIACOM AND CBS MAY PROVIDE IN A SIDE LETTER ADDITIONAL AND/OR ALTERNATIVE PROCEDURES FOR ADMINISTERING TAX CONTESTS.  NEW VIACOM AND CBS SHALL EQUALLY BEAR THE COST OF COUNSEL AND OTHER ADVISORS JOINTLY SELECTED TO ASSIST WITH MATTERS RELATED TO ISSUES THAT ARE JOINTLY CONTROLLED, BUT SHALL OTHERWISE BEAR THEIR OWN OUT-   13 --------------------------------------------------------------------------------   OF-POCKET EXPENSES INCURRED IN CONNECTION WITH A TAX CONTEST.  WHERE NEW VIACOM AND CBS JOINTLY CONTROL AN ISSUE IN A TAX CONTEST, NEITHER PARTY MAY SETTLE THAT ISSUE WITHOUT THE OTHER PARTY’S CONSENT, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD.  WHERE A TAX CONTEST IS PART OF A LARGER DISPUTE OR ACTION WITH THE TAXING AUTHORITIES, THE RIGHTS AND OBLIGATIONS OF THE PARTIES AS SET FORTH IN THIS SECTION 3.1(A), SECTION 3.2 OR SECTION 3.3 SHALL, TO THE EXTENT PRACTICABLE, ONLY APPLY WITH RESPECT TO THE SPECIFIC ISSUES RAISED IN THE TAX CONTEST.   (B)                                 EXTENDING THE STATUTE OF LIMITATIONS.  WHERE CONTROL OVER ANY ISSUE RAISED IN A TAX CONTEST IS SHARED PURSUANT TO SECTION 3.1(A), THEN EITHER PARTY MAY, SUBJECT TO SECTION 3.2 AND ACTING IN GOOD FAITH, EXTEND THE STATUTE OF LIMITATIONS FOR THE TAXABLE PERIOD OR PERIODS TO WHICH SUCH ISSUE RELATES, REGARDLESS OF (I) WHETHER CONTROL OVER OTHER ISSUES INCLUDED IN THE TAX CONTEST IS NOT SHARED OR (II) THE EXISTENCE OF ISSUES FROM TAX CONTROVERSIES THAT ARE OUTSIDE THE SCOPE OF THIS AGREEMENT.  A PARTY WITH SOLE CONTROL, AS DETERMINED UNDER SECTION 3.1(A), OVER ALL OF THE ISSUES IN A TAX CONTEST MAY, SUBJECT TO SECTION 3.2 AND ACTING IN GOOD FAITH, EXTEND THE STATUTE OF LIMITATIONS FOR THE TAXABLE PERIOD OR PERIODS TO WHICH SUCH TAX CONTEST RELATES, REGARDLESS OF THE EXISTENCE OF ISSUES FROM TAX CONTROVERSIES THAT ARE OUTSIDE THE SCOPE OF THIS AGREEMENT.  IF NEW VIACOM DECIDES TO EXTEND THE APPLICABLE STATUTE OF LIMITATIONS PURSUANT TO THIS SECTION 3.1(B), NEW VIACOM SHALL NOTIFY CBS IN WRITING OF SUCH DECISION AND THEN CBS SHALL TAKE ALL ACTIONS NECESSARY TO EXTEND SUCH STATUTE OF LIMITATIONS.  IF CBS DECIDES TO EXTEND THE APPLICABLE STATUTE OF LIMITATIONS PURSUANT TO THIS SECTION 3.1, CBS SHALL NOTIFY NEW VIACOM IN WRITING OF SUCH DECISION AND THEN CBS SHALL BE RESPONSIBLE FOR TAKING ALL ACTIONS NECESSARY TO EXTEND SUCH STATUTE OF LIMITATIONS.   Section 3.2                                      Notice and Overriding Elections; Freezing Liability with Respect to a Tax Contest; Assuming Control of a Tax Contest; Correlative Adjustments.   (A)                                  NOTICE AND OVERRIDING ELECTIONS.  THE PARTY DESIRING TO FILE, OR CAUSE TO BE FILED, AN AMENDED TAX RETURN IN ACCORDANCE WITH SECTION 2.5(A)(I), EFFECTUATE A CARRYBACK OF A TAX ITEM IN ACCORDANCE WITH SECTION 2.5(C), OR EXTEND THE APPLICABLE STATUTE OF LIMITATIONS IN ACCORDANCE WITH SECTION 2.5(A)(I) OR SECTION 3.1(B) (IN ANY SUCH CASE, THE “ELECTING PARTY”, AND EACH SUCH ELECTION, AN “ELECTION”) SHALL PROVIDE THE OTHER PARTY (THE “OVERRIDING PARTY”) TEN (10) DAYS PRIOR WRITTEN NOTICE OF SUCH ELECTION, DURING WHICH TIME THE OVERRIDING PARTY SHALL HAVE THE RIGHT TO PREVENT SUCH ACTION BY AGREEING TO MAKE PAYMENT TO, AND INDEMNIFY, THE ELECTING PARTY SO THAT THE ELECTING PARTY IS IN THE SAME POSITION AS IF THE AMENDED TAX RETURN HAD BEEN FILED, THE CARRYBACK HAD BEEN MADE, OR THE APPLICABLE STATUTE OF LIMITATIONS HAD BEEN EXTENDED, AS APPLICABLE (INCLUDING, WITHOUT LIMITATION, PAYING THE AMOUNT OF ANY ASSOCIATED REFUND)   (B)                                 FREEZING LIABILITY WITH RESPECT TO A TAX CONTEST.  WHERE NEW VIACOM OR CBS WISHES TO ACCEPT A SETTLEMENT OF ONE OR MORE OF THE ISSUES RAISED IN A TAX CONTEST (THE “SETTLING PARTY”) AND THE OTHER PARTY DOES NOT CONSENT TO SUCH SETTLEMENT WHERE SUCH CONSENT IS REQUIRED PURSUANT TO SECTION 3.1 (THE “NON-SETTLING PARTY”), THEN THE SETTLING PARTY MAY ELECT IN WRITING TO “FREEZE” ITS LIABILITY WITH RESPECT TO   14 --------------------------------------------------------------------------------   SUCH ISSUES SO THAT ITS LIABILITY WILL EQUAL WHAT THE SETTLING PARTY WOULD OWE IF THE PROPOSED SETTLEMENT WERE CONSUMMATED AFTER TAKING INTO ACCOUNT THE COMPUTATIONS DESCRIBED IN SECTIONS 3.2(D) AND 3.3 (THE “SECTION 3.2 SETTLEMENT AMOUNT”).  THE SETTLING PARTY SHALL REMIT TO THE NON-SETTLING PARTY THE AMOUNT OF THE SECTION 3.2 SETTLEMENT AMOUNT WITHIN FIVE (5) BUSINESS DAYS AFTER THE SECTION 3.2 SETTLEMENT AMOUNT HAS BEEN CALCULATED IN ACCORDANCE WITH SECTIONS 3.2(D) AND 3.3.  WHERE THE SETTLING PARTY ELECTS TO FREEZE ITS LIABILITY PURSUANT TO THE FIRST SENTENCE IN THIS SECTION 3.2, THE NON-SETTLING PARTY SHALL BE ENTITLED TO RETAIN ANY BENEFIT AND SHALL BEAR ANY DETRIMENT FROM NOT ACCEPTING SUCH SETTLEMENT.   (C)                                  ASSUMING CONTROL OF A TAX CONTEST.  EACH PARTY SHALL HAVE THE RIGHT TO HAVE SOLE CONTROL OVER, AND THE RELATED RIGHTS DESCRIBED IN SECTION 3.1 WITH RESPECT TO, ANY ISSUE RAISED IN A TAX CONTEST IF THAT PARTY (I) AGREES TO INDEMNIFY AND HOLD HARMLESS THE OTHER PARTY WITH RESPECT TO ANY LIABILITY FOR INCOME TAXES THAT MAY ULTIMATELY BE OWED AS A RESULT OF A RESOLUTION (AS DEFINED BELOW) OF SUCH ISSUE AND (II) NOTIFIES THE OTHER PARTY IN WRITING OF ITS DECISION TO EXERCISE SUCH RIGHT.   (D)                                 CORRELATIVE ADJUSTMENTS.  FOR PURPOSES OF THIS SECTION 3.2, CORRELATIVE ADJUSTMENTS SHALL BE (I) TAKEN INTO ACCOUNT AT THE EARLIEST TIME UNDER APPLICABLE FEDERAL INCOME TAX LAW AS IN EFFECT ON THE DATE SUCH CALCULATION IS MADE, (II) DETERMINED BY ASSUMING THAT NO SALE OR OTHER DISPOSITIONS OF ASSETS SHALL BE TREATED AS OCCURRING EXCEPT FOR THOSE SALES AND DISPOSITIONS THAT HAVE ALREADY OCCURRED BEFORE THE TIME THAT THE CALCULATION IS MADE, AND (III) COMPUTED ON A PRESENT VALUE BASIS USING 60% OF THE ADJUSTED SWAP RATE.   Section 3.3                                      Recalculation of the Share of Liability to Reflect Adjustments.   (A)                                  SUBJECT TO SECTIONS 3.2(B) AND 3.2(C), NEW VIACOM AND CBS SHALL BEAR ANY INCOME TAXES OWED BY REASON OF A RESOLUTION OF AN ISSUE OR ISSUES IN A TAX CONTEST FOR ANY PRE-SEPARATION PERIOD (THE “RESOLUTION”) IN ACCORDANCE WITH THIS SECTION 3.3.  THE OLD VIACOM TAX LIABILITY, THE NEW VIACOM ADJUSTED TAX LIABILITY AND THE CBS ADJUSTED TAX LIABILITY SHALL EACH, FOR THE TAXABLE PERIOD TO WHICH THE RESOLUTION RELATES, BE RECOMPUTED TO TAKE INTO ACCOUNT THE ADJUSTMENTS REQUIRED BY THE RESOLUTION; PROVIDED, HOWEVER, THAT ANY INTEREST OR PENALTIES OWED AS PART OF THE RESOLUTION SHALL BE EXCLUDED FROM SUCH RECOMPUTATION AND SHALL BE ALLOCATED IN ACCORDANCE WITH THE LAST THREE SENTENCES OF THIS SECTION 3.3(A).  SUBJECT TO THE FOLLOWING SENTENCE, (I) NEW VIACOM’S SHARE OF ANY ADDITIONAL INCOME TAXES SHALL BE EQUAL TO THE EXCESS, IF ANY, OF THE NEW VIACOM ADJUSTED TAX LIABILITY, AS RECOMPUTED IN ACCORDANCE WITH THIS SECTION 3.3(A), OVER THE NEW VIACOM ADJUSTED TAX LIABILITY, AS ORIGINALLY COMPUTED (OR PREVIOUSLY RECOMPUTED IN ACCORDANCE WITH THIS AGREEMENT, AS THE CASE MAY BE) AND (II) CBS’S SHARE OF ANY ADDITIONAL INCOME TAXES SHALL BE EQUAL TO THE EXCESS, IF ANY, OF THE CBS ADJUSTED TAX LIABILITY, AS RECOMPUTED IN ACCORDANCE WITH THIS SECTION 3.3(A), OVER THE CBS ADJUSTED TAX LIABILITY, AS ORIGINALLY COMPUTED (OR PREVIOUSLY RECOMPUTED IN ACCORDANCE WITH THIS AGREEMENT, AS THE CASE MAY BE).  THE AMOUNTS DESCRIBED IN THE PREVIOUS   15 --------------------------------------------------------------------------------   SENTENCE SHALL BE SUBJECT TO EQUITABLE ADJUSTMENT TO THE EXTENT THAT EITHER PARTY RECEIVES OR INCURS A CORRELATIVE ADJUSTMENT (WHETHER AS A BENEFIT OR BURDEN) THAT IS DISPROPORTIONATE TO THE MANNER IN WHICH THE LIABILITY DUE FROM THE RESOLUTION WAS BORNE.  FOR PURPOSES OF MAKING AN EQUITABLE ADJUSTMENT PURSUANT TO THE PRECEDING SENTENCE, THE CORRELATIVE ADJUSTMENT (WHETHER AS A BENEFIT OR BURDEN) AT ISSUE SHALL BE DETERMINED IN ACCORDANCE WITH SECTION 3.2(D).  SUBJECT TO SECTION 3.4, ANY INTEREST OWED AS PART OF A RESOLUTION (EXCEPT INTEREST ON INCOME TAX PENALTIES) SHALL BE ALLOCATED BETWEEN NEW VIACOM AND CBS BY DETERMINING THE AMOUNT OF INTEREST THAT ACCRUED ON A YEAR-BY-YEAR BASIS AND, THEN, ALLOCATING EACH YEAR’S ACCRUED INTEREST BETWEEN NEW VIACOM AND CBS IN THE SAME PROPORTION AS THE INCOME TAX LIABILITY TO WHICH SUCH INTEREST RELATES IS ALLOCATED.  SUBJECT TO SECTION 3.4, ANY INCOME TAX PENALTIES (OTHER THAN INTEREST ON SUCH PENALTIES, WHICH INTEREST SHALL BE ALLOCATED IN ACCORDANCE WITH THE FOLLOWING SENTENCE) OWED AS PART OF A RESOLUTION SHALL BE ALLOCATED BETWEEN NEW VIACOM AND CBS IN THE SAME PROPORTION AS THE INCOME TAX LIABILITY TO WHICH SUCH PENALTY RELATES IS ALLOCATED.  ANY INTEREST OWED ON INCOME TAX PENALTIES IMPOSED AS PART OF A RESOLUTION SHALL BE ALLOCATED BETWEEN NEW VIACOM AND CBS BY DETERMINING THE AMOUNT OF INTEREST THAT ACCRUED ON SUCH PENALTIES ON A YEAR-BY-YEAR BASIS AND, THEN, ALLOCATING EACH YEAR’S ACCRUED INTEREST BETWEEN NEW VIACOM AND CBS IN THE SAME PROPORTION AS SUCH PENALTIES TO WHICH SUCH INTEREST RELATES IS ALLOCATED.   (B)                                 IF NEW VIACOM HAS A PAYMENT OBLIGATION PURSUANT TO SECTION 3.3(A), THEN NEW VIACOM SHALL REMIT ITS PAYMENT TO CBS TWO (2) BUSINESS DAYS BEFORE THE DATE PAYMENT IS DUE TO THE IRS UNDER THE RESOLUTION.  CBS SHALL TIMELY REMIT TO THE IRS THE FULL AMOUNT DUE UNDER THE RESOLUTION AND SHALL PROMPTLY THEREAFTER PROVIDE NEW VIACOM WITH DOCUMENTATION EVIDENCING SUCH PAYMENT.   Section 3.4                                      Interest Netting.  For purposes of Sections 2.5 and 3.3, interest payable to or receivable from a taxing authority shall be calculated as if the Interest Netting Rules did not apply in respect of any underpayment for which CBS or New Viacom is responsible under this Agreement and any overpayment to which the other party is entitled under this Agreement. To the extent that the net amounts actually payable or receivable by the parties in respect of interest differ from the amount payable to or receivable from the relevant taxing authority, the difference shall be shared equally by the parties.  In addition, any interest that would be receivable by a party pursuant to the first sentence of this section but is not actually received in cash shall be treated as Actually Received when it reduces the amount that otherwise would be payable in cash or by way of offset to a taxing authority.   Section 3.5                                      Certain Dutch Tax Return Filings.  CBS and New Viacom agree to use their best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary or appropriate to (i) file all outstanding Tax Returns of Viacom International (Netherlands) B.V. and its Subsidiaries in compliance with the existing ruling issued by the Dutch taxing authorities   16 --------------------------------------------------------------------------------   in 1995 and (ii) cooperate with respect to all Dutch tax issues relating to Viacom International (Netherlands) B.V. and its Subsidiaries for any Pre-Separation Period.   ARTICLE IV SPIN-OFF DISQUALIFICATION AND OTHER TAXES ARISING FROM SEPARATION TRANSACTIONS   Section 4.1                                      Indemnification by New Viacom.  The New Viacom Business Tax shall include any and all Income Taxes resulting from:  (i) a Spin-Off Disqualification that is attributable to any action, or failure to take any action, by any New Viacom Entity after the Separation Date if such act or the failure to act (or the combination of any such act or failure to act after the Separation Date with an event occurring prior to the Separation Date) would be inconsistent with the Tax Opinion or the IRS Private Letter Ruling, information included in any submission to the IRS in connection with the IRS Private Letter Ruling or with any representation or covenant made in connection with the Tax Opinion or (ii) any action, or failure to take any action, by any New Viacom Entity after the Separation Date if such act or the failure to act (or the combination of any such act or failure to act after the Separation Date with an event occurring prior to the Separation Date) results in the recognition of income or gain pursuant to Section 355(e) of the Code; provided, however, that this Section 4.1 shall not apply to any liability for Income Taxes resulting from the failure of the Merger and the related distribution of New Viacom stock to satisfy the business purpose requirement of Section 355 of the Code and the Treasury regulations promulgated thereunder.   Section 4.2                                      Indemnification by CBS.  The CBS Business Tax shall include any and all Income Taxes resulting from:  (i) a Spin-Off Disqualification that is attributable to any action, or failure to take any action, by any CBS Entity after the Separation Date if such act or failure to act (or the combination of any such act or failure to act after the Separation Date with an event occurring prior to the Separation Date) would be inconsistent with the Tax Opinion or the IRS Private Letter Ruling, information included in any submission to the IRS in connection with IRS Private Letter Rulings or with any representation or covenant made in connection with the Tax Opinion or (ii) any action, or failure to take any action, by any CBS Entity after the Separation Date if such act or the failure to act (or the combination of any such act or failure to act after the Separation Date with an event occurring prior to the Separation Date) results in the recognition of income or gain pursuant to Section 355(e) or 361(b) of the Code; provided, however, that this Section 4.2 shall not apply to any liability for taxes resulting from the failure of the Merger and the related distribution of New Viacom stock to satisfy the business purpose requirement of Section 355 of the Code and the Treasury regulations promulgated thereunder.   17 --------------------------------------------------------------------------------   Section 4.3                                      Treatment of Other Income Tax Items Attributable to the Separation Transactions.  For purposes of this Agreement, items of income or gain (i) to which Section 4.1 applies shall be treated as attributable to the New Viacom Business, (ii) to which Section 4.2 applies shall be treated as attributable to the CBS Business, and (iii) relating to the Separation Transactions that are not described in clauses (i) or (ii) (including without limitation, except to the extent provided in Section 4.1(ii) or 4.2(ii), (w) items not arising from a Spin-Off Disqualification, (x) items relating to Spin-Off Disqualification to which neither Section 4.1 nor 4.2 is applicable and to any Spin-Off Disqualification described in the proviso to Section 4.1 or 4.2, (y) items attributable to the repatriation of cash undertaken in connection with the Separation Transactions and which occur on or prior to December 31, 2005, by any New Viacom Entity or any CBS Entity that is a foreign corporation to any New Viacom Entity or CBS Entity that is a U.S. corporation, and (z) items described in Section 4.4(b) other than in the proviso thereof) shall not be treated as attributable to the New Viacom Business, the New Viacom Discontinued Operations, the CBS Business or the CBS Discontinued Operations.   Section 4.4                                      Dual Consolidated Losses.   (A)                                  CBS AND NEW VIACOM AGREE TO USE THEIR BEST EFFORTS TO TAKE, OR CAUSE TO BE TAKEN, ALL ACTIONS, AND TO DO, OR CAUSE TO BE DONE, ALL THINGS NECESSARY OR APPROPRIATE TO ENTER INTO AND MAKE EFFECTIVE A CLOSING AGREEMENT WITH THE IRS PURSUANT TO TREASURY REGULATION SECTION 1.1503-2(G)(2)(IV)(B)(3) (A “DCL CLOSING AGREEMENT”) WITH RESPECT TO ANY DUAL CONSOLIDATED LOSS (WITHIN THE MEANING OF SECTION 1503 OF THE CODE) OF ANY NEW VIACOM ENTITY, ANY ENTITY THAT CONDUCTS OR CONDUCTED A NEW VIACOM DISCONTINUED OPERATION OR ANY SEPARATE UNIT (WITHIN THE MEANING OF TREASURY REGULATION SECTION 1.1503-2(C)(3)) OF THE NEW VIACOM BUSINESS OR NEW VIACOM DISCONTINUED OPERATION (A “DCL”), AS WELL TO OBTAIN RELIEF UNDER TREASURY REGULATION SECTION 301.9100 WITH RESPECT TO UTILIZATION, CERTIFICATION, OR AVOIDANCE OF RECAPTURE OF DCLS.  WITHOUT LIMITATION OF THE FORGOING, CBS AND NEW VIACOM SHALL, AS PROMPTLY AS PRACTICABLE AFTER THE DATE HEREOF, PREPARE AND FILE WITH THE IRS A RULING REQUEST APPLYING FOR ONE OR MORE DCL CLOSING AGREEMENTS WITH RESPECT TO THE DCLS AND THEREAFTER SHALL COOPERATE IN CAUSING TO BECOME EFFECTIVE SUCH DCL CLOSING AGREEMENTS.  EACH OF CBS AND NEW VIACOM SHALL EXECUTE AND DELIVER, OR USE ITS BEST EFFORTS TO CAUSE TO BE EXECUTED AND DELIVERED, ALL INSTRUMENTS, DATA OR INFORMATION, INCLUDING ANY REQUIRED CERTIFICATIONS, AND TO MAKE ALL FILINGS, AND OBTAIN ALL REPRESENTATIONS OR CONSENTS REQUIRED BY THE IRS, AND TO TAKE ALL SUCH OTHER ACTIONS AS MAY BE REQUESTED BY THE IRS FROM TIME TO TIME IN ORDER TO ENTER INTO ONE OR MORE DCL CLOSING AGREEMENTS WITH RESPECT TO THE DCLS.  NEW VIACOM AND CBS SHALL SHARE EQUALLY ALL THIRD-PARTY COSTS AND EXPENSES INCURRED BY THEM IN CONNECTION WITH ENTERING INTO A DCL CLOSING AGREEMENT WITH RESPECT TO ANY DCL AND ALL THIRD-PARTY COSTS AND EXPENSES INCURRED BY THEM IN DETERMINING AND INVESTIGATING ISSUES RELATED TO DUAL CONSOLIDATED LOSSES OF THE OLD VIACOM GROUP ARISING IN ANY PRE-SEPARATION PERIOD.   18 --------------------------------------------------------------------------------   (B)                                 ANY INCOME TAXES OWED IN CONNECTION WITH THE DISALLOWANCE OF, THE FAILURE OF CERTIFYING, OR THE RECAPTURE OF ANY DUAL CONSOLIDATED LOSS (WITHIN THE MEANING OF SECTION 1503 OF THE CODE) OF ANY MEMBER OF THE OLD VIACOM GROUP OR ANY SEPARATE UNIT (WITHIN THE MEANING OF TREASURY REGULATION SECTION 1.1503-2(C)(3)) WHERE SUCH DUAL CONSOLIDATED LOSS AROSE IN A PRE-SEPARATION PERIOD AND RELATES TO THE NEW VIACOM BUSINESS OR THE NEW VIACOM DISCONTINUED OPERATIONS (EXCLUDING THE BUSINESS OF BLOCKBUSTER INC., ITS SUBSIDIARIES AND ANY OF THEIR RESPECTIVE SEPARATE UNITS) SHALL BE SHARED EQUALLY BETWEEN NEW VIACOM AND CBS AND SHALL NOT BE TREATED AS ATTRIBUTABLE TO THE NEW VIACOM BUSINESS, THE NEW VIACOM DISCONTINUED OPERATIONS, THE CBS BUSINESS OR THE CBS DISCONTINUED OPERATIONS; PROVIDED, HOWEVER, THAT WHERE SUCH INCOME TAXES ARE ATTRIBUTABLE TO ANY ACTION, OR FAILURE TO TAKE ANY ACTION, AFTER THE SEPARATION DATE BY A PARTY HERETO (OR ITS SUBSIDIARIES) THAT WOULD BE INCONSISTENT WITH ANY APPLICABLE DCL CLOSING AGREEMENT OR OTHERWISE RESULTS IN A “TRIGGERING EVENT” (WITHIN THE MEANING OF SECTION 1503 OF THE CODE AND THE TREASURY REGULATIONS PROMULGATED THEREUNDER), THEN SUCH PARTY SHALL BEAR ALL OF THE INCOME TAXES RESULTING FROM SUCH RECAPTURE; PROVIDED, FURTHER, THAT IN APPLYING SECTION 3.2(D) WITH RESPECT TO THIS SECTION 4.4(B), CORRELATIVE ADJUSTMENTS SHALL BE COMPUTED BY ALSO TAKING INTO ACCOUNT (WITHOUT DUPLICATION) TAX BENEFITS ACTUALLY RECEIVED WITHIN 3 YEARS OF THE DATE THAT THE INCOME TAXES TO WHICH THIS SECTION 4.4(B) APPLIES ARE DUE, AND THE PARTIES SHALL MAKE APPROPRIATE PAYMENTS TO REFLECT THE FOREGOING.   ARTICLE V PAYMENTS MADE UNDER THIS AGREEMENT   Section 5.1                                      Interest.  Any payments required to be made by one party to another party pursuant to this Agreement, which is not made within the time period specified in this Agreement, shall bear interest at a rate equal to one month LIBOR plus 3.00%.   Section 5.2                                      Tax Treatment of Payments Made Under This Agreement.  For all Income Tax purposes (unless required by a change in applicable Tax Law or good faith resolution of a Tax Contest), (i) New Viacom and CBS shall treat, and shall cause their respective Subsidiaries to treat, (A) any payment obligation arising, and any payment made, under this Agreement after the Separation Date with respect to Pre-Separation Liabilities as arising or occurring immediately before the Merger and (B) the portion of any payment owed or paid by one party to another party that is attributable to Post-Separation Date Interest shall be treated as interest and not treated as arising or being paid immediately before the Merger, and (ii) no New Viacom Entity or CBS Entity shall take any position inconsistent with this Section 5.2 in connection with any matter relating to Income Taxes or Income Tax Returns.   Section 5.3                                      Tax Effecting Obligations Under This Agreement.   19 --------------------------------------------------------------------------------   The amount of any payment required to be paid under this Agreement between any New Viacom Entity and any CBS Entity in respect of a Pre-Separation Liability accruing for federal Income Tax purposes after the Separation Date (a “Payment”) shall be reduced to take into account any net Income Tax benefit of the payee arising from incurring or satisfying the Pre-Separation Liability giving rise to the payment obligation.  The preceding sentence shall be implemented by reducing the Payment at the time such Payment is due to reflect the amount of such net Income Tax benefit, assuming for this purpose that any such net Income Tax benefit would be fully and immediately utilized, unless such benefit is reflected in tax basis or similar item (Tax Basis”), in which case, assuming such Tax Basis would be fully and immediately utilizable over the depreciation or amortization period, if applicable, computed on a present value basis using 60% of the Adjusted Swap Rate.  If such Tax Basis is not depreciable or amortizable, then the payee shall promptly refund to the payor the portion of such Payment or Payments equal to the net Income Tax benefits arising from such Tax Basis at the time such benefits are actually realized.   Section 5.4                                      Direct Payments to the IRS.  Notwithstanding anything herein to the contrary, New Viacom may, at is sole election, remit payment in respect of its portion of any Old Viacom Tax Liability directly to the IRS, unless (i) such direct payment is not permitted under applicable federal Income Tax law or (ii) New Viacom, as the Settling Party for purposes of Section 3.2(b), elected to “freeze” its liability with respect to such portion in accordance with Section 3.2(b).  CBS shall cooperate with New Viacom in making any such direct payment.   ARTICLE VI STATE, LOCAL AND FOREIGN INCOME TAXES   Section 6.1                                      State, Local and Foreign Income Taxes; Capital Taxes.  Subject to the following five sentences, the principles of this Agreement shall apply with respect to any and all state, local or foreign Income Tax matters, as well as Capital Tax matters, of any New Viacom Entity or any CBS Entity, including, without limitation, the preparation and filing of Income Tax Returns and Tax Returns relating to Capital Taxes, paying Income Taxes and Capital Taxes, and resolving Tax Contests.  With respect to state, local and foreign Income Tax Returns and Tax Returns relating to Capital Taxes required to be filed after the Separation Date for any taxable period that includes or ends before the Separation Date, (i) New Viacom shall prepare, and New Viacom or CBS as appropriate shall file, (A) those Income Tax Returns that reflect solely conduct, activities or operations related to the New Viacom Business and/or the New Viacom Discontinued Operations and (B) those Tax Returns relating to Capital Taxes that reflect solely the capital, net worth or equity relating to a New Viacom Entity, and (ii) CBS shall prepare, and New Viacom or CBS as appropriate shall file, (A) those Income Tax Returns that reflect solely conduct, activities or operations related to the CBS Business and/or the CBS Discontinued Operations and (B) those Tax Returns   20 --------------------------------------------------------------------------------   relating to Capital Taxes that reflect solely the capital, net worth or equity relating to a CBS Entity.  New Viacom shall pay all Income Taxes and Capital Taxes due with respect to the Tax Returns described in clause (i) of the previous sentence and CBS shall pay all Income Taxes and Capital Taxes due with respect to the Tax Returns described in clause (ii) of the previous sentence.  CBS shall provide New Viacom, by August 1, 2006, with a pro forma federal Income Tax Return for the 2005 calendar year for any New Viacom Entity for which New Viacom is required to file any Tax Return under this Section 6.1, provided that New Viacom has given CBS a list of such New Viacom Entities on or before June 30, 2006.  For purposes of calculating state Income Taxes and Capital Taxes for purposes of this Agreement, items relating to state Income Taxes or Capital Taxes determined in a Resolution and relating to issues or principles described in the Schedule shall be allocated between CBS and New Viacom in the manner set forth in the Schedule.  For the avoidance of doubt, in applying Section 6.1 or Section 6.2, the term “IRS” shall mean the relevant state, local or foreign Governmental Authority having jurisdiction over the assessment, determination, collection, or other imposition of any Income Taxes, Capital Taxes or Transfer Taxes.   Section 6.2                                      Certain Transfer Taxes.  The principles of this Agreement shall apply with respect to any Transfer Taxes allocated between New Viacom and CBS pursuant to Section 2.06 of the Separation Agreement, except for (i) Section 6.1 and (ii) calculating the proportion in which the liability for Income Taxes and Capital Taxes are shared pursuant to this Agreement.  Liability for such Transfer Taxes shall, except as provided in Section 3.2, be shared between New Viacom and CBS in the manner set forth in Section 2.06 of the Separation Agreement.   ARTICLE VII DISPUTE RESOLUTION   Procedures for discussion, negotiation and arbitration set forth in Article X of the Separation Agreement shall apply to all disputes, controversies or claims (whether arising in contract, tort or otherwise) between the parties that may arise out of or relate to, or arise under or in connection with any Agreement Disputes relating to Taxes, but the arbitrator shall be a Big Four accounting firm mutually acceptable to CBS and New Viacom.   ARTICLE VIII CONFIDENTIALITY; EXCHANGE OF INFORMATION   Section 8.1                                      Ownership of Income Tax Information.  Subject to Section 8.6, any Income Tax Information owned (or jointly owned) by a Providing Party that is provided to a Requesting Party pursuant to Section 8.4 shall be deemed to remain the property (or joint property, as the case may be)   21 --------------------------------------------------------------------------------   of the Providing Party.  Unless specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such Income Tax Information.  For the avoidance of doubt, any and all Income Tax Information currently in possession of the CBS Group or the New Viacom Group (for this purpose, possession shall include the right to obtain such Income Tax Information) shall be jointly owned by New Viacom and CBS, except to the extent that any such Income Tax Information relates solely to Taxes or Tax Returns for which a member of the CBS Group or the New Viacom Group, as the case may be, has no responsibility under this Agreement or under applicable Tax Law, in which event such Income Tax Information shall be owned by the member of the CBS Group or the New Viacom Group, as the case may be, with responsibility for such Tax or Tax Return.   Section 8.2                                      Restrictions on Disclosure of Income Tax Information.   (A)                                  WITHOUT LIMITING ANY RIGHTS OR OBLIGATIONS UNDER ANY OTHER AGREEMENT BETWEEN OR AMONG ANY MEMBER OF THE CBS GROUP AND ANY MEMBER OF THE NEW VIACOM GROUP RELATING TO CONFIDENTIALITY AND SUBJECT TO SECTION 8.3 AND SECTION 8.8, EACH OF THE PARTIES HERETO AGREES THAT IT SHALL NOT, AND SHALL NOT PERMIT ANY MEMBER OF ITS GROUP TO, AND THAT ITS OR THEIR RESPECTIVE REPRESENTATIVES SHALL NOT, DISCLOSE TO ANY PERSON OR USE ANY INCOME TAX INFORMATION WITH RESPECT TO THE MEMBERS OR THE BUSINESS OF THE OTHER GROUP (“CONFIDENTIAL INCOME TAX INFORMATION”) (OTHER THAN SUCH MEMBERS OF ITS GROUP OR ITS OR THEIR REPRESENTATIVES ON A “NEED-TO-KNOW” BASIS IN CONNECTION WITH THE PURPOSE FOR WHICH THE CONFIDENTIAL INCOME TAX INFORMATION WAS ORIGINALLY DISCLOSED).  SUCH INCOME TAX INFORMATION SHALL NO LONGER BE DEEMED CONFIDENTIAL INCOME TAX INFORMATION TO THE EXTENT THAT IT IS OR WAS (I) IN THE PUBLIC DOMAIN OTHER THAN AS A RESULT OF THE BREACH OF THIS AGREEMENT OR ANY OTHER AGREEMENT BETWEEN ANY MEMBER OF THE CBS GROUP AND ANY MEMBER OF THE NEW VIACOM GROUP, (II) AVAILABLE TO THE REQUESTING PARTY OUTSIDE THE CONTEXT OF THE PRIOR RELATIONSHIP ON A NON-CONFIDENTIAL BASIS PRIOR TO THE DISCLOSURE OF SUCH CONFIDENTIAL INCOME TAX INFORMATION BY THE PROVIDING PARTY, OR (III) INDEPENDENTLY DEVELOPED BY, OR ON BEHALF OF, SUCH PARTY BY PERSONS WHO DO NOT HAVE ACCESS TO, OR DESCRIPTIONS OF, SUCH CONFIDENTIAL INCOME TAX INFORMATION.  NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS SECTION 8.2(A), ANY MEMBER OF EITHER GROUP MAY, SUBJECT TO SECTION 8.8 DISCLOSE OR USE CONFIDENTIAL INCOME TAX INFORMATION (X) IF THE PARTIES HERETO HAVE CONSENTED IN WRITING TO SUCH DISCLOSURE, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED, OR (Y) IN CONNECTION WITH PREPARING AND FILING TAX RETURNS OR IN CONNECTION WITH ANY TAX CONTEST.   (B)                                 EACH OF THE PARTIES HERETO SHALL BE RESPONSIBLE FOR ANY BREACH OF THIS SECTION 8.2 AND SECTION 8.3 BY THE REPRESENTATIVES OF ANY MEMBER OF ITS GROUP, AND SHALL MAINTAIN, DEVELOP, AND SHALL CAUSE THE MEMBERS OF ITS RESPECTIVE GROUP TO MAINTAIN AND DEVELOP, SUCH POLICIES AND PROCEDURES AS SHALL FROM TIME TO TIME BECOME NECESSARY OR APPROPRIATE TO ENSURE COMPLIANCE WITH THIS SECTION 8.2 AND SECTION 8.3.   Section 8.3                                      Disclosure of Income Tax Information.   22 --------------------------------------------------------------------------------   If either CBS or New Viacom or any member of their respective Groups or its or their respective Representatives becomes legally required to disclose any Confidential Income Tax Information which is jointly owned as provided in Section 8.1, such disclosing party shall promptly notify New Viacom or CBS, as the case may be (the “Joint Owner”), and, except to the extent such Confidential Income Tax Information is to be used in connection with preparing or filing Tax Returns or in connection with any Tax Contest, shall use all commercially reasonable efforts to cooperate with the Joint Owner so that the Joint Owner may seek a protective order or other appropriate remedy and/or waive compliance with this Section 8.3.  All expenses reasonably incurred by the disclosing party in seeking a protective order or other remedy shall be borne by the Joint Owner.  If such protective order or other remedy is not obtained, or if the Joint Owner waives compliance with this Section 8.3, the disclosing party shall (a) disclose only that portion of the Confidential Income Tax Information it is legally required to disclose, (b) use all commercially reasonable efforts to obtain reliable assurances requested by the Joint Owner that confidential treatment will be accorded such Confidential Income Tax Information and (c) promptly provide the Joint Owner with a copy of the Confidential Income Tax Information so disclosed, in the same form and format as so disclosed, together with the identity of all Persons to whom such Confidential Income Tax Information was disclosed.   Section 8.4                                      Access to Income Tax Information.   (A)                                  SUBJECT TO PARAGRAPH (C) BELOW, DURING THE RETENTION PERIOD, AT THE REQUEST OF EITHER OF THE PARTIES HERETO (THE “REQUESTING PARTY”), THE OTHER PARTY HERETO (THE “PROVIDING PARTY”) SHALL, AND SHALL CAUSE THE MEMBERS OF ITS GROUP OR ITS OR THEIR RESPECTIVE REPRESENTATIVES, SUCCESSORS AND ASSIGNEES, AND SHALL USE COMMERCIALLY REASONABLE EFFORTS TO CAUSE JOINT VENTURES TO WHICH IT IS AND THEY ARE A PARTY BUT THAT ARE NOT MEMBERS OF THEIR RESPECTIVE GROUP (COLLECTIVELY, “RELATED PARTIES”) TO, COOPERATE WITH AND AFFORD TO THE REQUESTING PARTY AND ITS REPRESENTATIVES, UPON REASONABLE ADVANCE WRITTEN REQUEST, REASONABLE ACCESS TO ALL INCOME TAX INFORMATION WITHIN THE POSSESSION OF THE PROVIDING PARTY OR ANY RELATED PARTY (OTHER THAN INCOME TAX INFORMATION (I) THE DISCLOSURE OF WHICH WOULD HAVE THE EFFECT OF WAIVING A LEGAL PRIVILEGE, OR (II) THAT IS THE SUBJECT OF A CONFIDENTIALITY AGREEMENT BETWEEN THE PROVIDING PARTY AND A THIRD PARTY WHICH PROHIBITS DISCLOSURE TO THE REQUESTING PARTY, PROVIDED THAT THE PROVIDING PARTY SHALL USE ALL COMMERCIALLY REASONABLE EFFORTS TO OBTAIN SUCH THIRD PARTY’S CONSENT TO DISCLOSURE OF SUCH INCOME TAX INFORMATION).  THE REQUESTING PARTY SHALL HAVE THE RIGHT TO MAKE PHOTOCOPIES OR IMAGES OF ANY SUCH REQUESTED INCOME TAX INFORMATION AND ANY THIRD-PARTY COSTS AND EXPENSES INCURRED IN CONNECTION WITH MAKING SUCH PHOTOCOPIES OR IMAGES SHALL BE FOR THE ACCOUNT OF THE REQUESTING PARTY.   (B)                                 SUBJECT TO PARAGRAPH (C) BELOW, EACH PARTY AGREES TO COOPERATE FULLY, AND TO CAUSE THE MEMBERS OF ITS RESPECTIVE GROUP OR ITS OR THEIR RESPECTIVE REPRESENTATIVES, SUCCESSORS AND ASSIGNEES, TO COOPERATE FULLY AND TO USE COMMERCIALLY REASONABLE EFFORTS TO CAUSE RELATED PARTIES TO COOPERATE FULLY, TO ALLOW ACCESS DURING NORMAL BUSINESS HOURS AND UPON REASONABLE NOTICE TO EACH OTHER’S EMPLOYEES (I) TO THE   23 --------------------------------------------------------------------------------   EXTENT THAT THEY ARE REASONABLY NECESSARY TO DISCUSS AND EXPLAIN REQUESTED INCOME TAX INFORMATION WITH AND TO THE REQUESTING PARTY AND (II) WITH RESPECT TO ANY MATTER RELATING TO INCOME TAXES OR INCOME TAX RETURNS (INCLUDING, WITHOUT LIMITATION, ANY TAX CONTESTS OR ANY OTHER ACTION OR PROCEEDING RELATING TO INCOME TAXES FOR ANY TAXABLE PERIOD BEGINNING AFTER DECEMBER 31, 2005); PROVIDED, HOWEVER, THAT SUCH ACCESS WILL BE GRANTED ONLY TO THE EXTENT THAT SUCH ACCESS DOES NOT UNREASONABLY INTERFERE WITH ANY EMPLOYEE’S PERFORMANCE OF HIS OR HER EMPLOYMENT DUTIES.   (C)                                  WITH RESPECT TO SUBSECTIONS (A) AND (B) OF THIS SECTION 8.4, ACCESS TO THE REQUESTED INCOME TAX INFORMATION SHALL BE PROVIDED TO THE EXTENT (I) PERMITTED OR REQUIRED BY SECTION 8.8, (II) SUCH INCOME TAX INFORMATION REASONABLY RELATES TO THE REQUESTING PARTY’S ASSETS, BUSINESS OR OPERATIONS OR ANY LIABILITY THE REQUESTING PARTY HAS ASSUMED OR IS RESPONSIBLE FOR HEREUNDER, (III) ACCESS IS REASONABLY REQUIRED BY THE REQUESTING PARTY FOR ANY INCOME TAX PURPOSE (INCLUDING, WITHOUT LIMITATION, PREPARING AND FILING ANY TAX RETURN OR ENGAGING IN ANY TAX CONTEST OR ANY OTHER ACTION OR PROCEEDING RELATING TO INCOME TAXES FOR ANY TAXABLE PERIOD BEGINNING AFTER DECEMBER 31, 2005).  NOTHING HEREIN IS INTENDED TO PUT EITHER PARTY’S INCOME TAX INFORMATION WITHIN THE POSSESSION, CUSTODY OR CONTROL OF THE OTHER PARTY EXCEPT TO THE EXTENT EXPRESSLY PROVIDED HEREIN.  ALL EXPENSES OF THE PROVIDING PARTY COMPLYING WITH THIS SECTION 8.4 SHALL BE BORNE BY THE REQUESTING PARTY.   Section 8.5                                      Record Retention.   (A)                                  THE ORIGINALS OF (AND IF NO ORIGINALS EXIST, THEN A COPY OR IMAGE OF) ALL INCOME TAX INFORMATION CURRENTLY IN THE POSSESSION OF THE EXISTING TAX DEPARTMENT SHALL BE STORED IN MUTUALLY AGREED STORAGE LOCATIONS.  EACH OF CBS AND NEW VIACOM SHALL, AND SHALL CAUSE THE MEMBERS OF THEIR RESPECTIVE GROUP TO, PRESERVE AND KEEP THEIR RECORDS RELATING TO ANY INCOME TAX MATTERS FOR ANY AND ALL PRE-SEPARATION PERIODS IN THEIR POSSESSION, WHETHER IN ELECTRONIC FORM OR OTHERWISE, UNTIL ONE YEAR AFTER THE EXPIRATION OF THE APPLICABLE STATUTE OF LIMITATIONS (THE “RETENTION PERIOD”).  THE COSTS OF STORING THE SUCH RECORDS SHALL BE SHARED EQUALLY BETWEEN NEW VIACOM AND CBS.  THE REQUESTING PARTY SHALL BE RESPONSIBLE FOR ANY AND ALL COSTS RELATED TO THE RETRIEVAL OF ANY RECORDS.  PRIOR TO DISPOSING OF ANY MATERIAL RECORDS OR WORK PAPERS (WHETHER CREATED INTERNALLY OR BY A THIRD PARTY) REGARDING INCOME TAX MATTERS FOR ANY PRE-SEPARATION PERIOD, EACH OF CBS AND NEW VIACOM SHALL, AND SHALL CAUSE THE MEMBERS OF THEIR RESPECTIVE GROUPS, TO NOTIFY THE OTHER PARTY IN WRITING OF SUCH INTENTION AND AFFORD THE OTHER PARTY THE OPPORTUNITY TO TAKE POSSESSION OR REQUEST COPIES OF SUCH RECORDS OR WORK PAPERS, AT ITS DISCRETION, THAT RELATE TO SUCH OTHER PARTY’S INCOME TAX LIABILITIES AND OBLIGATIONS.  ANY RECORDS THAT ARE DELIVERED (BY TRANSFER OF THE ORIGINAL, COPY OR IMAGES OF THE RECORDS) TO A PARTY PURSUANT TO THE PREVIOUS SENTENCE SHALL BE TREATED AS CONFIDENTIAL INCOME TAX INFORMATION TO THE EXTENT SUCH RECORDS QUALIFIED AS CONFIDENTIAL INCOME TAX INFORMATION IMMEDIATELY PRIOR TO THE TRANSFER.   (B)                                 EACH OF THE PARTIES HERETO SHALL, AND SHALL CAUSE THE MEMBERS OF ITS RESPECTIVE GROUP TO, USE REASONABLE EFFORTS TO DELIVER TO THE OTHER PARTY (I)   24 --------------------------------------------------------------------------------   ON OR PRIOR TO THE SEPARATION DATE, ANY AND ALL INCOME TAX INFORMATION (INCLUDING RECORDS RELATING TO INCOME TAX MATTERS FOR ANY AND ALL PRE-SEPARATION PERIODS) THAT SUCH PARTY OR ANY MEMBER OF ITS GROUP HAS IN ITS POSSESSION RELATING TO THE OTHER PARTY’S BUSINESS OR DISCONTINUED OPERATIONS AND (II) AS SOON AS REASONABLY PRACTICABLE FOLLOWING THEIR DISCOVERY, ANY INCOME TAX INFORMATION DESCRIBED IN CLAUSE (I) ABOVE WHICH IT OR ANY MEMBER OF ITS GROUP DISCOVERS ARE IN ITS POSSESSION OR CONTROL AND A COPY HAS NOT BEEN PROVIDED TO THE OTHER PARTY FOLLOWING THE SEPARATION DATE, PROVIDED, HOWEVER, THAT, WITH RESPECT TO CLAUSES (I) AND (II) OF THIS PARAGRAPH (B), THE PARTY PROVIDING SUCH RECORDS MAY RETAIN COPIES OR IMAGES OF ANY SUCH RECORDS.  THE PARTIES HERETO AGREE THAT IT SHALL NOT BE NECESSARY TO SEARCH INDIVIDUAL OFFICES OR DESKTOP COMPUTERS FOR SUCH RECORDS UNLESS SPECIFICALLY REQUESTED TO DO SO BY THE OTHER PARTY AND, IN EACH SUCH CASE, ONLY TO THE EXTENT IT IS REASONABLY NECESSARY FOR A SPECIFIC, IDENTIFIED BUSINESS PURPOSE.   (C)                                  NEW VIACOM AND CBS SHALL COOPERATE WITH EACH OTHER IN IMAGING (OR OTHERWISE DIGITIZING) IN A MANNER MUTUALLY AGREEABLE ALL INCOME TAX INFORMATION MUTUALLY AGREEABLE WITH NEW VIACOM AND CBS.  ALL REASONABLE THIRD-PARTY COSTS AND EXPENSES INCURRED IN CONNECTION WITH SUCH IMAGING OR DIGITIZING SHALL CONSTITUTE ONE-TIME TRANSACTION COSTS (AS DEFINED IN THE SEPARATION AGREEMENT).  FOR THE AVOIDANCE OF DOUBT, THE IMAGES AND OTHER DIGITAL PRODUCTS RESULTING FROM THE EFFORTS DESCRIBED IN THIS SECTION 8.5(C) SHALL BE JOINTLY OWNED BY NEW VIACOM AND CBS AND THE THIRD-PARTY COSTS AND EXPENSES OF MAINTAINING THE SAME SHALL BE SHARED EQUALLY BY NEW VIACOM AND CBS.   Section 8.6                                      Income Tax Information Relating to Non-Income Taxes.  Subject to Article VI, this Article VIII shall not apply to Information related to non-Income Taxes, which shall instead be governed by the Separation Agreement.   Section 8.7                                      Witness Services.  At all times from and after the Separation Date, each of CBS and New Viacom shall use its commercially reasonable efforts to make available to the other, upon reasonable written request, its and its Subsidiaries’ officers, directors, employees and agents as witnesses to the extent that (a) such persons may reasonably be required in connection with the investigation, prosecution or defense of any claim, demand or Action relating to Income Taxes in which either CBS or New Viacom or the members of their respective Group may from time to time be involved (except for claims, demands or Actions between members of each Group) and (b) there is no conflict in the claim, demand or Action between the Requesting Party and the other party hereto or any such witnesses.  A party providing witness services to the other party under this Section 8.7 shall be entitled to receive from the recipient of such services, upon the presentation of reasonably detailed invoices therefor, payments for such amounts, relating to disbursements and other out-of-pocket expenses (which shall not include the costs of salaries and benefits of employees who are witnesses or any pro rata portion of overhead or other costs of employing such employees which would have been incurred by such   25 --------------------------------------------------------------------------------   employees’ employer regardless of the employees’ services as witnesses), as may be reasonably incurred in providing such witness services.   Section 8.8                                      Privileged Matters.  CBS and New Viacom recognize that legal and other professional services relating to Income Tax matters that have been or will have been provided prior to the Separation Date have been or will be rendered for the benefit of each of Viacom, the members of the CBS Group and the members of the New Viacom Group, and that each of Viacom, the members of the CBS Group and the members of the New Viacom Group should be deemed to be the client for the purposes of asserting all privileges which may be asserted under applicable Law in connection therewith.  Subject to paragraphs (a) through (h) of this Section 8.8, CBS and New Viacom shall, and shall cause the members of their respective Groups to, agree to maintain their respective separate and joint privileges, including, without limitation, by executing common interest agreements where necessary or useful for this purpose.  To allocate the interests of each party in the information as to which any party is entitled to assert a privilege, whether or not such a privilege exists or the existence of which is in dispute, the parties agree as follows:   (A)                                  CBS SHALL BE ENTITLED, IN PERPETUITY, TO CONTROL THE ASSERTION OR WAIVER OF ALL PRIVILEGES IN CONNECTION WITH PRIVILEGED INCOME TAX INFORMATION WHICH RELATES TO THE CBS BUSINESS OR TO THE CBS DISCONTINUED OPERATIONS AND NOT TO THE NEW VIACOM BUSINESS OR THE NEW VIACOM DISCONTINUED OPERATIONS, WHETHER OR NOT THE PRIVILEGED INFORMATION IS IN THE POSSESSION OF OR UNDER THE CONTROL OF MEMBERS OF THE CBS GROUP OR THE NEW VIACOM GROUP.  CBS SHALL ALSO BE ENTITLED, IN PERPETUITY, TO CONTROL THE ASSERTION OR WAIVER OF ALL PRIVILEGES IN CONNECTION WITH PRIVILEGED INCOME TAX INFORMATION WHICH RELATES TO THE SUBJECT MATTER OF ANY PENDING OR FUTURE CLAIM, DEMAND OR ACTION RELATING TO INCOME TAXES THAT IS, OR WHICH CBS REASONABLY ANTICIPATES MAY BECOME A LIABILITY FOR WHICH CBS MAY BE RESPONSIBLE UNDER THIS AGREEMENT OR OTHERWISE, AND THAT IS NOT ALSO, OR THAT CBS REASONABLY ANTICIPATES WILL NOT BECOME A LIABILITY FOR WHICH NEW VIACOM MAY BE RESPONSIBLE UNDER THIS AGREEMENT OR OTHERWISE, WHETHER OR NOT THE PRIVILEGED INCOME TAX INFORMATION IS IN THE POSSESSION OF OR UNDER THE CONTROL OF MEMBERS OF THE CBS GROUP OR THE NEW VIACOM GROUP.   (B)                                 NEW VIACOM SHALL BE ENTITLED, IN PERPETUITY, TO CONTROL THE ASSERTION OR WAIVER OF ALL PRIVILEGES IN CONNECTION WITH PRIVILEGED INCOME TAX INFORMATION WHICH RELATES TO THE NEW VIACOM BUSINESS OR TO THE NEW VIACOM DISCONTINUED OPERATIONS AND NOT TO THE CBS BUSINESS OR THE CBS DISCONTINUED OPERATIONS, WHETHER OR NOT THE PRIVILEGED INFORMATION IS IN THE POSSESSION OF OR UNDER THE CONTROL OF MEMBERS OF THE CBS GROUP OR THE NEW VIACOM GROUP.  NEW VIACOM SHALL ALSO BE ENTITLED, IN PERPETUITY, TO CONTROL THE ASSERTION OR WAIVER OF ALL PRIVILEGES IN CONNECTION WITH PRIVILEGED INCOME TAX INFORMATION WHICH RELATES TO THE SUBJECT MATTER OF ANY PENDING OR FUTURE CLAIM, DEMAND OR ACTION RELATING TO INCOME TAXES THAT IS, OR WHICH NEW VIACOM REASONABLY ANTICIPATES MAY BECOME A LIABILITY FOR WHICH NEW VIACOM MAY BE RESPONSIBLE UNDER THIS AGREEMENT OR OTHERWISE, AND THAT IS NOT ALSO, OR THAT NEW VIACOM REASONABLY ANTICIPATES WILL NOT BECOME A LIABILITY FOR WHICH CBS MAY BE   26 --------------------------------------------------------------------------------   RESPONSIBLE UNDER THIS AGREEMENT OR OTHERWISE, WHETHER OR NOT THE PRIVILEGED INCOME TAX INFORMATION IS IN THE POSSESSION OF OR UNDER THE CONTROL OF MEMBERS OF THE CBS GROUP OR THE NEW VIACOM GROUP.   (C)                                  SUBJECT TO THE RESTRICTIONS OF THIS SECTION 8.8, NEW VIACOM AND CBS AGREE THAT THEY SHALL HAVE EQUAL RIGHT TO ASSERT ALL SHARED PRIVILEGES AND ALL PRIVILEGES NOT ALLOCATED PURSUANT TO THE TERMS OF SECTIONS 8.8(A) OR (B) AND WHICH RELATE TO THE MEMBERS OF BOTH THE CBS GROUP AND THE NEW VIACOM GROUP.   (D)                                 EACH PARTY HERETO SHALL ENSURE THAT NO MEMBER OF ITS RESPECTIVE GROUP MAY WAIVE ANY PRIVILEGE WHICH COULD BE ASSERTED UNDER ANY APPLICABLE LAW, AND IN WHICH THE OTHER PARTY HERETO HAS A SHARED PRIVILEGE, WITHOUT THE CONSENT OF THE OTHER PARTY, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED OR AS PROVIDED IN PARAGRAPH (E) OR (F) BELOW.   (E)                                  IN THE EVENT OF ANY CLAIM, DEMAND OR ACTION OR OTHER DISPUTE BETWEEN THE MEMBERS OF THE NEW VIACOM GROUP, ON THE ONE HAND, AND THE MEMBERS OF THE CBS GROUP, ON THE OTHER HAND, EITHER SUCH PARTY MAY WAIVE A PRIVILEGE IN WHICH THE OTHER PARTY HAS A SHARED PRIVILEGE, WITHOUT OBTAINING THE CONSENT OF THE OTHER PARTY; PROVIDED, HOWEVER, THAT SUCH WAIVER OF A SHARED PRIVILEGE SHALL BE EFFECTIVE ONLY AS TO THE USE OF INFORMATION WITH RESPECT TO THE CLAIM, DEMAND OR ACTION OR OTHER BETWEEN THE MEMBERS OF THE NEW VIACOM GROUP, ON THE ONE HAND, AND THE MEMBERS OF THE CBS GROUP, ON THE OTHER HAND, AND SHALL NOT OPERATE AS A WAIVER OF THE SHARED PRIVILEGE WITH RESPECT TO THIRD PARTIES.   (F)                                    IF A DISPUTE ARISES BETWEEN THE MEMBERS OF THE NEW VIACOM GROUP, ON THE ONE HAND, AND THE MEMBERS OF THE CBS GROUP, ON THE OTHER HAND, REGARDING WHETHER A PRIVILEGE SHOULD BE WAIVED TO PROTECT OR ADVANCE THE INTEREST OF EITHER PARTY, EACH PARTY AGREES THAT IT SHALL NEGOTIATE IN GOOD FAITH, SHALL ENDEAVOR TO MINIMIZE ANY PREJUDICE TO THE RIGHTS OF THE OTHER PARTY, AND SHALL NOT UNREASONABLY WITHHOLD CONSENT TO ANY REQUEST FOR WAIVER BY THE OTHER PARTY.  EACH PARTY HERETO SPECIFICALLY AGREES THAT IT WILL NOT WITHHOLD CONSENT TO WAIVER FOR ANY PURPOSE EXCEPT TO PROTECT ITS OWN LEGITIMATE INTERESTS.   (G)                                 UPON RECEIPT BY EITHER PARTY HERETO OR BY ANY SUBSIDIARY THEREOF OF ANY SUBPOENA, DISCOVERY OR OTHER REQUEST WHICH ARGUABLY CALLS FOR THE PRODUCTION OR DISCLOSURE OF INCOME TAX INFORMATION SUBJECT TO A SHARED PRIVILEGE OR AS TO WHICH THE OTHER PARTY OR A SUBSIDIARY THEREOF HAS THE SOLE RIGHT HEREUNDER TO ASSERT A PRIVILEGE, OR IF EITHER PARTY OBTAINS KNOWLEDGE THAT ANY OF ITS OR ANY OF ITS SUBSIDIARIES’ CURRENT OR FORMER DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES HAVE RECEIVED ANY SUBPOENA, DISCOVERY OR OTHER REQUESTS WHICH ARGUABLY CALL FOR THE PRODUCTION OR DISCLOSURE OF SUCH PRIVILEGED INFORMATION, SUCH PARTY SHALL PROMPTLY NOTIFY THE OTHER PARTY OF THE EXISTENCE OF THE REQUEST AND SHALL PROVIDE THE OTHER PARTY A REASONABLE OPPORTUNITY TO REVIEW THE INFORMATION AND TO ASSERT ANY RIGHTS IT OR THEY MAY HAVE UNDER THIS SECTION 8.8 OR OTHERWISE TO PREVENT THE PRODUCTION OR DISCLOSURE OF SUCH PRIVILEGED INFORMATION.   27 --------------------------------------------------------------------------------   (H)                                 THE TRANSFER OF ALL RECORDS AND OTHER INCOME TAX INFORMATION AND EACH PARTY’S RETENTION OF RECORDS AND OTHER INFORMATION WHICH MAY INCLUDE PRIVILEGED INFORMATION OF THE OTHER PURSUANT TO THIS AGREEMENT IS MADE IN RELIANCE ON THE AGREEMENT OF CBS AND NEW VIACOM, AS SET FORTH IN SECTION 8.2 AND THIS SECTION 8.8, TO MAINTAIN THE CONFIDENTIALITY OF PRIVILEGED INFORMATION AND TO ASSERT AND MAINTAIN ALL APPLICABLE PRIVILEGES.  THE ACCESS TO INFORMATION BEING GRANTED PURSUANT TO SECTIONS 8.3 AND 8.4 HEREOF, THE AGREEMENT TO PROVIDE WITNESSES PURSUANT TO SECTION 8.7 HEREOF, THE FURNISHING OF NOTICES AND DOCUMENTS AND OTHER COOPERATIVE EFFORTS CONTEMPLATED BY THIS AGREEMENT, AND THE TRANSFER OF PRIVILEGED INFORMATION BETWEEN AND AMONG THE PARTIES AND THEIR RESPECTIVE SUBSIDIARIES PURSUANT TO THIS AGREEMENT SHALL NOT BE DEEMED A WAIVER OF ANY PRIVILEGE THAT HAS BEEN OR MAY BE ASSERTED UNDER THIS AGREEMENT OR OTHERWISE.   Section 8.9                                      Tax Library.  The parties agree to share the written materials in the tax library on the 32nd floor of 1515 Broadway, New York, New York as long as the tax departments of New Viacom and CBS are sharing office space at such location.  At such time as one tax department vacates such location, the written materials shall be reasonably divided between New Viacom and CBS.   ARTICLE IX MISCELLANEOUS   Section 9.1                                      Termination.  Except as provided for pursuant to a written agreement of the parties hereto, this Agreement shall remain in force and be binding so long as the applicable period of assessment (including extensions) remains unexpired for any Taxes contemplated by this Agreement.   Section 9.2                                      Effect of Termination.  In the event of termination of this Agreement as provided in Section 9.1, this Agreement shall forthwith become void and there shall be no liability on the part of either party hereto.   Section 9.3                                      Amendments.  This Agreement may not be amended or modified except (a) by an instrument in writing signed by, or on behalf of, the parties hereto or (b) by a waiver in accordance with Section 9.4.   Section 9.4                                      Waiver.   28 --------------------------------------------------------------------------------   Either party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of the other party and (b) waive compliance with any of the agreements of the other party or conditions to such party’s obligations contained herein.  Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party to be bound thereby.  Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition of this Agreement.  The failure of either party hereto to assert any of its rights hereunder shall not constitute a waiver of any of such rights.   Section 9.5                                      Limitation of Liability.  IN NO EVENT SHALL ANY MEMBER OF THE CBS GROUP OR THE NEW VIACOM GROUP BE LIABLE TO ANY MEMBER OF THE NEW VIACOM GROUP OR THE CBS GROUP, RESPECTIVELY, FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER, CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING, WITHOUT LIMITATION, NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.   Section 9.6                                      Expenses.  Except as otherwise specified in this Agreement, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated by this Agreement, to the extent they are incurred prior to the Separation Date, shall be borne by CBS and New Viacom equally, and to the extent they are incurred subsequent to the Separation Date, shall be borne by the party incurring such costs and expenses.   Section 9.7                                      Counterparts.  This Agreement may be executed and delivered (including by facsimile transmission) in counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.   Section 9.8                                      Notices.  All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by an internationally recognized overnight courier service, by facsimile or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties hereto at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.8):   29 --------------------------------------------------------------------------------   If to CBS, to:       CBS Corporation   51 West 52nd Street   New York, NY 10019   Facsimile No.: (212) 975-4215       Attn: Louis J. Briskman     Richard M. Jones         With a copy to:       Weil, Gotshal & Manges LLP   767 Fifth Avenue   New York, NY 10153   Facsimile No.: (212) 310-8007       Attn: Howard Chatzinoff     Michael E. Lubowitz       If to New Viacom, to:       Viacom Inc.   1515 Broadway   New York, NY 10036   Facsimile No.: (212) 258-6099       Attn: Michael D. Fricklas     Jay Kushner       With a copy to:       Paul, Weiss, Rifkind, Wharton & Garrison LLP   1285 Avenue of the Americas   New York, NY 10019   Facsimile No.: (212) 757-3990       Attn: Alfred D. Youngwood     David R. Sicular     Section 9.9                                      Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect for so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to either party hereto.  Upon such   30 --------------------------------------------------------------------------------   determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement are consummated as originally contemplated to the greatest extent possible.   Section 9.10                                Entire Agreement; Assignment.  This Agreement, the Schedule attached hereto, and any side letter described in Section 3.1(a) constitute the entire agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, between the parties hereto with respect to the subject matter hereof and thereof.  This Agreement may not be assigned (whether pursuant to a merger, by operation of Law or otherwise) by a party hereto without the consent of the other parties hereto, provided that no such assignment shall relieve the assigning party of its obligations hereunder.   Section 9.11                                Parties in Interest.  This Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their successors and permitted assigns, and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.   Section 9.12                                Governing Law.  This Agreement shall be governed by, and construed in accordance with, the Laws of the State of New York.   Section 9.13                                Waiver of Jury Trial.  EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  EACH OF THE PARTIES HERETO HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE 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 HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.13.   31 --------------------------------------------------------------------------------   Section 9.14                                Headings.  The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.  Unless otherwise expressly provided for in this Agreement, the word “including” or any variation thereof means “including, without limitation” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.   Section 9.15                                Survival of Covenants.  Except as expressly set forth herein, the covenants, representations and warranties contained in this Agreement and each Ancillary Agreement, and liability for the breach of any obligations contained herein or therein, shall survive the Separation and shall remain in full force and effect.   *               *               *               *               *   32 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed by its duly authorized officer as of the date first set forth above.     VIACOM INC.,   a Delaware corporation               By: /s/ Joseph R. Ianniello       Name: Joseph R. Ianniello     Title: Senior Vice President, Finance and Treasurer               NEW VIACOM CORP.,   a Delaware corporation               By: /s/ Michael D. Fricklas       Name: Michael D. Fricklas     Title: Executive Vice President,       General Counsel and Secretary   33 --------------------------------------------------------------------------------

  Exhibit 10(a) Corporate Policy #C-004 Created on June 7, 2002 Revised on February 16, 2006 LESCO MANAGEMENT BONUS PLAN POLICY:   The purpose of the LESCO Management Bonus Plan is to promote the strategic interests of LESCO by providing key management with financial incentive awards for performance that contributes significantly to the success of the company, as determined by meeting or exceeding specific strategic goals. RESPONSIBLE OFFICER: Chief Executive Officer PROCEDURE: I. ELIGIBILITY AND PARTICIPATION   A.   Eligibility to participate in the Plan shall be limited to key management and other associates as recommended by the Vice President Human Resources with final approval by the Chief Executive Officer.   B.   Following the start of the calendar year, the list of participants for a Plan year can be revised upon authorization of the Chief Executive Officer. Any associate that is hired or selected to participate after the start of the calendar year shall participate on a prorated basis. This is determined by multiplying the maximum bonus opportunity by a fraction, the numerator of which shall be the number of days of his/her participation in the calendar year and the denominator of which shall be 365.   C.   Suggested Participation Levels           Management Level   Target Bonus as % of Base             Sr. Director / Director   15% - 25%             Sr. Manager / Manager   10% - 20%         Note: The Board of Directors and the Chief Executive Officer approve associate’s participation levels.   D.   Participation in the Plan as recommended and approved is not guaranteed from one year to the next. II. PAYMENT OF BONUS AWARD EARNED   A.   Bonuses are earned after the last day of the Plan Year. Associates must be actively employed at the time of payment to receive prior Plan Year’s bonus.   B.   Termination due to retirement or death will result in a prorated incentive award upon approval of the Chief Executive Officer.   --------------------------------------------------------------------------------   Corporate Policy #C-004 Created on June 7, 2002 Revised on February 16, 2006   C.   With respect to Section 1, paragraph B. above, the whole amount of the bonus earned in the Plan Year shall be paid to each eligible associate after the company’s audited financial results are available, but no later than March 15th of the following year.   D.   An associate will not receive a bonus even when financial performance measures have been met, when in the judgment of the CEO:   1.   The associate’s overall performance for the period is consistently below expectations.     2.   The associate has failed to achieve agreed upon goals.     3.   The associate has violated corporate policies or has broken federal, state, and/or local laws.     4.   The CEO determines at his discretion, that an award should not be given based on the current state of the company.   E.   Following release of the Company’s audited financial statements, the Board of Directors and the Chief Executive Officer can increase, decrease or eliminate awards when it is determined that the amount of the awards is unreasonable in view of any unique circumstances or the Company’s overall performance.   F.   All payouts for eligible participants shall be at the discretion of the Chief Executive Officer and Board of Directors. III. PLAN YEAR   A.   The Plan Year is defined as January 1st through December 31st, or the fiscal year when not a calendar year. IV. OPERATING RULES   A.   Each participant will have a Target Bonus that will be the amount earned for meeting the Plan’s performance measurements. The Target Bonus will be expressed as a percentage of actual base salary and will be reviewed by the Vice President Human Resources and approved by the Chief Executive Officer.   B.   Bonus payouts will be calculated based on the attainment of corporate goals of Basic Earnings Per Share (BEPS), Return on Invested Capital (ROIC), Sales Growth Percentage over Prior Year, and an Individual Performance Goal. Weighting for each goal against total target bonus percent is outlined in the Bonus Participation Letter.   C.   Attainment of the financial Plan measurements are paid out between threshold and maximum as defined in the following Payout Matrix.   --------------------------------------------------------------------------------   Corporate Policy #C-004 Created on June 7, 2002 Revised on February 16, 2006       Bonus Plan Payout Matrix                               % of Target   % of Target Dollars           Achieved   Payable   Definitions                             Threshold     90 %     80 %   Threshold performance pays at 80% of Target Dollars prorated up to Target.       91 %     82 %               95 %     90 %                                   Target     100 %     100 %   Target pays at 100% of Target Dollars.       105 %     110 %               110 %     120 %               115 %     130 %               120 %     140 %               125 %     150 %               130 %     160 %               135 %     170 %               140 %     180 %               145 %     190 %                                   Maximum     150 %     200 %   Above Target pays at a 2:1 ratio up to maximum of 200% of Target Dollars.   D.   Attainment of the Individual Performance Achievement measurement is paid based on your agreed upon goals and performance rating as defined in the following Performance Matrix. This measurement is paid only when the minimum achievement is reached for at least one of the three financial measures; EPS, ROIC and/or Sales Growth Percentage over Prior Year.       Bonus Plan Individual Performance Matrix           Agreed Upon Goals /   % of Target Paid for Personal   Performance Rating   Performance Component             Doesn’t Meet (1)     0% - 20%   Meets (2)     70% - 100%   Exceeds (3)     100% - 120%     E.   Personalized Bonus Plan documents will be presented to all participants that detail their approved target percent, target dollars and performance measures or individual targets for the current Plan year. V. GUIDELINES   A.   Bonus Plan participants’ base salary in effect January 1 of the Plan Year will be the basis for calculating target and actual bonus dollars.   --------------------------------------------------------------------------------   Corporate Policy #C-004 Created on June 7, 2002 Revised on February 16, 2006   B.   An associate who is hired or promoted after January 1st and qualifies for participation during the Plan Year will receive a payment for earned rewards (see section 1, paragraph B) based on prorated salary data in effect with regard to either date of hire or promotion.   C.   Only full-time, regular associates are eligible to participate in the Bonus Plan. When an associate is on a Leave of Absence for any portion of the calendar year, the associate will participate in the Plan on a prorated basis as long as the associate is on active status for a minimum of ninety (90) days during the calendar year.   D.   Attainment of goals is based on actual results.     E.   All percentages will be rounded to the nearest tenth of a percent.     F.   Bonus awards are included as compensation for the LESCO, Inc. Stock Investment and Salary Savings and Trust (401(k) Plan) and the LESCO, Inc. Restoration Plan, but are excluded in calculating all other associate benefits. VI. RIGHT OF PARTICIPANTS AND FORFEITURE   A.   Nothing in this Plan shall:   1.   Confer upon any associate any right with respect to continuation of employment with LESCO.   2.   Interfere in any way with the right of the Company to terminate his or her employment at any time, or   3.   Confer upon any associate or any person any claim or right to any distribution under the Plan except in accordance with its terms.   B.   No right or interest of any Associate in the Plan shall, prior to actual payment or distribution of such Associate, be assignable or transferable in whole or part, either voluntarily or by operation of law otherwise, or be subject to payment of debts of any Associate by execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner. VII. PLAN ADMINISTRATION   A.   The Plan shall be administered by LESCO. LESCO can at any time amend, suspend, terminate or reinstate any or all of the provisions of the Plan as may seem necessary or advisable for the administration of the Plan. The Chief Executive Officer must approve any exceptions to this policy.                 Approved:       Date:                       Jeffrey L. Rutherford, CEO          

EXHIBIT 10.3   -------------------------------------------------------------------------------- SECOND AMENDED AND RESTATED CREDIT AGREEMENT Dated as of November 3, 2006, Among HEXION LLC, HEXION SPECIALTY CHEMICALS, INC., as U.S. Borrower, HEXION SPECIALTY CHEMICALS CANADA, INC., as Canadian Borrower, HEXION SPECIALTY CHEMICALS B.V., as Dutch Borrower, HEXION SPECIALTY CHEMICALS UK LIMITED and BORDEN CHEMICAL UK LIMITED, as U.K. Borrowers, THE LENDERS PARTY HERETO, JPMORGAN CHASE BANK, N.A., as Administrative Agent, and CREDIT SUISSE, as Syndication Agent   -------------------------------------------------------------------------------- J.P. MORGAN SECURITIES INC. and CREDIT SUISSE SECURITIES (USA) LLC, as Joint Lead Arrangers and Joint Bookrunners   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TABLE OF CONTENTS   ARTICLE I DEFINITIONS    1 SECTION 1.01.    Defined Terms    1 SECTION 1.02.    Terms Generally    66 SECTION 1.03.    Effectuation of Transfers    66 SECTION 1.04.    Currency Translation    66 ARTCLE II THE CREDITS    67 SECTION 2.01.    Commitments    67 SECTION 2.02.    Loans and Borrowings    69 SECTION 2.03.    Requests for Borrowings    70 SECTION 2.04    Swingline Loans    71 SECTION 2.05.    Letters of Credit    73 SECTION 2.06.    Canadian Bankers’ Acceptances    82 SECTION 2.07.    Funding of Borrowings    85 SECTION 2.08.    Interest Elections    86 SECTION 2.09.    Termination and Reduction of Commitments; Return of Tranche C-3 Credit-Linked Deposits    88 SECTION 2.10.    Repayment of Loans and B/As; Evidence of Debt    89 SECTION 2.11.    Repayment of Term Loans, B/As, Revolving Facility Loans and Tranche C-3 Credit-Linked Deposits    90 SECTION 2.12.    Prepayment of Loans    93 SECTION 2.13.    Fees    94 SECTION 2.14    Interest    97 SECTION 2.15.    Alternate Rate of Interest    98 SECTION 2.16.    Increased Costs    99 SECTION 2.17.    Break Funding Payments    100 SECTION 2.18.    Taxes    100 SECTION 2.19.    Payments Generally; Pro Rata Treatment; Sharing of Set-offs    102 SECTION 2.20.    Mitigation Obligations; Replacement of Lenders    104 SECTION 2.21.    Incremental Commitments    105 SECTION 2.22.    Illegality    108 SECTION 2.23.    Credit-Linked Deposit Account    108 SECTION 2.24.    Additional Reserve Costs    109 ARTICLE III REPRESENTATIONS AND WARRANTIES    110 SECTION 3.01.    Organization; Powers    110 SECTION 3.02.    Authorization    110 SECTION 3.03.    Enforceability    111 SECTION 3.04.    Governmental Approvals    111 SECTION 3.05.    Financial Statements    111 SECTION 3.06.    No Material Adverse Change or Material Adverse Effect    112 SECTION 3.07.    Title to Properties; Possession Under Leases    112 SECTION 3.08.    Subsidiaries    113 SECTION 3.09.    Litigation; Compliance with Laws    114   - i - -------------------------------------------------------------------------------- SECTION 3.10.    Federal Reserve Regulations    114 SECTION 3.11.    Investment Company Act    115 SECTION 3.12.    Use of Proceeds    115 SECTION 3.13.    Tax Returns    115 SECTION 3.14.    No Material Misstatements    116 SECTION 3.15.    Employee Benefit Plans    116 SECTION 3.16.    Environmental Matters    117 SECTION 3.17.    Security Documents    118 SECTION 3.18.    Location of Real Property    119 SECTION 3.19.    Solvency    120 SECTION 3.20.    Labor Matters    120 SECTION 3.21.    Insurance    121 SECTION 3.23.    First-Lien Indebtedness; Senior Debt    121 SECTION 3.24.    Dutch Banking Act    121 ARTICLE IV CONDITIONS OF LENDING    121 SECTION 4.01.    All Non-Delayed Draw Credit Events    121 SECTION 4.02A.    Delayed Draw Credit Events    122 ARTICLE V AFFIRMATIVE COVENANTS    123 SECTION 5.01.    Existence; Businesses and Properties    123 SECTION 5.02.    Insurance    123 SECTION 5.03.    Taxes    124 SECTION 5.04.    Financial Statements, Reports, etc    124 SECTION 5.05.    Litigation and Other Notices    127 SECTION 5.06.    Compliance with Laws    127 SECTION 5.07.    Maintaining Records; Access to Properties and Inspections    128 SECTION 5.08.    Use of Proceeds    128 SECTION 5.09.    Compliance with Environmental Laws    128 SECTION 5.10.    Further Assurances; Additional Mortgages    128 SECTION 5.11.    Fiscal Year; Accounting    131 SECTION 5.12.    Rating    131 SECTION 5.13.    Lender Meetings    131 SECTION 5.14.    German Guarantor    131 SECTION 5.16.    Financial Assistance    132 SECTION 5.17.    U.K. Pension Matters    132 SECTION 5.18.    Transactions    132 ARTICLE VI NEGATIVE COVENANTS    133 SECTION 6.01.    Indebtedness    133 SECTION 6.02.    Liens    137 SECTION 6.05.    Mergers, Consolidations, Sales of Assets and Acquisitions    147 SECTION 6.06.    Dividends and Distributions    150 SECTION 6.07    Transactions with Affiliates    152 SECTION 6.08    Business of the U.S. Borrower and the Subsidiaries    155   - ii - -------------------------------------------------------------------------------- SECTION 6.09.    Limitation on Modifications and Payments of Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; etc    156 SECTION 6.10.    Capital Expenditures    158 SECTION 6.11.    Senior Secured Bank Leverage Ratio    158 SECTION 6.12.    Indenture Restricted Subsidiaries    158 SECTION 6.13.    Swap Agreements    158 ARTICLE VIA HOLDINGS NEGATIVE COVENANTS    159 SECTION 6.01A.    Holdings Negative Covenants    159 ARTICLE VII EVENTS OF DEFAULT    159 SECTION 7.01.    Events of Default    159 SECTION 7.02.    Exclusion of Certain Subsidiaries    163 SECTION 7.03.    Right to Cure    163 ARTICLE VIII THE AGENTS    164 SECTION 8.01.    Appointment    164 SECTION 8.02.    Delegation of Duties    164 SECTION 8.03.    Exculpatory Provisions    164 SECTION 8.04.    Reliance by Administrative Agent    164 SECTION 8.05.    Notice of Default    165 SECTION 8.06.    Non-Reliance on Agents and Other Lenders    165 SECTION 8.07.    Indemnification    166 SECTION 8.08.    Agent in Its Individual Capacity    166 SECTION 8.09.    Successor Administrative Agent    166 SECTION 8.10.    Agents and Arrangers    167 SECTION 8.11.    Additional Intercreditor Agreements    167 SECTION 8.12.    Certain German Matters    167 SECTION 8.13.    Certain Canadian Matters    168 SECTION 8.14.    Foreign Obligations    168 SECTION 8.15.    Certain Italian Matters    169 ARTICLE IX MISCELLANEOUS    169 SECTION 9.01.    Notices    169 SECTION 9.02.    Survival of Agreement    170 SECTION 9.03.    Binding Effect    170 SECTION 9.04.    Successors and Assigns    171 SECTION 9.05.    Expenses; Indemnity    175 SECTION 9.06.    Right of Set-off    176 SECTION 9.07.    Applicable Law    176 SECTION 9.08.    Waivers; Amendment    176 SECTION 9.09.    Interest Rate Limitation    179 SECTION 9.10.    Conversion of Currencies    180 SECTION 9.11.    Entire Agreement    180 SECTION 9.12.    Waiver Of Jury Trial    180 SECTION 9.13.    Severability    181   - iii - -------------------------------------------------------------------------------- SECTION 9.14.    Counterparts    181 SECTION 9.15.    Headings    181 SECTION 9.16.    Jurisdiction; Consent to Service of Process    181 SECTION 9.17.    Confidentiality    182 SECTION 9.18.    JPMorgan Chase Bank, N.A. Direct Website Communications    182 SECTION 9.19.    Release of Liens and Guarantees    183 SECTION 9.20.    Dutch Parallel Debt    184 SECTION 9.21.    German Parallel Debt; Limitation on Enforcement    186 SECTION 9.22.    Dutch Banking Act    187 SECTION 9.23.    Power of Attorney    188 SECTION 9.24.    Certain Approvals    188 SECTION 9.25.    U.S.A. Patriot Act    188 SECTION 9.26.    Czech Parallel Debt    188 ARTICLE X COLLECTION ALLOCATION MECHANISM    189 SECTION 10.01.    Implementation of CAM    189 SECTION 10.02.    Letters of Credit    190 SECTION 10.03.    May 2006 Credit Agreement; Effectiveness of Amendment    192 Exhibits and Schedules   Exhibit A    Form of Assignment and Acceptance Exhibit B    Form of Administrative Questionnaire Exhibit C    Form of Affiliate Authorization Exhibit D-1    Form of Borrowing Request Exhibit D-2    Form of Swingline Borrowing Request Exhibit E    [reserved] Exhibit F-1    [reserved] Exhibit F-2    [reserved] Exhibit G    Mandatory Costs Rate Schedule 1.01(a)    [reserved] Schedule 1.01(b)    Foreign Subsidiary Loan Parties Schedule 1.01(c)    Mortgaged Properties Schedule 1.01(d)    Unrestricted Subsidiaries Schedule 1.01(e)    Foreign Subsidiary Loan Party Jurisdictions Schedule 1.01(f)    Immaterial Subsidiaries Schedule 2.01    Commitments Schedule 2.03    Borrowing Requests Schedule 2.05    Issuing Banks Schedule 3.01    Organization and Good Standing Schedule 3.04    Governmental Approvals Schedule 3.07(b)    Possession under Leases Schedule 3.08(a)    Subsidiaries Schedule 3.08(b)    Subscriptions Schedule 3.09    Litigation   - iv - -------------------------------------------------------------------------------- Schedule 3.13    Taxes Schedule 3.15    Employee Benefit Plans Schedule 3.16    Environmental Matters Schedule 3.20    Labor Matters Schedule 3.21    Insurance Schedule 9.22    PMP Requirements Schedule 9.24    Certain Approvals   - v - -------------------------------------------------------------------------------- SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of November 3, 2006 (this “Agreement”), among HEXION LLC, a Delaware limited liability company (“Holdings”), HEXION SPECIALTY CHEMICALS, INC., a New Jersey corporation (the “U.S. Borrower”), HEXION SPECIALTY CHEMICALS CANADA, INC., a Canadian corporation (the “Canadian Borrower”), HEXION SPECIALTY CHEMICALS B.V., a company organized under the laws of The Netherlands (the “Dutch Borrower”), HEXION SPECIALTY CHEMICALS UK LIMITED, a corporation organized under the laws of England and Wales, and BORDEN CHEMICAL UK LIMITED, a corporation organized under the laws of England and Wales (together, the “U.K. Borrowers” and, together with the U.S. Borrower, the Canadian Borrower and the Dutch Borrower, the “Borrowers”), the LENDERS party hereto from time to time, JPMORGAN CHASE BANK, N.A., as administrative agent for the Lenders, CREDIT SUISSE, as syndication agent (in such capacity, the “Syndication Agent”), and J.P. MORGAN SECURITIES INC. and CREDIT SUISSE SECURITIES (USA) LLC as joint lead arrangers and joint bookrunners (in such capacity, the “Joint Lead Arrangers”). Subject to the satisfaction or waiver of the conditions set forth in the Amendment Agreement dated as of November 3, 2006 (the “Amendment Agreement”), among Holdings, the Borrowers, the Required Amendment Lenders (as defined therein) and JPMorgan Chase Bank, N.A., as administrative agent, the May 2006 Credit Agreement (as defined below) shall be amended and restated as provided herein. ARTICLE I Definitions SECTION 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below: “2005 Credit Agreement” shall mean the Credit Agreement dated as of May 31, 2005 among Holdings, the Borrowers, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Citicorp North America, Inc., as syndication agent, and Credit Suisse, as documentation agent. “2005 Transaction Agreement” shall mean the Transaction Agreement dated as of April 22, 2005 among the Combination Parties (as defined in the 2005 Credit Agreement). “2005 Transaction Documents” shall mean the Combination Documents, the PIK Preferred Stock Documents, the Bakelite Acquisition Agreement and the Loan Documents (as defined in the 2005 Credit Agreement). -------------------------------------------------------------------------------- “2005 Transactions” shall mean, collectively, the transactions to occur pursuant to the 2005 Transaction Documents, including (a) the Combination; (b) the execution and delivery of the Loan Documents (as defined in the 2005 Credit Agreement) and the initial borrowings thereunder; (c) the Equity Financing; (d) the repayment of the Bakelite Bridge Facility; and (e) the payment of all fees and expenses in connection therewith to be paid on, prior to or subsequent to the Closing Date and owing in connection with the foregoing. “ABR” shall mean, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus  1/2 of 1%. For purposes hereof: “Prime Rate” shall mean the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank, N.A. as its prime rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by JPMorgan Chase Bank, N.A. in connection with extensions of credit to debtors). Any change in the ABR due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. “ABR Borrowing” shall mean a Borrowing comprised of ABR Loans. “ABR Loan” shall mean any ABR Term Loan, any ABR Revolving Loan or any Swingline Loan to the U.S. Borrower. “ABR Revolving Borrowing” shall mean a Borrowing comprised of ABR Revolving Loans. “ABR Revolving Loan” shall mean any Revolving Facility Loan bearing interest at a rate determined by reference to the ABR in accordance with the provisions of Article II. “ABR Term Loan” shall mean any Term Loan bearing interest at a rate determined by reference to the ABR in accordance with the provisions of Article II. “Acquired Assets” shall mean, for any fiscal year, the total purchase price of assets acquired pursuant to Permitted Business Acquisitions after the Closing Date through the end of such fiscal year determined in accordance with GAAP; provided that if a Permitted Business Acquisition is not consummated during the first quarter of a fiscal year, Acquired Assets for such fiscal year shall be determined by multiplying the amount attributable to such Permitted Business Acquisition by (i) 0.75 if such Permitted Business Acquisition is consummated during the second quarter of such fiscal year, (ii) 0.50 if such Permitted Business Acquisition is consummated during the third quarter of such fiscal year and (iii) 0.25 if such Permitted Business Acquisition is consummated during the fourth quarter of such fiscal year. “Acquired Assets Amount” shall have the meaning assigned to such term in Section 6.10(a). “Additional Mortgage” shall have the meaning assigned to such term in Section 5.10(c).   2 -------------------------------------------------------------------------------- “Adjusted Eurocurrency 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 (a) (i) for any Eurocurrency Borrowing denominated in U.S. Dollars or Sterling, the LIBO Rate, or (ii) for any Eurocurrency Borrowing denominated in euros, the EURO LIBO Rate, in each case in effect for such Interest Period divided by (b) one minus the Statutory Reserves applicable to such Eurocurrency Borrowing, if any. “Adjustment Date” shall have the meaning assigned to such term in the definition of the term “Applicable Margin.” “Administrative Agent” shall mean JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the Lenders hereunder, or, as applicable, such Affiliates thereof as it shall from time to time designate for the purpose of performing its obligations hereunder in such capacity, including initially (a) with respect to a Loan or Borrowing made to the Dutch Borrower or a U.K. Borrower, J.P. Morgan Europe Limited, and (b) with respect to a Loan or Borrowing made to, or a B/A Drawing drawn by, the Canadian Borrower, JPMorgan Chase Bank, N.A., Toronto Branch. References to the “Administrative Agent” shall also include J.P. Morgan Europe Limited or any other Affiliate of JPMorgan Chase Bank, N.A. or any other person designated by JPMorgan Chase Bank, N.A., in each case acting in its capacity as “Security Trustee”, “Trustee” or “Agent” under any Security Document relating to collateral provided under the laws of any United Kingdom jurisdiction, or acting in any similar capacity under any other Security Document under the laws of the United States or any other jurisdiction. Notwithstanding the foregoing, for purposes of Section 9.20, the term “Administrative Agent” shall mean JPMorgan Chase Bank, N.A. and any successor agent appointed pursuant to Section 8.09. “Administrative Agent Fees” shall have the meaning assigned to such term in Section 2.13(e). “Administrative Questionnaire” shall mean an Administrative Questionnaire in the form of Exhibit B or in such other form as may be supplied by the Administrative Agent. “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. “Affiliate Authorization” means each Affiliate Authorization delivered by any Affiliate of a Lender to the Administrative Agent substantially in the form of Exhibit C. “AFS” shall mean the Act on the Financial Supervision (Wet op het financieel toezicht). “Agent Parties” shall have the meaning assigned to such term in Section 9.18(c). “Agents” shall mean the Administrative Agent and the Syndication Agent. “Agreement” shall have the meaning assigned to such term in the preamble hereto.   3 -------------------------------------------------------------------------------- “Alternative Currency” shall mean Sterling, Kronor, euros, Canadian Dollars, Japanese Yen or any other foreign currency reasonably acceptable to the applicable Issuing Bank that is freely available, freely transferable and freely convertible into U.S. Dollars, provided that the aggregate amount of L/C Exposure in all such foreign currencies (other than Sterling, Kronor, euros, Japanese Yen and Canadian Dollars) shall not exceed $25,000,000. “Alternative Currency Letter of Credit” shall mean a Letter of Credit denominated in an Alternative Currency. “Alternative Currency Revolving L/C Exposure” shall mean Revolving L/C Exposure related to Alternative Currency Letters of Credit. “Amendment Agreement” shall have the meaning assigned to such term in the preamble to this Agreement. “Amendment Effective Date” shall have the meaning assigned to such term in the Amendment Agreement. “Applicable Margin” shall mean for any day, (i) with respect to any Term Loan, 2.50% per annum in the case of any Eurocurrency Loan and 1.00% per annum in the case of any ABR Loan or Base Rate Loan and (ii) with respect to any Revolving Facility Loan or Swingline Loan, as the case may be, the applicable margin per annum set forth below under the caption “Applicable Margin for ABR/Base Rate Revolving Loans and ABR Swingline Loans” or “Applicable Margin for Eurocurrency Revolving Loans and Base Rate Swingline Loans”, as applicable, based upon the Consolidated Leverage Ratio as of the most recent determination date. Applicable Margins for Revolving Loans and Swingline Loans   Consolidated Leverage Ratio    Applicable Margin for ABR/Base Rate Revolving Loans and ABR Swingline Loans     Applicable Margin for Eurocurrency Revolving Loans and Base Rate Swingline Loans   Equal to or greater than 3.75 to 1.00    1.00 %   2.50 % Equal to or greater than 3.25 to 1.00 and less than 3.75 to 1.00    0.75 %   2.25 % Less than 3.25 to 1.00    0.50 %   2.00 % For the purposes of the foregoing relating to Revolving Loans and Swingline Loans, changes in the Applicable Margin resulting from changes in the Consolidated Leverage Ratio shall become effective on the date (the “Adjustment Date”) that is three Business Days after the date on which financial statements are delivered to the Lenders pursuant to Section 5.04, and shall remain in effect until the next change to be effected pursuant to this paragraph. If any financial statements referred to above are not delivered within the time periods specified in Section 5.04, then, until the date that is three Business Days after the date on which such financial statements are   4 -------------------------------------------------------------------------------- delivered, the highest rate set forth in each column of the pricing grid shall apply. In addition, at all times while a Default or an Event of Default shall have occurred and be continuing, the highest rate set forth in each column of the pricing grid shall apply. “Approved Fund” shall have the meaning assigned to such term in Section 9.04(b). “Asset Disposition” shall mean any sale, transfer or other disposition by Holdings (prior to a Qualified IPO), the U.S. Borrower or any of the Subsidiaries to any person other than Holdings (prior to a Qualified IPO), the U.S. Borrower 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 $1.0 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 U.S. Borrower (if required by Section 9.04), in the form of Exhibit A or such other form as shall be approved by the Administrative Agent. “Availability Period” shall mean (a) with respect to the Canadian Tranche Commitments, the period from and including the Closing Date to but excluding the earlier of the Revolving Facility Maturity Date and in the case of each of the Canadian Tranche Revolving Facility Loans, Canadian Tranche Revolving Borrowings and Canadian Tranche Letters of Credit, the date of termination of the Canadian Tranche Commitments, (b) with respect to the European Tranche Commitments, the period from and including the Closing Date to but excluding the earlier of the Revolving Facility Maturity Date and in the case of each of the European Tranche Revolving Facility Loans, European Tranche Revolving Borrowings, Swingline Loans, Swingline Borrowings and European Tranche Letters of Credit, the date of termination of the European Tranche Commitments, (c) with respect to the U.S. Tranche Commitments, the period from and including the Closing Date to but excluding the earlier of the Revolving Facility Maturity Date and in the case of each of the U.S. Tranche Revolving Facility Loans and U.S. Tranche Revolving Borrowings, the date of termination of the U.S. Tranche Commitments and (d) with respect to the Tranche C-3 Credit-Linked Deposits, the period from and including the Closing Date to but excluding the earlier of the Tranche C-3 Maturity Date and the date on which all of the Tranche C-3 Credit-Linked Deposits are returned to the Tranche C-3 Lenders. “Available Investment Basket Amount” shall mean, on any date of determination, an amount equal to (a) the Cumulative Retained Excess Cash Flow Amount on such date of determination plus (b) the aggregate amount of proceeds received after the Closing Date and prior to such date of determination 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 (the “Below-Threshold Asset Sale Proceeds”), plus (c) the cumulative amount of proceeds (including cash and the fair market value of property other than cash) from the sale or issuance of Equity Interests of Holdings (after the Closing Date and prior to a Qualified IPO) (which proceeds have been contributed as common equity to the capital of the U.S. Borrower) or of the U.S. Borrower (other than any such proceeds that are (i) received pursuant to the exercise   5 -------------------------------------------------------------------------------- of a Cure Right pursuant to Section 7.03, (ii) received pursuant to (A) sales of Equity Interests financed as contemplated by 6.04(e) or (B) contributions made pursuant to 6.06(m) (other than contributions in excess of the amount of the dividends and distributions made by the U.S. Borrower to fund the applicable Investment pursuant to 6.06(m)) or (iii) used for Dividends pursuant to Section 6.06(e)), plus (d) 100% of the aggregate amount of contributions to the common capital of the U.S. Borrower received in cash (and the fair market value of property other than cash) after the Closing Date (subject to the same exclusions as are applicable to clause (c) above, and without duplication of any amounts included in the Available Investment Basket Amount pursuant to clause (c) above); provided that the U.S. Borrower and its Subsidiaries shall be in Pro Forma Compliance, plus (e) the principal amount of any Indebtedness (including the liquidation preference or maximum fixed repurchase price, as the case may be, of any Disqualified Stock) of the U.S. Borrower or any Subsidiary thereof issued after the Closing Date (other than Indebtedness issued to the U.S. Borrower or any Subsidiary), which has been converted into or exchanged for Equity Interests (other than Disqualified Stock) in the U.S. Borrower or Holdings (prior to a Qualified IPO), plus (f) without duplication of any amounts included in the Cumulative Retained Excess Cash Flow Amount pursuant to clause (a) above, 100% of the aggregate amount received by the U.S. Borrower or any Subsidiary in cash (and the fair market value of property other than cash received by the U.S. Borrower or any Subsidiary) after the Closing Date from: (A) the sale (other than to the U.S. Borrower or any Subsidiary) of the Equity Interests of an Unrestricted Subsidiary, or (B) any dividend or other distribution by an Unrestricted Subsidiary, minus (g) any amounts thereof used to make Investments pursuant to Section 6.04(b)(y) after the Closing Date and on or prior to such date, minus (h) any amounts thereof used to make Investments pursuant to Section 6.04(j)(ii) after the Closing Date and on or prior to such date, minus (i) the aggregate amount of Capital Expenditures made after the Closing Date and on or prior to such date pursuant to Section 6.10(c), minus (j) the cumulative amount of dividends paid and distributions made pursuant to Section 6.06(f)(iii) after the Closing Date and on or prior to such date; provided, however, for purposes of Section 6.06(f)(iii), the calculation of the Available Investment Basket Amount shall not include any Below-Threshold Asset Sale Proceeds except to the extent they are used as contemplated in clauses (g), (h) and (i) above. “Available Unused Commitment” shall mean, with respect to a Revolving Facility Lender at any time, an amount equal to the amount by which (a) the aggregate amount of the Revolving Facility Commitment of such Revolving Facility Lender at such time exceeds (b) the Revolving Facility Exposure of such Revolving Facility Lender at such time. “B/A” shall mean a bill of exchange governed by the Bills of Exchange Act (Canada) or a depository bill issued in accordance with the Depository Bills and Notes Act (Canada), denominated in Canadian Dollars, drawn by the Canadian Borrower and accepted by a Canadian Tranche Lender in accordance with the terms of this Agreement. “B/A Drawing” shall mean B/As accepted and purchased on the same date and as to which a single Contract Period is in effect, including any B/A Equivalent Loans made on the same date and as to which a single Contract Period is in effect. For greater certainty, all provisions of this Agreement that are applicable to B/As are also applicable, mutatis mutandis, to B/A Equivalent Loans.   6 -------------------------------------------------------------------------------- “B/A Equivalent Loan” has the meaning assigned to such term in Section 2.06(j). “Bakelite Acquisition” shall mean the acquisition by a Wholly Owned Subsidiary of the U.S. Borrower of all the issued share capital of the German Guarantor consummated on April 29, 2005, pursuant to the Bakelite Acquisition Agreement. “Bakelite Acquisition Agreement” shall mean the Share Purchase Agreement dated as of October 6, 2004, all material exhibits and schedules thereto and all agreements expressly contemplated thereby, in each case as amended, supplemented or modified from time to time (without giving effect to any waiver, amendment, supplement or other modification thereto after the Closing Date in a manner materially adverse to the Lenders unless otherwise consented to by the Required Lenders). “Bakelite Bridge Facility” shall mean a bridge loan facility in an aggregate principal amount of $250.0 million to finance the Bakelite Acquisition pursuant to the Bridge Loan Agreement dated as of April 29, 2005, among Borden U.S. Finance Corp., Borden Nova Scotia Finance ULC, the U.S. Borrower, the subsidiary guarantors party thereto, the lenders party thereto and the agents, arrangers and bookrunners party thereto. “Base Rate” shall mean (a) with respect to European Tranche Revolving Facility Loans denominated in Sterling or euros, and European Tranche Revolving Facility Loans denominated in U.S. Dollars and made to a U.K. Borrower, the rate of interest per annum quoted by the Administrative Agent as its base rate for loans made by it in U.S. Dollars, Sterling or euros, as applicable, whether or not such rate is the lowest rate charged by the Administrative Agent to its most preferred borrowers, and, if such base rate is discontinued by the Administrative Agent as a standard, a comparable reference rate designated by the Administrative Agent as a substitute therefor shall be the Base Rate with respect to such European Tranche Revolving Facility Loans, (b) with respect to Canadian Tranche Revolving Facility Loans denominated in U.S. Dollars made to the Canadian Borrower, the U.S. Base Rate, (c) with respect to Canadian Tranche Revolving Facility Loans denominated in Canadian Dollars made to the Canadian Borrower, the Canadian Base Rate and (d) with respect to Swingline Loans to a U.K. Borrower or the Dutch Borrower, the rate of interest offered by the London office of JPMorgan Chase Bank, N.A.. “Base Rate Borrowing” shall mean a Borrowing consisting of Base Rate Loans. “Base Rate Loan” shall mean any Base Rate Revolving Loan, Base Rate Term Loan or any Swingline Loan to the Dutch Borrower or a U.K. Borrower. “Base Rate Revolving Borrowing” shall mean a Borrowing comprised of Base Rate Revolving Loans. “Base Rate Revolving Loan” shall mean any Revolving Facility Loan bearing interest at a rate determined by reference to the Base Rate in accordance with the provisions of Article II. “Base Rate Term Loan” shall mean any Term Loan bearing interest at a rate determined by reference to the Base Rate in accordance with the provisions of Article II.   7 -------------------------------------------------------------------------------- “Benchmark LIBOR Rate” shall have the meaning assigned to such term in Section 2.23(b). “Board” shall mean the Board of Governors of the Federal Reserve System of the United States of America. “Board of Directors” shall mean, as to any person, the board of directors or managers, as applicable, of such person (or, if such person is a partnership, the board of directors or other governing body of the general partner of such person) or any duly authorized committee thereof. “Borden Nova Scotia Finance ULC” shall mean a collective reference to Borden Nova Scotia Finance, ULC, Borden 2 Nova Scotia Finance, ULC and any successor entity or entities formed as a result of the merger, amalgamation or other combination of such entities. “Borrowers” shall have the meaning assigned to such term in the preamble hereto. “Borrowing” shall mean a group of Loans of a single Type, Class and currency and made on a single date to a single Borrower 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 a Borrowing denominated in U.S. Dollars, $5.0 million, (b) in the case of a Borrowing denominated in euro, €1.0 million, (c) in the case of a Borrowing denominated in Sterling, £1.0 million and (d) in the case of a Borrowing denominated in Canadian Dollars, C$1.0 million. “Borrowing Multiple” shall mean (a) in the case of a Borrowing denominated in U.S. Dollars, $1.0 million, (b) in the case of a Borrowing denominated in euro, €1.0 million, (c) in the case of a Borrowing denominated in Sterling, £1.0 million and (d) in the case of a Borrowing denominated in Canadian Dollars, C$1.0 million. “Borrowing Request” shall mean a request by a Borrower in accordance with the terms of Section 2.03 and substantially in the form of Exhibit D-1. “Budget” shall have the meaning assigned to such term in Section 5.04(f). “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 (a) 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, (b) when used in connection with a Loan denominated in euro, the term “Business Day” shall also exclude any day on which the Trans-European Automated Real Time Gross Settlement Express Transfer (TARGET) payment system is not open for the settlement of payments in euro, (c) when used in connection with any Loan to the Canadian Borrower or B/A, the term “Business Day” shall also (i) exclude any day on which banks are not open for dealings in deposits in Toronto but (ii) include, with respect to any Loan denominated in Canadian Dollars or any B/A, any day on which banks are open for dealings in deposits in Toronto and (d) when used in connection with any Loan to the Dutch Borrower or a   8 -------------------------------------------------------------------------------- U.K. Borrower, the term “Business Day” shall also include any day on which banks are open for dealings in deposits in euro, Sterling and U.S. Dollars in London and, with respect to any Loan to the Dutch Borrower, any day on which banks are open for dealings in deposits in euro in Amsterdam. “CAM” shall mean the mechanism for the allocation and exchange of interests in Loans, participations in Letters of Credit and Swingline Loans and other extensions of credit under the several Tranches and collections thereunder established under Article X. “CAM Exchange” shall mean the exchange of the Lender’s interests provided for in Section 10.01. “CAM Exchange Date” shall mean the first date on which there shall occur (a) any event referred to in paragraph (h) or (i) of Section 7.01 in respect of any Borrower or (b) an acceleration of Loans pursuant to Section 7.01. “CAM Percentage” shall mean, as to each Lender, a fraction, expressed as a decimal, of which (a) the numerator shall be the aggregate U.S. Dollar Equivalent (determined on the basis of Exchange Rates prevailing on the CAM Exchange Date) of the sum, without duplication, of (i) the Obligations owed to such Lender (whether or not at the time due and payable), (ii) the L/C Exposure of such Lender and (iii) the Swingline Exposure of such Lender, in each case immediately prior to the occurrence of the CAM Exchange Date, and (b) the denominator shall be the aggregate U.S. Dollar Equivalent (as so determined) of the sum, without duplication, of (A) the Obligations owed to all the Lenders (whether or not at the time due and payable), (B) the L/C Exposure and (iii) the Swingline Exposure, in each case immediately prior to the occurrence of the CAM Exchange Date; provided that, for purposes of clause (a) above, the Obligations owed to the Swingline Lender will be deemed not to include any Swingline Loans except to the extent provided in clause (a)(iii) above. “Canadian Base Rate” shall mean, for any day, the rate of interest per annum equal to the greater of (a) the interest rate per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect on such day at its principal office in Toronto for determining interest rates applicable to commercial loans denominated in Canadian Dollars in Canada (each change in such reference rate being effective from and including the date such change is publicly announced as being effective) and (b) the interest rate per annum equal to the sum of (i) the CDOR Rate applicable to bankers’ acceptances with a term of 30 days on such day and (ii) 0.50% per annum. “Canadian Base Rate Borrowing” shall mean a Borrowing consisting of Canadian Base Rate Loans. “Canadian Base Rate Loan” shall mean any Revolving Facility Loan bearing interest at a rate determined by reference to the Canadian Base Rate in accordance with the provisions of Article II. “Canadian Borrower” shall have the meaning assigned to such term in the preamble hereto.   9 -------------------------------------------------------------------------------- “Canadian Dollars” or “C$” shall mean the lawful money of Canada. “Canadian Lending Office” shall mean, as to any Canadian Tranche Lender, the applicable branch, office or Affiliate of such Canadian Tranche Lender designated by such Canadian Tranche Lender to make Canadian Tranche Loans to the Canadian Borrower and to accept and purchase or arrange for the purchase of B/As. “Canadian Security Documents” shall mean all security agreements delivered pursuant to this Agreement and granted by any Foreign Subsidiary Loan Party incorporated under the laws of Canada or any province thereof and all confirmations and acknowledgements thereof, including (a) general security agreements, (b) debentures, (c) intellectual property security agreements and (d) the Quebec Documents. “Canadian Tranche” has the meaning assigned to such term under the definition of “Tranche”. “Canadian Tranche Commitment” shall mean, with respect to each Canadian Tranche Lender, the commitment of such Canadian Tranche Lender to make Canadian Tranche Revolving Facility Loans pursuant to Section 2.01, to acquire participations in Letters of Credit under the Canadian Tranche and to accept and purchase or arrange for the purchase of B/As pursuant to Section 2.06, expressed as an amount representing the maximum aggregate permitted amount of such Lender’s Canadian Tranche Revolving Facility Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 2.21 or Section 9.04. The initial amount of each Lender’s Canadian Tranche Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance or Incremental Assumption Agreement pursuant to which such Lender shall have assumed its Canadian Tranche Commitment, as applicable. The aggregate amount of the Lenders’ Canadian Tranche Commitments as of the Amendment Effective Date is $50.0 million. “Canadian Tranche L/C Exposure” shall mean, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Canadian Tranche Letters of Credit denominated in U.S. Dollars at such time, (b) the U.S. Dollar Equivalent of the aggregate undrawn amount of all outstanding Canadian Tranche Letters of Credit denominated in Canadian Dollars at such time and (c) the U.S. Dollar Equivalent of the aggregate amount of all L/C Disbursements in respect of Canadian Tranche Letters of Credit that have not yet been reimbursed by or on behalf of the applicable Borrower at such time. The Canadian Tranche L/C Exposure of any Revolving Lender at any time shall be its Canadian Tranche Percentage of the total Canadian Tranche L/C Exposure at such time. “Canadian Tranche Lender” shall mean a Lender with a Canadian Tranche Commitment or with outstanding Canadian Tranche Revolving Facility Exposure. “Canadian Tranche Letters of Credit” shall mean Letters of Credit issued under the Canadian Tranche. “Canadian Tranche Percentage” shall mean, with respect to any Canadian Tranche Lender, the percentage of the total Canadian Tranche Commitments represented by such   10 -------------------------------------------------------------------------------- Lender’s Canadian Tranche Commitment. If the Canadian Tranche Commitments have terminated or expired, the Canadian Tranche Percentages shall be determined based upon the Canadian Tranche Commitments most recently in effect, giving effect to any assignments pursuant to Section 9.04. “Canadian Tranche Revolving Facility Exposure” shall mean, at any time, the sum of (a) the aggregate principal amount of the Canadian Tranche Revolving Facility Loans denominated in U.S. Dollars outstanding at such time, (b) the U.S. Dollar Equivalent of the aggregate principal amount of the Canadian Tranche Revolving Facility Loans denominated in Canadian Dollars outstanding at such time, (c) the U.S. Dollar Equivalent of the aggregate face amount of the B/As accepted by the Canadian Tranche Lenders and outstanding at such time and (d) the Canadian Tranche L/C Exposure at such time. The Canadian Tranche Revolving Facility Exposure of any Lender at any time shall be such Lender’s Canadian Tranche Percentage of the total Canadian Tranche Revolving Facility Exposure at such time. “Canadian Tranche Revolving Facility Loan” shall mean a loan made by a Canadian Tranche Lender pursuant to Section 2.01(c). Each Canadian Tranche Revolving Facility Loan denominated in U.S. Dollars and made to the U.S. Borrower shall be a Eurocurrency Loan or an ABR Loan, each Canadian Tranche Revolving Facility Loan denominated in U.S. Dollars and made to the Canadian Borrower shall be a Eurocurrency Loan or a U.S. Base Rate Loan and each Canadian Tranche Revolving Facility Loan denominated in Canadian Dollars shall be a Canadian Base Rate Loan. “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 the U.S. Borrower and the Subsidiaries shall not include: (a) expenditures to the extent made with proceeds (so long as such proceeds are not included in any determination of the Available Investment Basket Amount) of the issuance of Equity Interests of Holdings (prior to a Qualified IPO) or the U.S. Borrower or funds that would have constituted Net Proceeds under clause (a) of the definition of the term “Net Proceeds” (but that will not constitute Net Proceeds as a result of the first proviso to such clause (a)); (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 U.S. Borrower and the Subsidiaries within 12 months of receipt of such proceeds or, if not made within such period of 12 months, are committed to be made during such period; (c) interest capitalized during such period;   11 -------------------------------------------------------------------------------- (d) expenditures that are accounted for as capital expenditures of such person and that actually are paid for by a third party (excluding Holdings (prior to a Qualified IPO), the U.S. Borrower or any Subsidiary) and for which none of Holdings (prior to a Qualified IPO), the U.S. Borrower or any Subsidiary 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 that 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 2005 Transactions; or (i) the purchase of property, plant or equipment made within 12 months of the sale of any asset to the extent purchased with the proceeds of such sale (or, if not made within such 12 months, to the extent committed to be made during such period and actually made within a 15 month period from such sale). “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. “Cash Interest Expense” shall mean, with respect to Holdings (prior to a Qualified IPO), the U.S. Borrower and the Subsidiaries on a consolidated basis for any period, Interest Expense for such period, less the sum of, without duplication, (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 (prior to a Qualified IPO), the U.S. Borrower or any Subsidiary, including such fees paid in connection with the Transactions, the May 2006 Transactions or the 2005 Transactions, (c) the amortization of debt discounts, if any, or fees in respect of Swap Agreements and (d) cash interest income of Holdings (prior to a Qualified IPO), the U.S. Borrower and the Subsidiaries for such period; provided that Cash Interest Expense shall exclude   12 -------------------------------------------------------------------------------- any one-time financing fees paid in connection with the Transactions, the May 2006 Transactions or the 2005 Transactions or any amendment of this Agreement. “CDOR Rate” shall mean, on any date, an interest rate per annum equal to the average discount rate applicable to bankers’ acceptances denominated in Canadian Dollars with a term equal to the Contract Period of the relevant B/As (for purposes of the definition of “Discount B/A Rate”) appearing on the Reuters Screen CDOR Page (“Screen”) (or on any successor or substitute page of such Screen, or any successor to or substitute for such Screen, providing rate quotations comparable to those currently provided on such page of such Screen, as determined by the Administrative Agent from time to time) at approximately 10:00 a.m., Toronto time, on such date (or, if such date is not a Business Day, on the next preceding Business Day) or, if such rate is not so reported, the average of the rate quotes for bankers’ acceptances denominated in Canadian Dollars with a term of 30 days received by the Administrative Agent at approximately 10:00 a.m., Toronto time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) from one or more banks of recognized standing selected by it. A “Change in Control” shall be deemed to occur if: (a) at any time, (i) a majority of the seats (other than vacant seats) on the Board of Directors of (A) prior to a Qualified IPO, Holdings or (B) after a Qualified IPO, the U.S. Borrower, shall at any time be occupied by persons who were neither (a) nominated by the Board of Directors of the U.S. Borrower or a Permitted Holder, (b) appointed by directors so nominated nor (c) appointed by a Permitted Holder or (ii) a “Change in Control” (or similar event) shall occur under (x) the New Second Secured Notes, (y) any Material Indebtedness secured by a Second-Priority Lien or (z) any Permitted Refinancing Indebtedness in respect of any of the foregoing or in respect of Indebtedness created hereunder or under the other Loan Documents (in each case to the extent constituting Material Indebtedness); (b) at any time prior to a Qualified IPO, (i) Holdings shall fail to own, directly or indirectly, beneficially and of record, 51% of the issued and outstanding common stock of the U.S. Borrower (unless Holdings shall merge into the U.S. Borrower in a transaction in which the U.S. Borrower is the surviving entity, in which case this clause (b)(i) shall not apply), or (ii) any combination of Permitted Holders shall fail to own beneficially (within the meaning of Rule 13d-5 of the Exchange Act as in effect on the Closing Date ), directly or indirectly, in the aggregate Equity Interests representing at least 51% of (A) the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Holdings (or, if Holdings shall merge into the U.S. Borrower in a transaction in which the U.S. Borrower is the surviving entity, the U.S. Borrower) or (B) the common economic interest represented by the issued and outstanding Equity Interests of Holdings (or, if Holdings shall merge into the U.S. Borrower in a transaction in which the U.S. Borrower is the surviving entity, the U.S. Borrower); or (c) at any time after a Qualified IPO, (a) any Person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in effect on the Closing Date ), other than any combination of the Permitted Holders, shall have acquired beneficial ownership of 35% or more of the voting and/or economic   13 -------------------------------------------------------------------------------- interest in the U.S. Borrower’s capital stock and the Permitted Holders shall own, directly or indirectly, less than such Person or “group” of the economic and voting interest in the U.S. Borrower’s capital stock. “Change in Law” shall mean (a) the adoption of any law, rule or regulation after the Closing Date , (b) any change in law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the Closing Date or (c) compliance by any Lender or Issuing Bank (or, for purposes of Section 2.16(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 Closing Date . “Charges” shall have the meaning assigned to such term in Section 9.09. “CIGNA L/C” shall mean, collectively, the Original Letters of Credit issued for the account of the U.S. Borrower and for the benefit of various state workers’ compensation boards and surety bond issuers and any extensions, renewals or replacements thereof, so long as the Administrative Agent, for the ratable benefit of the Secured Parties, has been named as a loss payee under the insurance policy that insures the obligations supported by such Original Letters of Credit (or such extensions, renewals or replacements) pursuant to a loss payable clause or endorsement in form and substance reasonably satisfactory to the Administrative Agent; provided that the aggregate face amount of Original Letters of Credit that may constitute the CIGNA L/C at any time shall not exceed $15,280,900. “Class” when used in reference to (a) any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are European Tranche Revolving Facility Loans, Canadian Tranche Revolving Facility Loans, U.S. Tranche Revolving Facility Loans, Tranche C-1 Term Loans, Tranche C-2 Term Loans, Tranche C-4 Term Loans, Other Revolving Facility Loans, Other Term Loans or Swingline Loans and (b) when used in reference to any Commitment, refers to whether such Commitment is a European Tranche Commitment, Canadian Tranche Commitment, U.S. Tranche Commitment, Tranche C-1 Term Loan Commitment, Tranche C-2 Term Loan Commitment, Tranche C-3 Credit-Limited Deposit, Tranche C-4 Term Loan Commitment, Incremental Revolving Facility Commitment with respect to Other Revolving Facility Loans or Incremental Term Loan Commitment with respect to Other Term Loans. Other Term Loans (together with the Incremental Term Loan Commitments in respect thereof) and Other Revolving Facility Loans (together with the Incremental Revolving Facility Commitments in respect thereof) that have different terms and conditions shall be construed to be in different Classes. “Closing Date” shall mean May 31, 2005. “Closing Date First Lien Intercreditor Agreement” shall mean the Amended and Restated Intercreditor Agreement, dated as of December 22, 2003, as amended and restated as of May 31, 2005, among the U.S. Borrower and the Administrative Agent, and acknowledged and agreed to by Holdings and the Domestic Subsidiary Loan Parties.   14 -------------------------------------------------------------------------------- “Closing Date Second Lien Intercreditor Agreement” shall mean the Intercreditor Agreement dated as of August 12, 2004, as amended and restated as of May 31, 2005, among the U.S. Borrower, Wilmington Trust Company, the Administrative Agent, Holdings and the Domestic Subsidiary Loan Parties. “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time and the regulations promulgated and rulings issued thereunder. “Collateral” shall mean all the “Collateral” as defined in any Security Document and shall also include the Mortgaged Properties. “Collateral Agreement” shall mean the Amended and Restated Collateral Agreement, dated as of the date hereof, as amended, supplemented or otherwise modified from time to time, among Holdings, the U.S. Borrower and each Domestic Subsidiary Loan Party and the Administrative Agent. “Collateral and Guarantee Requirement” shall mean, at any time, the requirement that: (a) on the Closing Date (except as provided in Section 4.02(e) of the 2005 Credit Agreement), the Administrative Agent shall have received (i) from Holdings, the U.S. Borrower and each Domestic Subsidiary Loan Party, a counterpart of the Collateral Agreement, duly executed and delivered on behalf of such person, (ii) from Holdings, the U.S. Borrower and each Domestic Subsidiary Loan Party, a counterpart of the U.S. Guarantee Agreement duly executed and delivered on behalf of such person, (iii) from the U.S. Borrower, each Domestic Subsidiary Loan Party and the Administrative Agent, a counterpart of the Closing Date First Lien Intercreditor Agreement, duly executed and delivered on behalf of such person, (iv) from the U.S. Borrower, each Domestic Subsidiary Loan Party and the Administrative Agent, a counterpart of the Closing Date Second Lien Intercreditor Agreement, duly executed and delivered on behalf of such person, and (v) from each Domestic Loan Party that directly owns Equity Interests of a Foreign Subsidiary (other than any Foreign Subsidiary organized under the laws of an Excluded Jurisdiction) a counterpart of a Foreign Pledge Agreement, duly executed and delivered on behalf of such person; (b) on the Closing Date (except as provided in Section 4.02(e) of the 2005 Credit Agreement), the Administrative Agent shall have received from each Foreign Subsidiary Loan Party (other than the German Guarantor and any Foreign Subsidiary Loan Party that is a subsidiary of the German Guarantor), (i) a counterpart of the Foreign Guarantee Agreement, duly executed and delivered on behalf of such person, and (ii) a counterpart of all Foreign Security Documents and Foreign Pledge Agreements that it determines, based on the advice of counsel, to be necessary or advisable in connection with the pledge of, or granting of security interests in, Equity Interests, Collateral or Indebtedness of such Foreign Subsidiary Loan Party, including as contemplated by paragraph (c) or (d) below, duly executed and delivered by such person;   15 -------------------------------------------------------------------------------- (c) on the Closing Date (except as provided in Section 4.02(e) of the 2005 Credit Agreement), all outstanding Equity Interests of the U.S. Borrower (other than any shares of PIK Preferred Stock, options or management shares), all other outstanding Equity Interests directly owned by the U.S. Borrower or any Subsidiary Loan Party (other than the German Guarantor and any Foreign Subsidiary Loan Party that is a subsidiary of the German Guarantor), and all Indebtedness owing to any Loan Party (other than intercompany indebtedness, which is governed by clause (d) below) shall have been pledged pursuant to the Collateral Agreement (or other applicable Security Document) and the Administrative Agent shall have received certificates or other instruments representing all such Equity Interests (other than (i) uncertificated Equity Interests, (ii) Equity Interests issued by Foreign Subsidiaries organized under the laws of a jurisdiction where receipt of such certificates or other instruments is not required for perfection of security interests in such Equity Interests and (iii) Equity Interests issued by a Foreign Subsidiary organized under the laws of an Excluded Jurisdiction) and any notes or other instruments representing such Indebtedness in excess of $15.0 million, together with stock powers, note powers or other instruments of transfer with respect thereto endorsed in blank, provided that in no event shall more than 65% of the issued and outstanding voting Equity Interests of any Foreign Subsidiary be pledged to secure Obligations of the Domestic Loan Parties; (d) all Indebtedness of the U.S. Borrower and each Subsidiary (other than intercompany Indebtedness incurred in the ordinary course of business in connection with the cash management operations and intercompany sales of the U.S. Borrower and each Subsidiary) that is owing to any Loan Party shall be evidenced by a promissory note or an instrument in form satisfactory to the Administrative Agent and, except for Indebtedness of any Foreign Subsidiary owing to the U.S. Borrower or a Domestic Subsidiary for so long as the pledge of such Indebtedness would be deemed an incurrence of Indebtedness under any of the Existing Notes Documents or the New Second Secured Notes Documents, shall have been pledged pursuant to the Collateral Agreement (or other applicable Security Document) and the Administrative 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 (other than with respect to any such intercompany debt the perfection of the pledge of which does not require delivery to the Administrative Agent); (e) except as otherwise contemplated by any Security Document, all documents and instruments, including Uniform Commercial Code financing statements, filings with the United States Copyright Office and the United States Patent and Trademark Office, filings with the U.K. Patent Office and OHIM, Personal Property Security Act financing statements (and similar documents) and filings with the Canadian Intellectual Property Office, required by law or reasonably requested by the Administrative 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 Administrative Agent for filing, registration or the recording concurrently with, or promptly following, the execution and delivery of each such Security Document;   16 -------------------------------------------------------------------------------- (f) all documents and particulars, including those required to be filed with the Registrar of Companies in England and Wales under section 395 of the UK Companies Act 1985, required by law or reasonably requested by the Administrative Agent to be filed, registered or recorded to create the Liens intended to be created by the U.K. Debentures and perfect such Liens to the extent required by, and with the priority required by, the U.K. Debentures, shall within 21 days of the execution of any applicable U.K. Debenture have been filed, registered or recorded; (g) on the Closing Date (except as provided in Section 4.02(e) of the 2005 Credit Agreement), the Administrative Agent shall have received (i) counterparts of each Foreign Mortgage to be entered into with respect to each Mortgaged Property duly executed and delivered by the record owner of such Mortgaged Property, (ii) such other documents, including such surveys, abstracts, legal opinions, abstracts of title, title deeds and reports of title, as the Administrative Agent may reasonably request with respect to any such Foreign Mortgage or Mortgaged Property, and (iii) a policy or policies or marked up unconditional binder of title insurance or foreign equivalent thereof, as applicable, paid for by the applicable Loan Party, issued by a nationally recognized title insurance company insuring the Lien of each such Foreign Mortgage covering real property located in Canada to be entered into on the Closing Date as a valid first Lien on the Mortgaged Property described therein, free of any other Liens except as expressly permitted by Section 6.02 and Liens arising by operation of law, together with such endorsements, coinsurance and reinsurance as the Administrative Agent may reasonably request; (h) except as set forth pursuant to any Security Document, 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 (ii) the performance of its obligations thereunder; and (i) subject to Section 5.10(g), in the case of any person that (i) becomes a Domestic Subsidiary Loan Party after the Closing Date, the Administrative Agent shall have received from such Domestic Subsidiary Loan Party, (x) a supplement to the Collateral Agreement, in the form specified therein, duly executed and delivered on behalf of such person, (y) a supplement to the U.S. Guarantee Agreement, in the form specified therein, duly executed and delivered on behalf of such person, and (z) with respect to any Foreign Pledge Agreement that the Administrative Agent determines, based on the advice of counsel, to be necessary or advisable in connection with the pledge of Equity Interests or Indebtedness of a Foreign Subsidiary that is a Material Subsidiary (other than a pledge of Equity Interests of any Foreign Subsidiary that is not a Loan Party and is organized under the laws of an Excluded Jurisdiction) owned by such Domestic Subsidiary Loan Party, a counterpart thereof, duly executed and delivered on behalf of such person, or (ii) becomes a Foreign Subsidiary Loan Party after the Closing Date, the Administrative Agent shall have received from such Foreign Subsidiary Loan Party a counterpart of (x) the Foreign Guarantee Agreement, duly executed and delivered by such person, and (y) all Foreign Security Documents and Foreign Pledge Agreements that the Administrative Agent determines, based on the advice of counsel, to be necessary   17 -------------------------------------------------------------------------------- or advisable in connection with the pledge of Equity Interests of a Material Subsidiary, Collateral or Indebtedness of such Foreign Subsidiary Loan Party (other than a pledge of Equity Interests of any Foreign Subsidiary that is not a Loan Party and is organized under the laws of an Excluded Jurisdiction), including as contemplated by paragraph (c) or (d) above (and subject to the materially thresholds therein), duly executed and delivered by such person. “Combination” shall mean the mergers and other transactions contemplated by the 2005 Transaction Agreement. “Combination Documents” shall mean the collective reference to the 2005 Transaction Agreement, all material exhibits and schedules thereto and all agreements expressly contemplated thereby. “Combined Group” shall mean the combination of the U.S. Borrower, RPP and RSM pursuant to EITF 02-5 “Definition of Common Control in Relation to FASB Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations”. “Commitment Fee” shall have the meaning assigned to such term in Section 2.13(a)(i). “Commitments” shall mean (a) with respect to any Lender, such Lender’s Canadian Tranche Commitment, European Tranche Commitment, U.S. Tranche Commitment, Tranche C-1 Term Loan Commitment, Tranche C-2 Term Loan Commitment, Tranche C-3 Credit-Linked Deposit, Tranche C-4 Term Loan Commitment, Incremental Revolving Facility Commitment and/or Incremental Term Loan Commitment and (b) with respect to the Swingline Lender, its Swingline Commitment. “Conduit Lender” shall mean any special purpose corporation organized and administered by any Lender for the purpose of making Loans otherwise required to be made by such Lender and designated by such Lender in a written instrument; provided that the designation by any Lender of a Conduit Lender shall not relieve the designating Lender of any of its obligations to fund a Loan under this Agreement if, for any reason, its Conduit Lender fails to fund any such Loan, and the designating Lender (and not the Conduit Lender) shall have the sole right and responsibility to deliver all consents and waivers required or requested under this Agreement with respect to its Conduit Lender; provided further that no Conduit Lender shall (a) be entitled to receive any greater amount pursuant to Section 2.16, 2.17, 2.18 or 9.05 than the designating Lender would have been entitled to receive in respect of the extensions of credit made by such Conduit Lender or (b) be deemed to have any Commitment. “Consolidated Debt” at any date shall mean the sum of (without duplication) all Indebtedness (other than letters of credit, including Tranche C-3 Letters of Credit, to the extent undrawn) consisting of Capital Lease Obligations, bankers’ acceptances, Indebtedness for borrowed money, Disqualified Stock and Indebtedness in respect of the deferred purchase price of property or services of the U.S. Borrower and the Subsidiaries determined on a consolidated basis on such date.   18 -------------------------------------------------------------------------------- “Consolidated Leverage Ratio” shall mean, on any date, the ratio of (a) Consolidated Total Debt as of such date to (b) EBITDA for the period of four consecutive fiscal quarters of the U.S. Borrower most recently ended as of such date, all determined on a consolidated basis in accordance with GAAP; provided that EBITDA shall be determined for the relevant Test Period on a Pro Forma Basis. “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, without duplication, (a) any net after-tax extraordinary, nonrecurring or unusual gains or losses or income, expenses or charges (less all fees and expenses relating thereto), including any severance expenses, transition expenses incurred in connection with the Combination and fees, expenses or charges related to any offering of Equity Interests of the U.S. Borrower, any Investment, acquisition or Indebtedness permitted to be incurred hereunder (in each case, whether or not successful), including any such fees, expenses, charges or change in control payments related to the 2005 Transactions, the May 2006 Transactions or the Transactions, in each case, shall be excluded; provided that, with respect to each nonrecurring item, the U.S. Borrower shall have delivered to the Administrative Agent an officers’ certificate specifying and quantifying such item and stating that such item is a nonrecurring item; (b) 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; (c) any net after-tax gains or losses or any subsequent charges or expenses incurred during such period 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 the U.S. Borrower) shall be excluded; (d) any net after-tax income or loss attributable to the early extinguishment of indebtedness shall be excluded; (e) (i) the Net Income for such period of any person that is not a subsidiary of such person, or that is an Unrestricted Subsidiary, 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 (ii) the Net Income for such period shall include any ordinary course dividend, distribution or other payment in cash received from any person in excess of the amounts included in clause (i); (f) the Net Income for such period of any subsidiary 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   19 -------------------------------------------------------------------------------- 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 for such period shall be included); (g) Consolidated Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period (including the expected change from LIFO to FIFO); (h) any increase in amortization or depreciation or any one-time non-cash charges (such as purchased in-process research and development or capitalized manufacturing profit in inventory) resulting from purchase accounting in connection with the 2005 Transactions or any acquisition that is consummated after the Closing Date shall be excluded; (i) accruals and reserves that are established within twelve months after the Closing Date and that are so required to be established in accordance with GAAP shall be excluded; (j) any non-cash impairment charges resulting from the application of Statement of Financial Accounting Standards No. 142 and 144, and the amortization of intangibles arising pursuant to No. 141, shall be excluded; (k) any non-cash compensation expense realized from any deferred stock compensation plan or grants of stock appreciation or similar rights, stock options, restricted stock or other rights to officers, directors and employees of such person or any of its subsidiaries shall be excluded; (l) solely for purposes of calculating EBITDA, the Net Income of any person and its subsidiaries shall be calculated without deducting the income attributable to, or adding the losses attributable to, the minority equity interests of third parties in any non-Wholly Owned Subsidiary except to the extent of dividends declared or paid by such person or its subsidiaries in respect of such period or any prior period on the shares of capital stock of such subsidiary held by such third parties; (m) non-cash gains, losses, income and expenses resulting from fair value accounting required by Statement of Financial Accounting Standards No. 133 shall be excluded; (n) non-cash charges for deferred tax asset valuation allowances shall be excluded; and (o) any (a) costs or expenses realized in connection with, resulting from or in anticipation of the Transactions or (b) costs or expenses realized in connection with or resulting from stock appreciation or similar rights, stock options or other rights existing on the Amendment Effective Date of officers, directors and employees, in each case of the U.S. Borrower or any of the Subsidiaries, shall be excluded;   20 -------------------------------------------------------------------------------- provided that any non-cash charge, expense, gain, loss or income referred to in clause (j), (k), (m) or (n) above that consists of or requires an accrual of, or cash reserve for, anticipated cash charges in any future period shall not be excluded. “Consolidated Non-cash Charges” shall mean, with respect to any person for any period, the aggregate depreciation, amortization and other non-cash expenses of such person and its subsidiaries for such period reducing Consolidated Net Income for such period on a consolidated basis and otherwise determined in accordance with GAAP, but excluding any such charge that consists of or requires an accrual of, or cash reserve for, anticipated cash charges for any future period. “Consolidated Taxes” shall mean, with respect to any person for any period, provision for Taxes based on income, profits or capital of such person and its subsidiaries for such period, including state, franchise and similar taxes, and, without duplication, any Tax Distributions taken into account in calculating Consolidated Net Income. “Consolidated Total Assets” shall mean, as of any date, the total assets of the U.S. Borrower and the Subsidiaries, determined on a consolidated basis in accordance with GAAP, as set forth on the consolidated balance sheet of the U.S. Borrower as of such date. “Consolidated Total Debt” at any date shall mean Consolidated Debt on such date less the lesser of (i) the unrestricted cash and marketable securities (determined in accordance with GAAP) of the U.S. Borrower and its Subsidiaries on such date and (ii) $100.0 million. “Constructive Distributions” shall mean constructive distributions made in cash or otherwise (i) to Holdings relating to reimbursements of certain pension costs and (ii) to Shell Oil Company relating to reimbursements of certain pension costs in accordance with the Master Sales Agreement dated July 10, 2000, as amended as of November 14, 2000, and related ancillary agreements. “Contract Period” shall mean, with respect to any B/A, the period commencing on the date such B/A is issued and accepted and ending on the date 30, 60, 90 or 180 days thereafter, as the Canadian Borrower may elect (in each case subject to availability and provided that there remains a minimum of 30, 60, 90 or 180 days (depending on the Contract Period selected by the Canadian Borrower) prior to the Revolving Facility Maturity Date), or any other number of days from 1 to 180 with the consent of each applicable Lender; provided that if such Contract Period would end on a day other than a Business Day, such Contract Period shall be extended to the next succeeding Business Day. “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. “Credit Event” shall have the meaning assigned to such term in Article IV. “Cumulative Retained Excess Cash Flow Amount” shall mean, at any date, an amount, not less than zero in the aggregate, determined on a cumulative basis equal to the sum of   21 -------------------------------------------------------------------------------- the Retained Percentage of Excess Cash Flow for each Excess Cash Flow Period commencing after the Closing Date; provided that for purposes of determining the Cumulative Retained Excess Cash Flow Amount, the periods, each taken as a single accounting period, (i) beginning on January 1, 2006, and ending on December 31, 2006 and (ii) beginning on January 1, 2007 and ending on December 31, 2007 shall each be deemed to be an Excess Cash Flow Period. “Cure Amount” shall have the meaning assigned to such term in Section 7.03(a). “Cure Right” shall have the meaning assigned to such term in Section 7.03(a). “Current Assets” shall mean, with respect to Holdings (prior to a Qualified IPO), the U.S. Borrower and the Subsidiaries on a consolidated basis at any date of determination, all assets (other than cash and Permitted Investments or other cash equivalents) that would, in accordance with GAAP, be classified on a consolidated balance sheet of Holdings (prior to a Qualified IPO), the U.S. Borrower and the Subsidiaries as current assets at such date of determination, other than amounts related to current or deferred Taxes based on income or profits. “Current Liabilities” shall mean, with respect to Holdings (prior to a Qualified IPO), the U.S. Borrower and the Subsidiaries on a consolidated basis at any date of determination, all liabilities that would, in accordance with GAAP, be classified on a consolidated balance sheet of Holdings (prior to a Qualified IPO), the U.S. Borrower and the Subsidiaries as current liabilities at such date of determination, other than (a) the current portion of any Indebtedness, (b) accruals of Interest Expense (excluding Interest Expense that is due and unpaid), (c) accruals for current or deferred Taxes based on income or profits, (d) accruals, if any, of transaction costs resulting from the 2005 Transactions, the May 2006 Transactions or the Transactions, and (e) accruals of any costs or expenses related to (i) severance or termination of employees prior to the Closing Date or (ii) bonuses, pension and other post-retirement benefit obligations, and (f) accruals for add-backs to EBITDA included in clauses (a)(iv) through (a)(vi) of the definition of such term. “Debenture Indentures” shall mean the Indenture of the U.S. Borrower dated as of January 15, 1983, governing the Debentures due 2016, and the Indenture of the U.S. Borrower dated as of December 15, 1987, governing the Debentures due 2021 and 2023, in each case as amended, modified or supplemented from time to time. “Debentures” shall mean the 8.375% Debentures of the U.S. Borrower due 2016, the 9.200% Debentures of the U.S. Borrower due 2021 and the 7.875% Debentures of the U.S. Borrower due 2023. “Debt Service” shall mean, with respect to Holdings (prior to a Qualified IPO), the U.S. Borrower and the Subsidiaries on a consolidated basis for any period, Cash Interest Expense for such period plus scheduled principal amortization of Consolidated Debt for such period. “Debt Tender Offer” shall mean the offer to purchase and consent solicitation made by the U.S. Borrower on October 12, 2006, with respect to all its outstanding Existing Borden Second Secured Notes, pursuant to which the U.S. Borrower subject to the satisfaction or   22 -------------------------------------------------------------------------------- waiver of the conditions thereto (a) will purchase all the Existing Borden Second Secured Notes validly tendered and not withdrawn pursuant to such offer to purchase (the “Tendered Notes”), (b) will enter into a supplemental indenture that amends the indenture under which the Existing 2004 Borden Floating Rate Notes and the Existing Borden Fixed Rate Notes are issued to eliminate all the material restrictive covenants and default provisions contained therein, (c) will enter into a supplemental indenture that amends the indenture under which the Existing 2005 Borden Floating Rate Notes are issued to eliminate all the material restrictive covenants and default provisions contained therein, (d) if more than 66-2/3% of the Existing 2004 Borden Floating Rate Notes and the Existing Borden Fixed Rate Notes (taken together) are validly tendered and not withdrawn pursuant to such offer to purchase, will enter into a supplemental indenture that will release all the Liens securing the Existing 2004 Borden Floating Rate Notes and the Existing Borden Fixed Rate Notes, (e) if more than 66-2/3% of the Existing 2005 Borden Floating Rate Notes are validly tendered and not withdrawn pursuant to such offer to purchase, will enter into a supplemental indenture that will release all the Liens securing the Existing 2005 Borden Floating Rate Notes and (f) will pay tender premiums, accrued interest and consent fees in connection with the purchase of the Tendered Notes, in each case in accordance with the Debt Tender Offer Documents. “Debt Tender Offer Documents” shall mean the U.S. Borrower’s Offer to Purchase and Consent Solicitation Statement dated October 12, 2006, and all other documents executed and delivered with respect to the Debt Tender Offer. “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. “Delayed Draw Expiration Date” shall mean the date that is 60 days after the date of initial drawing of the Tranche C-4 Initial Term Loans. “Designated Non-Cash Consideration” shall mean the fair market value of non-cash consideration received by the U.S. Borrower or one of the Subsidiaries in connection with an asset disposition that is so designated as Designated Non-Cash Consideration pursuant to a certificate of a Responsible Officer, setting forth the basis of such valuation, less the amount of cash or cash equivalents received in connection with a subsequent sale of such Designated Non-Cash Consideration. “Discount B/A Rate” shall mean, with respect to a B/A being accepted and purchased on any day, (a) for a Lender that is a Schedule I Lender, (i) the CDOR Rate applicable to such B/A or (ii) if the discount rate for a particular Contract Period is not quoted on the Reuters Screen CDOR Page, the arithmetic average (as determined by the Administrative Agent) of the percentage discount rates (expressed as a decimal and rounded upward, if necessary, to the nearest 1/100 of 1%) quoted to the Administrative Agent by the Schedule I Reference Lenders as the percentage discount rate at which each such bank would, in accordance with its normal practices, at approximately 10:00 a.m., Toronto time, on such day, be prepared to purchase bankers’ acceptances accepted by such bank having a face amount and term comparable to the   23 -------------------------------------------------------------------------------- face amount and Contract Period of such B/A, and (b) for a Lender that is not a Schedule I Lender, the lesser of (i) the CDOR Rate applicable to such B/A plus 0.10% per annum and (ii) the arithmetic average (as determined by the Administrative Agent) of the percentage discount rates (expressed as a decimal and rounded upward, if necessary, to the nearest 1/100 of 1%) quoted to the Administrative Agent by the Schedule II/III Reference Lenders as the percentage discount rate at which such bank would, in accordance with its normal practices, at approximately 10:00 a.m., Toronto time, on such day, be prepared to purchase bankers’ acceptances accepted by such bank having a face amount and term comparable to the face amount and Contract Period of such B/A. “Discount Proceeds” shall mean, with respect to any B/A, an amount (rounded upward, if necessary, to the nearest C$.01) calculated by multiplying (a) the face amount of such B/A by (b) the quotient obtained by dividing (i) one by (ii) the sum of (A) one and (B) the product of (x) the Discount B/A Rate (expressed as a decimal) applicable to such B/A and (y) a fraction of which the numerator is the Contract Period applicable to such B/A and the denominator is 365, with such quotient being rounded upward or downward to the fifth decimal place and .000005 being rounded upward. “Disqualified Stock” shall mean, with respect to any person, any Equity Interests of such person that, by their terms (or by the terms of any security into which such Equity Interests are convertible or for which such Equity Interests are redeemable or exchangeable), or upon the happening of any event, (i) mature or are mandatorily redeemable, pursuant to a sinking fund obligation or otherwise (other than as a result of a change of control or asset sale), (ii) are convertible or exchangeable for Indebtedness or Disqualified Stock or (iii) are redeemable at the option of the holder thereof, in whole or in part, in each case prior to 91 days after the latest to mature of any Tranche, Other Term Loan, if any, and Other Revolving Facility Loan, if any (without regard to the proviso to the definition of “Term Facility Maturity Date” or “Revolving Facility Maturity Date” or any similar qualification to the maturity date of any such Other Term Loan or Other Revolving Facility Loan); provided, however, that only the portion of the Equity Interests that so mature or are mandatorily redeemable, are so convertible or exchangeable or are so redeemable at the option of the holder thereof prior to such date shall be deemed to be Disqualified Stock; provided further, however, that if such Equity Interests are issued to any employee or to any plan for the benefit of employees of the U.S. Borrower or the Subsidiaries or by any such plan to such employees, such Equity Interests shall not constitute Disqualified Stock solely because they may be required to be repurchased by the U.S. Borrower in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s termination, death or disability; provided further, however, that any class of Equity Interests of such person that by its terms authorizes such person to satisfy its obligations thereunder by delivery of Equity Interests that are not Disqualified Stock shall not be deemed to be Disqualified Stock. “Dividends” shall have the meaning assigned to such term in Section 6.06. “Domestic Loan Party” shall mean the U.S. Borrower and any Domestic Subsidiary Loan Party. “Domestic Subsidiary” shall mean any Subsidiary that is not a Foreign Subsidiary.   24 -------------------------------------------------------------------------------- “Domestic Subsidiary Loan Party” shall mean each Wholly-Owned Domestic Subsidiary other than (a) Unrestricted Subsidiaries and (b) Indenture Restricted Subsidiaries. “Dutch Banking Act” shall mean the Dutch Act on the Supervision of Credit Institutions 1992 (Wet toezicht kredietwezen 1992), as amended from time to time. “Dutch Borrower” shall have the meaning assigned to such term in the preamble hereto. “Dutch Security Documents” shall mean (a) Dutch law notarial share pledges over the Equity Interests in each Foreign Subsidiary Loan Party incorporated under Dutch law (including the Dutch Borrower), (b) Dutch law pledges over all receivables owing to any of the Foreign Subsidiary Loan Parties incorporated under Dutch law (which will be notified pledges in respect of intercompany receivables, insurance receivables and bank account receivables and not notified until an Event of Default has occurred in respect of trade receivables), (c) Dutch law pledges over all stock, inventory and other tangible assets located in the Netherlands and all intellectual property rights registered in or in respect of the Netherlands and (d) any other Dutch law security document that may be entered into by any Loan Party. “Dutch Term Loan Obligations” shall mean (a) the obligations of the Dutch Borrower to the Lenders under the Tranche C-2 Term Loans and (b) the obligations of the other Loan Parties guaranteeing the obligations of the Dutch Borrower to the Lenders under the Tranche C-2 Term Loans, as such obligations may exist from time to time. “Early Maturity Notes” shall mean (a) the Existing Notes (other than the Existing Borden Fixed Rate Notes and the Debentures) and (b) any other debt securities and bank Indebtedness issued by the U.S. Borrower or any of the Subsidiaries (other than Indebtedness issued by a Foreign Subsidiary that is not a Foreign Subsidiary Loan Party that is denominated in currencies other than the U.S. Dollar in the form of bank financings or notes offered or arranged outside the United States and not placed with investors that regularly invest in the U.S. financial markets) with a final maturity prior to the date that is 91 days after the last to mature of the Facilities. “Early Maturity Test Date” shall mean each date that is 91 days prior to the final maturity of any of the Early Maturity Notes. “EBITDA” shall mean, with respect to the U.S. Borrower and the Subsidiaries on a consolidated basis for any period, the Consolidated Net Income of the U.S. Borrower and the Subsidiaries for such period plus (a) the sum of (without duplication and to the extent the same was deducted in calculating Consolidated Net Income for such period): (i) Consolidated Taxes of the U.S. Borrower and the Subsidiaries for such period; (ii) Interest Expense (and to the extent not included in Interest Expense, any losses on hedging obligations or other derivative instruments entered into for the purpose of hedging interest rate risk and costs of surety bonds in connection with financing activities) of the U.S. Borrower and the Subsidiaries for such period (net of interest income of the U.S. Borrower and the Subsidiaries for such period);   25 -------------------------------------------------------------------------------- (iii) Consolidated Non-cash Charges of the U.S. Borrower and the Subsidiaries for such period; (iv) plant closure, severance and other restructuring costs and charges; (v) business optimization expenses (which, for the avoidance of doubt, shall include, without limitation, the effect of inventory optimization programs, retention, systems establishment costs and excess pension charges); provided, that with respect to each business optimization expense, the U.S. Borrower shall have delivered to the Administrative Agent an officers’ certificate specifying and quantifying such expense; (vi) impairment charges, including the write-down of investments; (vii) non-operating expenses; (viii) the amount of management, monitoring, consulting, transaction and advisory fees and related expenses paid to the Fund or any Fund Affiliate (or any accruals relating to such fees and related expenses) during such period; provided, however, that such amount shall not exceed in any four-quarter period the greater of (x) $3.0 million and (y) 2% of EBITDA of the U.S. Borrower and the Subsidiaries on a consolidated basis for the immediately preceding fiscal year, plus 2% of the value of transactions permitted hereunder and entered into by the U.S. Borrower or any of the Subsidiaries with respect to which the Fund or any Fund Affiliate provides any of the aforementioned types of services; provided, however, any payment not made in any fiscal year may be carried forward and paid in the following fiscal year; plus (ix) the cost (or amortization of prior service cost) of subsidizing coverage for persons affected by amendments to medical benefit plans implemented prior to the Closing Date; provided, however, that such amount will be included in EBITDA notwithstanding that such amount was not deducted in calculating Consolidated Net Income; minus (b) the sum of (without duplication and to the extent the amounts described in this clause (b) increased such Consolidated Net Income for the respective period for which EBITDA is being determined) non-cash items increasing Consolidated Net Income of the U.S. Borrower 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) that represent the reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period, including the amortization of employee benefit plan prior service costs). For purposes of determining EBITDA under this Agreement for any period that includes the fiscal quarter ended September 30, 2005, December 31, 2005, March 31, 2006 or June 30, 2006, EBITDA for such fiscal quarter shall be deemed to be $152 million, $144 million, $163 million or $161 million, respectively. “EMU Legislation” shall mean the legislative measures of the European Union for the introduction of, changeover to or operation of the euro in one or more member states.   26 -------------------------------------------------------------------------------- “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 Laws” shall mean all applicable laws (including common law), rules, regulations, codes, ordinances, orders, decrees, directives, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by or with any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the generation, management, Release or threatened Release of, or exposure to, any Hazardous Material or to health and safety matters (to the extent relating to the environment or Hazardous Materials). “Equity Financing” shall mean, in connection with the consummation of the Combination, the issuance by the U.S. Borrower of the PIK Preferred Stock in an aggregate amount of $350.0 million, which amount was distributed by the U.S. Borrower to the holders of its Equity Interests (including Holdings) and by Holdings to the holders of its Equity Interests. “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 amended from time to time. “ERISA Affiliate” shall mean any trade or business (whether or not incorporated) that, together with Holdings (prior to a Qualified IPO), the U.S. Borrower or a 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 (prior to a Qualified IPO), the U.S. Borrower, a Subsidiary or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by Holdings (prior to a Qualified IPO), the U.S. Borrower, a Subsidiary or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention, or the institution by the PBGC of proceedings, to terminate any Plan or to appoint a trustee to administer any Plan; (f) the incurrence by Holdings (prior to a Qualified IPO), the U.S. Borrower, a Subsidiary or any ERISA Affiliate of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by Holdings (prior to a Qualified IPO), the U.S. Borrower, a Subsidiary or any ERISA   27 -------------------------------------------------------------------------------- Affiliate of any notice, or the receipt by any Multiemployer Plan from Holdings (prior to a Qualified IPO), the U.S. 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. “euro” or “€” shall mean the currency constituted by the Treaty on the European Union and as referred to in the EMU Legislation. “Eurocurrency Borrowing” shall mean a Borrowing comprised of Eurocurrency Loans. “Eurocurrency Loan” shall mean any Eurocurrency Term Loan or Eurocurrency Revolving Loan. “Eurocurrency Revolving Borrowing” shall mean a Borrowing comprised of Eurocurrency Revolving Loans. “Eurocurrency Revolving Loan” shall mean any Revolving Facility Loan bearing interest at a rate determined by reference to the Adjusted Eurocurrency Rate in accordance with the provisions of Article II. “Eurocurrency Term Loan” shall mean any Term Loan bearing interest at a rate determined by reference to the Adjusted Eurocurrency Rate in accordance with the provisions of Article II. “Euro Lending Office” shall mean, as to any European Tranche Lender or Tranche C-2 Lender, the applicable branch, office or Affiliate of such European Tranche Lender or Tranche C-2 Lender designated (i) by such European Tranche Lender to make Loans to the Dutch Borrower and the U.K. Borrowers or (ii) by such Tranche C-2 Lender to make Loans to the Dutch Borrower. “EURO LIBO Rate” shall mean, with respect to any Eurocurrency Borrowing denominated in euro, for any Interest Period, the offered rate for deposits in euros in the European interbank market for the relevant Interest Period that is determined by the Banking Federation of the European Union, and displayed on the appropriate page of the Telerate Screen, at or about 11:00 am (Brussels time) on the relevant quotation date for the delivery of euros on the first day of the relevant Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the “EURO LIBO Rate” shall be the interest rate per annum determined by the Administrative Agent to be the average of the rates per annum at which deposits in euro are offered for a maturity comparable to such relevant Interest Period to major banks in the London interbank market in London, England by the Administrative Agent at approximately 11:00 a.m. (London time) on the date that is two Business Days prior to the beginning of such Interest Period. “European Tranche” has the meaning assigned to such term under the definition of “Tranche”.   28 -------------------------------------------------------------------------------- “European Tranche Commitment” shall mean, with respect to each European Tranche Lender, the commitment of such European Tranche Lender to make European Tranche Revolving Facility Loans and to acquire participations in Letters of Credit and Swingline Loans under the European Tranche, expressed as an amount representing the maximum aggregate permitted amount of such Lender’s European Tranche Revolving Facility Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 2.21 or Section 9.04. The initial amount of each Lender’s European Tranche Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance or Incremental Assumption Agreement pursuant to which such Lender shall have assumed its European Tranche Commitment, as applicable. The aggregate amount of the Lenders’ European Tranche Commitments as of the Amendment Effective Date is $125.0 million. “European Tranche L/C Exposure” shall mean, at any time, the sum of (a) the aggregate undrawn amount of all outstanding European Tranche Letters of Credit denominated in U.S. Dollars at such time, (b) the U.S. Dollar Equivalent of the aggregate undrawn amount of all outstanding European Tranche Letters of Credit denominated in euro or Sterling at such time and (c) the U.S. Dollar Equivalent of the aggregate amount of all L/C Disbursements in respect of European Tranche Letters of Credit that have not yet been reimbursed by or on behalf of the applicable Borrower at such time. The European Tranche L/C Exposure of any Revolving Lender at any time shall be its European Tranche Percentage of the total European Tranche L/C Exposure at such time. “European Tranche Lender” shall mean a Lender with a European Tranche Commitment or with outstanding European Tranche Revolving Facility Exposure. “European Tranche Letters of Credit” shall mean Letters of Credit issued or deemed outstanding under the European Tranche. “European Tranche Percentage” shall mean, with respect to any European Tranche Lender, the percentage of the total European Tranche Commitments represented by such Lender’s European Tranche Commitment. If the European Tranche Commitments have terminated or expired, the European Tranche Percentages shall be determined based upon the European Tranche Commitments most recently in effect, giving effect to any assignments pursuant to Section 9.04. “European Tranche Revolving Facility Exposure” shall mean, at any time, the sum of (a) the aggregate principal amount of the European Tranche Revolving Facility Loans denominated in U.S. Dollars outstanding at such time, (b) the U.S. Dollar Equivalent of the aggregate principal amount of the European Tranche Revolving Facility Loans denominated in euro outstanding at such time, (c) the U.S. Dollar Equivalent of the aggregate principal amount of European Tranche Revolving Facility Loans denominated in Sterling outstanding at such time, (d) the European Tranche L/C Exposure at such time and (e) the Swingline Exposure at such time. The European Tranche Revolving Facility Exposure of any Lender at any time shall be such Lender’s European Tranche Percentage of the total European Tranche Revolving Facility Exposure at such time.   29 -------------------------------------------------------------------------------- “European Tranche Revolving Facility Loan” shall mean a loan made by a European Tranche Lender pursuant to Section 2.01. Each European Tranche Revolving Facility Loan denominated in U.S. Dollars shall be a Eurocurrency Loan or (a) an ABR Loan (if to the U.S. Borrower) or (b) a Base Rate Loan (if to any other Borrower), and each European Tranche Revolving Facility Loan denominated in Sterling or euro shall be a Eurocurrency Loan or a Base Rate Loan. “Event of Default” shall have the meaning assigned to such term in Section 7.01. “Excess Cash Flow” shall mean, with respect to the U.S. Borrower and the Subsidiaries on a consolidated basis for any Excess Cash Flow Period, EBITDA of the U.S. Borrower and the Subsidiaries on a consolidated basis for such Excess Cash Flow Period, minus, without duplication, (a) Debt Service for such Excess Cash Flow Period (reduced by the aggregate principal amount of voluntary prepayments of Consolidated Debt that would otherwise constitute scheduled principal amortization during such Excess Cash Flow Period to the extent such scheduled principal amortization has been included in Debt Service); (b) the amount of any voluntary prepayment permitted hereunder of term Indebtedness (other than any Term Loans) during such Excess Cash Flow Period, in each case to the extent not financed, or intended to be financed, using the proceeds of the incurrence of Indebtedness, so long as the amount of such prepayment is not already reflected in Debt Service; (c) (i) Capital Expenditures by the U.S. Borrower and the Subsidiaries on a consolidated basis during such Excess Cash Flow Period that are paid in cash and (ii) the aggregate consideration paid in cash during such Excess Cash Flow Period in respect of Permitted Business Acquisitions and other Investments permitted hereunder to the extent not financed with the proceeds of Indebtedness other than Loans that are not Incremental Term Loans (less any amounts received in respect thereof as a return of capital); (d) Capital Expenditures that the U.S. Borrower or any Subsidiary shall, during such Excess Cash Flow Period, become obligated to make but that are not made during such Excess Cash Flow Period (provided that any amount so deducted that will be paid after the close of such Excess Cash Flow Period shall not be deducted again in a subsequent Excess Cash Flow Period); provided that the U.S. Borrower shall deliver a certificate to the Administrative Agent not later than 90 days after the end of such Excess Cash Flow Period, signed by a Responsible Officer of the U.S. Borrower and certifying that such Capital Expenditures and the delivery of the related equipment will be made in the following Excess Cash Flow Period; (e) Taxes and Tax Distributions paid in cash by Holdings (prior to a Qualified IPO), the U.S. Borrower and the Subsidiaries on a consolidated basis during such Excess Cash Flow Period or that will be paid within six months after the close of such Excess Cash Flow Period (provided that any amount so deducted that will be paid after the close of such Excess Cash Flow Period shall not be deducted again in a subsequent Excess   30 -------------------------------------------------------------------------------- Cash Flow Period) and for which reserves have been established, including income tax expense and withholding tax expense incurred in connection with cross-border transactions involving the Foreign Subsidiaries; (f) an amount equal to any increase in Working Capital of the U.S. Borrower and the Subsidiaries for such Excess Cash Flow Period; (g) cash expenditures made in respect of Swap Agreements during such Excess Cash Flow Period, to the extent not reflected in the computation of EBITDA or Cash Interest Expense; (h) permitted dividends or distributions or repurchases of its Equity Interests paid in cash by Holdings (prior to a Qualified IPO) or the U.S. Borrower (after a Qualified IPO) during such Excess Cash Flow Period and permitted dividends paid by any Subsidiary to any person other than the U.S. Borrower or any of the Subsidiaries during such Excess Cash Flow Period, in each case in accordance with Section 6.06 (other than Section 6.06(e), 6.06(f)(ii), 6.06(f)(iii) and 6.06(k)); (i) amounts paid in cash during such Excess Cash Flow Period on account of (x) items that were accounted for as noncash reductions of Net Income in determining Consolidated Net Income or as noncash reductions of Consolidated Net Income in determining EBITDA of the U.S. Borrower and the Subsidiaries in a prior Excess Cash Flow Period and (y) reserves or accruals established in purchase accounting; (j) to the extent not deducted in the computation of Net Proceeds in respect of any asset disposition or condemnation giving rise thereto, the amount of any mandatory prepayment of Indebtedness (other than Indebtedness created hereunder or under any other Loan Document), together with any interest, premium or penalties required to be paid (and actually paid) in connection therewith, and (k) the amount related to items that were added to or not deducted from Net Income in calculating Consolidated Net Income or were added to or not deducted from Consolidated Net Income in calculating EBITDA to the extent such items represented a cash payment (which had not reduced Excess Cash Flow upon the accrual thereof in a prior Excess Cash Flow Period), or an accrual for a cash payment, by the U.S. Borrower and the Subsidiaries or did not represent cash received by the U.S. Borrower and the Subsidiaries, in each case on a consolidated basis during such Excess Cash Flow Period, plus, without duplication, (a) an amount equal to any decrease in Working Capital for such Excess Cash Flow Period; (b) all proceeds received during such Excess Cash Flow Period of Capital Lease Obligations, purchase money Indebtedness, Sale and Lease-Back Transactions pursuant to Section 6.03 and any other Indebtedness, in each case to the extent used to finance any Capital Expenditure (other than Indebtedness under this Agreement to the extent there is no corresponding deduction to Excess Cash Flow above in respect of the use of such Borrowings);   31 -------------------------------------------------------------------------------- (c) all amounts referred to in clause (c) or (d) above to the extent funded with (i) the proceeds of the issuance of Equity Interests of, or capital contributions to, the U.S. Borrower after the Closing Date, (ii) any amount that would have constituted Net Proceeds under clause (a) of the definition of the term “Net Proceeds” if not so spent or (iii) Cumulative Retained Excess Cash Flow Amount, in each case to the extent there is a corresponding deduction from Excess Cash Flow above; (d) to the extent any permitted Capital Expenditures referred to in clause (d) above and the delivery of the related equipment do not occur in the following Excess Cash Flow Period specified in the certificate of the U.S. Borrower provided pursuant to clause (d) above, the amount of such Capital Expenditures that were not so made in such following Excess Cash Flow Period; (e) cash payments received in respect of Swap Agreements during such Excess Cash Flow Period to the extent (i) not included in the computation of EBITDA or (ii) such payments do not reduce Cash Interest Expense; (f) any extraordinary or nonrecurring gain realized in cash during such Excess Cash Flow Period (except to the extent such gain consists of Net Proceeds subject to 2.11(c)); (g) to the extent deducted in the computation of EBITDA, cash interest income; and (h) the amount related to items that were deducted from or not added to Net Income in connection with calculating Consolidated Net Income or were deducted from or not added to Consolidated Net Income in calculating EBITDA to the extent either (x) such items represented cash received by the U.S. Borrower or any Subsidiary or (y) such items do not represent cash paid by the U.S. Borrower or any Subsidiary, in each case on a consolidated basis during such Excess Cash Flow Period. “Excess Cash Flow Period” shall mean (i) the period taken as one accounting period beginning on January 1, 2008, and ending on December 31, 2008, and (ii) each fiscal year of the U.S. Borrower ended thereafter. “Excess Tranche C-3 Credit-Linked Deposits” shall mean, at any time, the excess, if any, of the Total Tranche C-3 Credit-Linked Deposit over the Tranche C-3 L/C Exposure at such time. The Excess Tranche C-3 Credit-Linked Deposit of any Tranche C-3 Lender at any time shall mean its Tranche C-3 Percentage of the Excess Tranche C-3 Credit-Linked Deposits. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. “Exchange Rate” shall mean, on any day, for purposes of determining the U.S. Dollar Equivalent of any other currency, the rate at which such other currency may be exchanged   32 -------------------------------------------------------------------------------- into U.S. Dollars at the time of determination on such day on the Reuters WRLD Page for such currency. In the event that such rate does not appear on any Reuters WRLD Page, the Exchange Rate shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the U.S. Borrower, or, in the absence of such an agreement, such Exchange Rate shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the market where its foreign currency exchange operations in respect of such currency are then being conducted, at or about such time as the Administrative Agent shall elect after determining that such rates shall be the basis for determining the Exchange Rate, on such date for the purchase of U.S. Dollars for delivery two Business Days later; provided that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent may use any reasonable method it deems appropriate to determine such rate, and such determination shall be conclusive absent manifest error. “Excluded Indebtedness” shall mean all Indebtedness permitted to be incurred under Section 6.01 (as amended or waived from time to time). “Excluded Jurisdictions” shall mean Hong Kong, Ireland, Luxembourg, Korea, Argentina, South Africa, France, Philippines, Finland, Barbados, People’s Republic of China, Mexico, Sweden, Japan, Switzerland, Singapore, Australia, Malaysia and Thailand. “Excluded Taxes” shall mean, with respect to the Administrative Agent, any Lender, any Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of any Borrower hereunder or, for purposes of Section 2.18 only, by or on account of any obligation of the Administrative Agent pursuant to Section 2.23(b), the following taxes, including interest, penalties or other additions thereto: (a) income taxes imposed on (or measured by) its net income or franchise taxes imposed on (or measured by) its gross or net income by the country in which the applicable Borrower (or the Administrative Agent) is legally organized or any political subdivision thereof, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, in each case including any political subdivision thereof (provided that no Foreign Lender shall be deemed to be located in any country solely as a result of taking any action under this Agreement), (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (a) above, (c) any withholding tax that is attributable to a Lender’s failure to comply with Section 2.18(f), (d) in the case of a Lender (other than an assignee pursuant to a request by the U.S. Borrower under Section 2.20(b) or by operation of the CAM), any withholding tax imposed by the Country in which the applicable Borrower (or the Administrative Agent) is legally organized or any political subdivision thereof that is in effect and would apply to amounts payable by such Borrower (or the Administrative Agent) from an office   33 -------------------------------------------------------------------------------- within such jurisdiction to the applicable Lending Office of such Lender at the time such Lender becomes a party to this Agreement (or designates a new Lending Office) provided that if a Lender is required to complete an application for a reduced withholding tax rate under an applicable income tax treaty with the United Kingdom in order to receive the benefit of such reduced withholding tax rate and such Lender completes such application as soon as practicable following the Closing Date, the rate of withholding in effect on the date on which such application is approved shall be deemed to be the rate in effect on the date on which such Lender becomes a party to this Agreement, (e) in the case of a European Tranche Lender (other than an assignee pursuant to a request by the U.S. Borrower under Section 2.20(b) or by operation of the CAM), any tax on income of the Lender levied by Germany solely as a result of any real property serving as collateral under this Agreement, except, in the case of clauses (d) and (e) above, to the extent that (i) 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 2.18(a) or (ii) such withholding tax shall have resulted from the making of any payment to a location other than the office designated by the Administrative Agent or such Lender for the receipt of payments of the applicable type. “Exemption Regulation” shall mean the Exemption Regulation (Vrijstellingsregeling) dated 26 June 2002 of the Ministry of Finance of The Netherlands (as amended from time to time), as promulgated in connection with the Dutch Banking Act. “Existing 2004 Borden Floating Rate Notes” shall mean $150.0 million aggregate principal amount of Borden U.S. Finance Corp/Borden Nova Scotia Finance, ULC Second-Priority Senior Secured Floating Rate Notes due 2010 issued under the Indenture dated as of August 12, 2004, by and among Hexion U.S. Finance Corp., each of the guarantors party thereto, Hexion Nova Scotia Finance, ULC and Wilmington Trust Company, as Trustee. “Existing 2005 Borden Floating Rate Notes” shall mean $150.0 million aggregate principal amount of Borden U.S. Finance Corp/Borden Nova Scotia Finance, ULC Second-Priority Senior Secured Floating Rate Notes due 2010 issued under the Indenture dated as of May 20, 2005, by and among Hexion U.S. Finance Corp., each of the guarantors party thereto, Hexion Nova Scotia Finance, ULC and Wilmington Trust Company, as Trustee. “Existing Borden Fixed Rate Notes” shall mean $325.0 million aggregate principal amount of Borden U.S. Finance Corp/Borden Nova Scotia Finance, ULC Second-Priority Senior Secured 9% Notes due 2014. “Existing Borden Floating Rate Notes” shall mean the Existing 2004 Borden Floating Rate Notes and the Existing 2005 Borden Floating Rate Notes. “Existing Borden Floating Rate Notes Redemption” shall mean, following the consummation of the Debt Tender Offer with respect to the Existing Borden Floating Rate Notes, the repurchase, satisfaction and discharge and/or defeasance of all remaining Existing   34 -------------------------------------------------------------------------------- Borden Floating Rate Notes in accordance with the terms of the indenture governing the Existing Borden Floating Rate Notes. “Existing Borden Second Secured Notes” shall mean the Existing Borden Floating Rate Notes and the Existing Borden Fixed Rate Notes. “Existing Notes” shall mean (a) the Existing Borden Second Secured Notes, (b) the Debentures and (c) the Industrial Revenue Bonds, in each case outstanding on the Closing Date. “Existing Notes Documents” shall mean the indentures under which the Existing Notes are issued and all other instruments, agreements and other documents evidencing or governing the Existing Notes or providing for any security, guarantee or other right in respect thereof. “Existing Notes Issuer” means any subsidiary of the U.S. Borrower that is an issuer or co-issuer of any of the Existing Notes. “Existing Borden Second Secured Notes Documents” shall mean the indentures under which the Existing Borden Second Secured Notes are issued and all other instruments, agreements and other documents evidencing or governing the Existing Borden Second Secured Notes or providing for any security, guarantee or other right in respect thereof. “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 that 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. “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. “Flow Through Entity” means an entity that is treated as a partnership not taxable as a corporation, a grantor trust or a disregarded entity for U.S. federal income tax purposes or subject to treatment on a comparable basis for purposes of state, local or foreign tax law. “Foreign Borrowers” shall mean the Canadian Borrower, the Dutch Borrower, and the U.K. Borrowers. “Foreign Guarantee Agreement” shall mean the Foreign Guarantee Agreement, dated as of May 31, 2005, as amended, supplemented or otherwise modified from time to time, among the Foreign Subsidiary Loan Parties and the Administrative Agent that provides for a Guarantee by such Foreign Subsidiary Loan Parties of the Obligations of Foreign Subsidiary Loan Parties.   35 -------------------------------------------------------------------------------- “Foreign Lender” shall mean, as to any Loan Party, any Lender that is organized under the laws of a jurisdiction other than that in which such Loan Party is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. “Foreign Mortgages” shall mean the mortgages, debentures, hypothecs, deeds of trust, charges, assignments of leases and rents and other security documents delivered pursuant to Section 4.02 of the 2005 Credit Agreement or Section 5.10 with respect to Mortgaged Properties located outside the United States of America, each in form and substance reasonably satisfactory to the Administrative Agent. “Foreign Obligations” means the aggregate of (a) the Guaranteed Obligations (as defined in the Foreign Guarantee Agreement) of each of the Foreign Subsidiary Loan Parties and (b) the Guaranteed Obligations (as defined in the U.S. Guarantee Agreement) of each of the U.S. Borrower and the Domestic Subsidiary Loan Parties but only to the extent they guarantee the Guaranteed Obligations (as defined in the Foreign Guarantee Agreement) of any of the Foreign Subsidiary Loan Parties, each as they may exist from time to time, other than the Parallel Debt Foreign Obligations. “Foreign Pledge Agreement” shall mean a pledge or charge agreement with respect to the Pledged Collateral that constitutes Equity Interests of a Foreign Subsidiary that is a Material Subsidiary, in form and substance reasonably satisfactory to the Administrative Agent; provided that in no event shall more than 65% of the issued and outstanding voting Equity Interests of such Foreign Subsidiary be pledged to secure Obligations of the Domestic Loan Parties. “Foreign Security Documents” shall mean one or more security agreements, charges, mortgages or pledges with respect to Collateral (other than Collateral that is subject to a Foreign Mortgage) of a Foreign Subsidiary Loan Party (including, notwithstanding the foregoing exclusion of Collateral subject to Foreign Mortgages, the Quebec Documents), including the Canadian Security Documents, the U.K. Debentures, the Security Trust Deed, the Dutch Security Documents and the German Security Documents, each in form and substance reasonably satisfactory to the Administrative Agent, that secure the Obligations of any Foreign Subsidiary Loan Party. “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. “Foreign Subsidiary Loan Party” shall mean (a) each Foreign Borrower, (b) each Foreign Subsidiary that is set forth on Schedule 1.01(b), (c) each other Wholly-Owned Foreign Subsidiary organized under the laws of Canada, the United Kingdom, The Netherlands or Germany (other than the German Guarantor and its subsidiaries until the actions contemplated by Section 5.14 have been consummated) and (d) at the U.S. Borrower’s option, any other Foreign   36 -------------------------------------------------------------------------------- Subsidiary organized under the laws of any jurisdiction set forth on Schedule 1.01(e) that has satisfied the Collateral and Guarantee Requirement, completed all actions required by Sections 5.10(b) and (c) and delivered to the Administrative Agent a customary written opinion of legal counsel in the United States with respect to applicable United States legal issues and, if applicable, such foreign jurisdiction with respect to the guarantee and security interests granted by such Foreign Subsidiary. “Fund” shall mean Apollo Investment Fund IV, L.P., Apollo Investment Fund V, L.P. and Apollo Overseas Partners IV, L.P. “Fund Affiliate” shall mean (a) each Affiliate of the Fund that is neither a “portfolio company” (which means a company actively engaged in providing goods or services to unaffiliated customers) nor a company controlled by a “portfolio company” and (b) any individual who is a partner or employee of Apollo Management, L.P., Apollo Management IV, L.P. or Apollo Management V, L.P. “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; provided that any reference to the application of GAAP in Section 3.13(a), 3.13(b), 3.20, 5.03, 5.07 and 6.02(e) to a Foreign Subsidiary (and not as a consolidated Subsidiary of the U.S. Borrower) shall mean generally accepted accounting principles in effect from time to time in the jurisdiction of organization of such Foreign Subsidiary. “German Guarantor” shall mean Hexion Specialty Chemicals GmbH. “German Security” shall mean any security assumed and accepted by or through the Administrative Agent or any Secured Party, as the case may be, pursuant to any German Security Document and held or administered by the Administrative Agent on behalf of or in trust for the Secured Parties and any addition or replacement or substitution thereof. “German Security Documents” shall mean all Security Documents governed by German law and “German Security Document” means any of them. “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   37 -------------------------------------------------------------------------------- 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 (other than the Lien permitted pursuant to Section 6.02(hh)) securing any Indebtedness or other obligation (or any existing right, contingent or otherwise, of the holder of Indebtedness or other obligation 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 Closing 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 explosive or radioactive substances or petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls or radon gas, of any nature subject to regulation or which can give rise to liability under any Environmental Law. “Holdings” shall have the meaning assigned to such term in the preamble hereto. “Immaterial Subsidiary” shall mean any Subsidiary (i) designated by the U.S. Borrower, (ii) that did not, as of the last day of the fiscal quarter of the U.S. Borrower most recently ended, have assets with a value in excess of 5.0% of the Consolidated Total Assets or revenues representing in excess of 5.0% of total revenues of the U.S. Borrower and the Subsidiaries on a consolidated basis as of such date and (iii) that taken together with all Unrestricted Subsidiaries designated pursuant to clause (ii) of the definition thereof and all other Immaterial Subsidiaries as of the last day of the fiscal quarter of the U.S. Borrower most recently ended, did not have assets with a value in excess of 10.0% of the Consolidated Total Assets or revenues representing in excess of 10.0% of total revenues of the U.S. Borrower and the Subsidiaries on a consolidated basis as of such date. Each Subsidiary to be designated as an Immaterial Subsidiary by the U.S. Borrower hereunder shall be set forth on Schedule 1.01(f), and the U.S. Borrower may update such Schedule from time to time after the Closing Date as necessary to reflect all Immaterial Subsidiaries at such time (the selection of Subsidiaries to be added to or removed from such Schedule to be made as the U.S. Borrower may determine). “Increased Amount Date” shall have the meaning assigned to such term in Section 2.21. “Incremental Amount” shall mean, at any time, the excess, if any, of (a) $200.0 million over (b) the aggregate amount of all Incremental Term Loan Commitments and Incremental Revolving Facility Commitments established prior to such time pursuant to Section 2.21.   38 -------------------------------------------------------------------------------- “Incremental Assumption Agreement” shall mean an Incremental Assumption Agreement in form and substance reasonably satisfactory to the Administrative Agent, among the U.S. Borrower and/or the Dutch Borrower, the Administrative Agent and one or more Incremental Term Lenders and/or Incremental Revolving Facility Lenders. “Incremental Revolving Facility Commitment” shall mean the commitment of any Lender, established pursuant to Section 2.21, to make Incremental Revolving Facility Loans to the U.S. Borrower or the Dutch Borrower. “Incremental Revolving Facility Lender” shall mean a Lender with an Incremental Revolving Facility Commitment or an outstanding Incremental Revolving Facility Loan. “Incremental Revolving Facility Loans” shall mean Revolving Facility Loans made by one or more Lenders to the U.S. Borrower or the Dutch Borrower pursuant to Section 2.01(e). Incremental Revolving Facility Loans may be made in the form of additional Revolving Facility Loans or, to the extent permitted by Section 2.21 and provided for in the relevant Incremental Assumption Agreement, Other Revolving Facility Loans. “Incremental Term Lender” shall mean a Lender with an Incremental Term Loan Commitment or an outstanding Incremental Term Loan. “Incremental Term Loan Commitment” shall mean the commitment of any Lender, established pursuant to Section 2.21, to make Incremental Term Loans to the U.S. Borrower or the Dutch Borrower. “Incremental Term Loans” shall mean Term Loans made by one or more Lenders to the U.S. Borrower or the Dutch Borrower pursuant to Section 2.01(e). Incremental Term Loans may be made in the form of additional Tranche C-1 Term Loans, Tranche C-2 Term Loans or Tranche C-4 Term Loans or, to the extent permitted by Section 2.21 and provided for in the relevant Incremental Term Loan Assumption Agreement, Other Term Loans. “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 Guarantees by such person of Indebtedness of others, (f) all Capital Lease Obligations of such person, (g) 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, (h) the principal component of all obligations, contingent or otherwise, of such person as an account party in respect of letters of credit (including Tranche C-3 Letters of Credit), (i) the principal component of all obligations of such person in respect of bankers’ acceptances and (j) the amount of all obligations of such person with respect to the redemption, repayment or   39 -------------------------------------------------------------------------------- other repurchase of any Disqualified Stock (excluding accrued dividends that have not increased the liquidation preference of such Disqualified Stock); provided, that Indebtedness shall not include (A) trade payables, accrued expenses and intercompany liabilities arising in the ordinary course of business (other than, in the case of such intercompany liabilities, for purposes of clause (d) of the definition of the term “Collateral and Guarantee Requirement”), (B) prepaid or deferred revenue arising in the ordinary course of business, (C) purchase price holdbacks arising in the ordinary course of business in respect of a portion of the purchase price of an asset to satisfy unperformed obligations of the seller of such asset or (D) earn-out obligations until such obligations become a liability on the balance sheet of such person in accordance with GAAP. 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. For the avoidance of doubt, except as provided in clause (h) above, the Tranche C-3 Credit-Linked Deposits shall not constitute Indebtedness. “Indemnified Taxes” shall mean all Taxes other than Excluded Taxes and Other Taxes. “Indemnitee” shall have the meaning assigned to such term in Section 9.05(b). “Indenture Restricted Subsidiary” shall mean a “Restricted Subsidiary” under and as defined in either of the Debenture Indentures. “Industrial Revenue Bonds” shall mean the Parish of Ascension, Louisiana, Industrial Revenue Bonds guaranteed by the U.S. Borrower outstanding on the Closing Date. “Ineligible Institution” shall mean the persons identified in writing to the Administrative Agent by the U.S. Borrower on the Closing Date , and as may be identified in writing to the Administrative Agent by the U.S. Borrower from time to time thereafter, with the written consent of the Administrative Agent, by delivery of a notice thereof to the Administrative Agent setting forth such person or persons (or the person or persons previously identified to Agent that are to be no longer considered “Ineligible Institutions”). “Information Memorandum” shall mean the Confidential Information Memorandum dated October 17, 2006, as modified or supplemented prior to the Amendment Effective Date. “Intercreditor Agreement” shall mean (a) the New Second Lien Intercreditor Agreement and (b) any additional or replacement intercreditor agreement entered into by the Administrative Agent pursuant to Section 8.11, each as amended, modified or supplemented from time to time in accordance with this Agreement. “Interest Election Request” shall mean a request by the applicable Borrower to convert or continue a Term Borrowing or Revolving Borrowing in accordance with Section 2.08. “Interest Expense” shall mean, with respect to any person for any period, the sum of, without duplication, (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   40 -------------------------------------------------------------------------------- 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) net payments and receipts (if any) pursuant to interest rate hedging obligations, and excluding amortization of deferred financing fees and expensing of any bridge or other financing fees, (b) capitalized interest of such person, whether paid or accrued, and (c) commissions, discounts, yield and other fees and charges incurred for such period in connection with any receivables financing of such person or any of its subsidiaries that are payable to persons other than Holdings (prior to a Qualified IPO), the U.S. Borrower and the Subsidiaries. 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 the U.S. Borrower 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 (other than a Swingline Loan) or Base Rate Loan, the first day of each calendar quarter (being the first day of January, April, July and October of each year) and (c) with respect to any Swingline Loan, the day that such Swingline Loan is required to be repaid pursuant to Section 2.10(a). “Interest Period” shall mean (a) 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 applicable Borrower may elect, or the date any Eurocurrency Borrowing is converted to an ABR Borrowing in accordance with Section 2.08 or repaid or prepaid in accordance with Section 2.10, 2.11 or 2.12 and (b) as to any Swingline Borrowing made by the Dutch Borrower or the U.K. Borrower, the period commencing on the date of such Borrowing and ending on the day that is designated in the notice delivered pursuant to Section 2.04 with respect to such Swingline Borrowing, which shall not be later than the first date after such Swingline Loan is to be 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, in the case of each of clause (a) and clause (b), 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. “Investment” shall have the meaning set forth in Section 6.04.   41 -------------------------------------------------------------------------------- “Issuing Bank” shall mean (a) with respect to each of the European Tranche, the Canadian Tranche and Tranche C-3, each Issuing Bank set forth with respect to such Tranche on Schedule 2.05 and each other Issuing Bank designated with respect to such Tranche 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) and (b) with respect to each Original Letter of Credit, the person that issued such Original Letter of Credit and any successor to such person. 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 2.13(b). “Joint Lead Arrangers” shall have the meaning assigned to such term in the preamble hereto. “L/C Disbursement” shall mean a payment or disbursement made by an Issuing Bank pursuant to a Letter of Credit. The amount of any L/C Disbursement made by an Issuing Bank in an Alternative Currency and not reimbursed by the applicable Borrower shall be determined as set forth in paragraph (e) or (m) of Section 2.05, as applicable. “L/C Exposure” shall mean, at any time, the sum, without duplication, of the Revolving L/C Exposure and the Tranche C-3 L/C Exposure at such time. “L/C Participation Fee” shall have the meaning assigned such term in Section 2.13(b). “Lender” shall mean each financial institution listed on Schedule 2.01, the persons listed on Schedule 1 to the Amendment Agreement, the persons listed on Schedule 1 to the May 2006 Amendment Agreement as well as any person that becomes a “Lender” hereunder pursuant to Section 9.04 or Section 2.21. “Lender Default” shall mean (a) the refusal (which has not been retracted) of a Lender to make available its portion of any Borrowing or Tranche C-3 Credit-Linked Deposit, 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 (b) a Lender having notified in writing the U.S. Borrower and/or the Administrative Agent that it does not intend to comply with its obligations under Section 2.04, 2.05, 2.06 or 2.07. “Lending Office” shall mean, as to any Lender, the applicable branch, office or Affiliate of such Lender designated by such Lender to make Loans to the U.S. Borrower, Canadian Borrower, U.K. Borrower, or Dutch Borrower, as the case may be. “Letter of Credit” shall mean any letter of credit issued pursuant to Section 2.05 of this Agreement, including each Original Letter of Credit. “LIBO Rate” shall mean, with respect to any Eurocurrency Borrowing denominated in U.S. Dollars or Sterling for any Interest Period, the rate per annum determined   42 -------------------------------------------------------------------------------- by the Administrative Agent at approximately 11:00 a.m., London time, on the date that is two Business Days prior to the commencement of such Interest Period (or on the date of the commencement of such Interest Period if such Eurocurrency Borrowing is denominated in Sterling) by reference to the British Bankers’ Association Interest Settlement Rates for deposits in the currency of such Eurocurrency Borrowing (as set forth by any service selected by the Administrative Agent that has been nominated by the British Bankers’ Association as an authorized information vendor for the purpose of displaying such rates) with a maturity comparable 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 interest rate per annum determined by the Administrative Agent to be the average of the rates per annum at which deposits in the currency of such Eurocurrency Borrowing are offered for a maturity comparable to such relevant Interest Period to major banks in the London interbank market in London, England, as selected by the Administrative Agent at approximately 11:00 a.m. (London time) on the date that is two Business Days prior to the beginning of such Interest Period (or on the date of the commencement of such Interest Period if such Eurocurrency Borrowing is denominated in Sterling). “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; provided that in no event shall an operating lease or an agreement to sell be deemed to constitute a Lien. “Loan Documents” shall mean this Agreement, the Amendment Agreement, the Letters of Credit, the Security Documents and any promissory note issued under Section 2.10(e), and solely for the purposes of Section 7.01(c) hereof, the Fee Letter dated October 11, 2006, by and among the U.S. Borrower, the Administrative Agent and the Joint Lead Arrangers. “Loan Parties” shall mean Holdings (prior to a Qualified IPO), the U.S. Borrower and the Subsidiary Loan Parties. “Loans” shall mean the Term Loans, the Revolving Facility Loans and the Swingline Loans (and shall include any Loans under the Incremental Revolving Facility Commitments or Incremental Term Loan Commitments). “Local Time” shall mean (a) with respect to a Loan or Borrowing made to the U.S. Borrower, New York City time, (b) with respect to a Loan or Borrowing made to the Dutch Borrower or a U.K. Borrower, London time, and (c) with respect to a Loan or Borrowing made to the Canadian Borrower or a B/A, Toronto time. “Majority Lenders” of any Tranche shall mean, at any time, Lenders under such Tranche having Loans and unused Commitments representing more than 50% of the sum of all Loans outstanding under such Tranche and unused Commitments under such Tranche at such time.   43 -------------------------------------------------------------------------------- “Management Group” means the group consisting of the directors, executive officers and other management personnel of the U.S. Borrower and Holdings, as the case may be, on the Closing Date together with (a) any new directors of the U.S. Borrower or (prior to a Qualified IPO) Holdings whose election by such Boards of Directors or whose nomination for election by the shareholders of the U.S. Borrower or (prior to a Qualified IPO) Holdings, as the case may be, was approved by a vote of a majority of the directors of the U.S. Borrower or (prior to a Qualified IPO) Holdings, as the case may be, then still in office who were either directors on the Closing Date or whose election or nomination was previously so approved and (b) executive officers and other management personnel of the U.S. Borrower or (prior to a Qualified IPO) Holdings, as the case may be, hired at a time when the directors on the Closing Date together with the directors so approved constituted a majority of the directors of the U.S. Borrower or Holdings, as the case may be. “Margin Stock” shall have the meaning assigned to such term in Regulation U. “Material Adverse Effect” shall mean a material adverse effect on (a) the business, property, operations or condition of the U.S. Borrower and the Subsidiaries, taken as a whole, or (b) the validity or enforceability of any material Loan Document or the rights and remedies of the Administrative Agent and the Lenders thereunder. “Material Indebtedness” shall mean Indebtedness (other than Loans and Letters of Credit) of any one or more of Holdings (prior to a Qualified IPO), the U.S. Borrower or any Subsidiary in an aggregate principal amount exceeding $50.0 million, excluding the Industrial Revenue Bonds and Guarantees thereof. “Material Subsidiary” shall mean any Subsidiary other than Immaterial Subsidiaries. “Maximum Rate” shall have the meaning assigned to such term in Section 9.09. “May 2006 Amendment Agreement” shall mean the Amendment and Restatement Agreement dated as of May 5, 2006 among Holdings, the Borrowers, the Required Restatement Lenders (as defined therein) and JPMorgan Chase Bank, N.A., as administrative agent, pursuant to which the 2005 Credit Agreement was amended and restated. “May 2006 Amendment Effective Date” shall mean May 5, 2006. “May 2006 Credit Agreement” shall mean the Amended and Restated Credit Agreement dated as of May 5, 2006 among Holdings, the Borrowers, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Credit Suisse, as syndication agent, and Citicorp North America, Inc., as documentation agent. “May 2006 Debt Repurchase and Redemption” shall mean the repurchase or redemption, as applicable, by the U.S. Borrower of all outstanding RPP 8% Notes, RPP 9-1/2% Notes and Subordinated Notes and the payment of premiums, accrued interest and fees in connection therewith.   44 -------------------------------------------------------------------------------- “May 2006 Transactions” shall mean, collectively, (a) the consummation of the May 2006 Debt Repurchase and Redemption, (b) the PIK Preferred Stock Redemption, (d) the repayment of all term loans outstanding, and the return of all credit-linked deposits remaining, in each case under the 2005 Credit Agreement on the May 2006 Amendment Effective Date, (e) the entering into of the Loan Documents (as defined in the May 2006 Credit Agreement) and the incurrence of all Loans (as defined in the May 2006 Credit Agreement) under the May 2006 Credit Agreement on the May 2006 Amendment Effective Date and (f) the payment of all fees and expenses in connection therewith to be paid on, prior to or subsequent to the May 2006 Amendment Effective Date. “Moody’s” shall mean Moody’s Investors Service, Inc. “Mortgaged Properties” shall mean the owned real properties of the Loan Parties set forth on Schedule 1.01(c) and each additional real property encumbered by a Mortgage pursuant to Section 5.10. “Mortgages” shall mean the mortgages, debentures, hypothecs, deeds of trust, deeds to secure debt, assignments of leases and rents, and other security documents delivered pursuant to Section 4.02 of the 2005 Credit Agreement or Section 5.10, as amended, supplemented or otherwise modified from time to time, with respect to Mortgaged Properties, each in form and substance reasonably satisfactory to the Administrative Agent. “Multiemployer Plan” shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA to which Holdings (prior to a Qualified IPO), the U.S. Borrower or any Subsidiary or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding six plan years made or accrued an obligation to make contributions. “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 the U.S. Borrower or any Subsidiary Loan Party (or, in the case of any sale, transfer or other disposition of Principal Property, any other Subsidiary) (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 the U.S. Borrower or any Subsidiary Loan Party (other than those pursuant to Section 6.05(a), (b), (c), (e), (f), (g), (i) or (j)), 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   45 -------------------------------------------------------------------------------- (other than pursuant hereto (or pursuant to the Existing Notes, any Indebtedness secured by Second-Priority Liens or Permitted Refinancing Indebtedness in respect of any thereof)), 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 the U.S. Borrower shall deliver a certificate of a Responsible Officer of the U.S. Borrower to the Administrative Agent promptly following receipt of any such proceeds setting forth the U.S. Borrower’s intention to use, or to commit to use, any portion of such proceeds, to acquire, maintain, develop, construct, improve, upgrade or repair assets useful in the business of the U.S. Borrower and the Subsidiaries or to make investments in Permitted Business Acquisitions or Investments permitted by Section 6.04, in each case within twelve months of such receipt, such portion of such proceeds shall not constitute Net Proceeds except to the extent (A) not so used (or committed to be used) within such twelve-month period or (B) if committed to be used within such twelve-month period, not so used within 18 months of such receipt); 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 $5.0 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 $15.0 million; and (b) 100% of the cash proceeds from the incurrence, issuance or sale by the U.S. Borrower or any Subsidiary Loan Party 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 U.S. Borrower or any Affiliate of either of them shall be disregarded, except for financial advisory fees customary in type and amount paid to Affiliates of the Fund. “New Notes Issuer” means any subsidiary of the U.S. Borrower that is an issuer or co-issuer of any of the New Second Secured Notes. “New Second Lien Intercreditor Agreement” shall mean the Intercreditor Agreement dated as of November 3, 2006, among the U.S. Borrower, Wilmington Trust Company, as Trustee for the New Second Secured Notes, the Administrative Agent, Holdings and the Domestic Subsidiary Loan Parties. “New Second Secured Notes” shall mean (a) $200 million aggregate principal amount of Hexion U.S. Finance Corp./Hexion Nova Scotia Finance, ULC Second-Priority Senior Secured Floating Rate Notes due 2014 and (b) $625 million aggregate principal amount of Hexion U.S. Finance Corp./Hexion Nova Scotia Finance, ULC Second-Priority Senior Secured 9 3/4% Notes due 2014. “New Second Secured Notes Documents” shall mean the indentures under which the New Second Secured Notes are issued and all other instruments, agreements and other   46 -------------------------------------------------------------------------------- documents evidencing or governing the New Second Secured Notes or providing for any security, guarantee or other right in respect thereof. “New Second Secured Notes Offering Memorandum” shall mean the Offering Circular, dated October 27, 2006, in respect of the New Second Secured Notes. “Non-Consenting Lender” shall have the meaning assigned to such term in Section 2.20(c). “Note” shall have the meaning assigned to such term in Section 2.10(e). “Notice Date” shall mean any date on which (a) tenders are accepted for payment pursuant to the Debt Tender Offer or (b) an irrevocable notice of redemption is delivered in respect of Existing 2004 Borden Floating Rate Notes or Existing 2005 Borden Floating Rate Notes, as applicable. “Obligations” shall, unless otherwise indicated, have the meaning assigned to the term “Loan Document Obligations” in the Collateral Agreement. “Original Letters of Credit” shall mean each letter of credit previously issued for the account of, or guaranteed by, the Borrowers or RSM pursuant to the 2005 Credit Agreement or the May 2006 Credit Agreement that is outstanding on the Amendment Effective Date. “Other Revolving Facility Loans” shall have the meaning assigned to such term in Section 2.21(a). “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. “Other Term Loans” shall have the meaning assigned to such term in Section 2.21. “Overdraft Line” shall have the meaning assigned to such term in Section 6.01(v). “Parallel Debt Dutch Term Loan Obligations” shall mean the Parallel Debt Foreign Obligations to the extent consisting of amounts equal to the aggregate amount payable pursuant to the Dutch Term Loan Obligations as they may exist from time to time. “Parallel Debt Foreign Obligations” shall have the meaning assigned to such term in Section 9.20. “Parallel Debt U.S. Obligations” shall have the meaning assigned to such term in Section 9.20. “Participant” shall have the meaning assigned to such term in Section 9.04(c).   47 -------------------------------------------------------------------------------- “PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions. “Perfection Certificates” shall mean the Perfection Certificate with respect to each of the U.S. Borrower, the Canadian Borrower, the Dutch Borrower and the U.K. Borrowers, in a form reasonably satisfactory to the Administrative Agent. “Permitted Business Acquisition” shall mean any acquisition, directly or indirectly (including in one transaction or a series of related transactions), of all or substantially all the assets of, or all the Equity Interests (other than directors’ qualifying shares) in, or merger or consolidation with, a person or division or line of business of a person (or any subsequent investment made in a person, division or line of business previously acquired in a Permitted Business Acquisition) if (a) such acquisition was not preceded by, or effected pursuant to, a hostile offer by the acquirer or an Affiliate of the acquirer 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; (iii) with respect to any such acquisition with a fair market value in excess of $25 million, the U.S. Borrower and the Subsidiaries shall be in Pro Forma Compliance after giving effect to such acquisition and the U.S. Borrower shall have delivered to the Administrative Agent a certificate of a Responsible Officer of the U.S. Borrower to such effect, together with all relevant financial information for such Subsidiary or assets, (iv) any acquired or newly formed Subsidiary shall not be liable for any Indebtedness (except for Indebtedness permitted by Section 6.01); (v) to the extent required by Section 5.10, any person acquired in such acquisition, if acquired by the U.S. Borrower or a Subsidiary Loan Party, shall be merged into the U.S. Borrower or a Subsidiary Loan Party or become upon consummation of such acquisition a Subsidiary Loan Party, and (vi) the aggregate amount of such acquisitions of assets that are not (or do not become) owned by the U.S. Borrower or a Subsidiary Loan Party or in Equity Interests in Persons that do not become Loan Parties upon consummation of such acquisition shall not exceed the greater of (x) 3.0% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such acquisition for which financial statements have been delivered pursuant to Section 5.04 and (y) $100.0 million. “Permitted Cure Security” shall mean an equity security of Holdings (prior to a Qualified IPO) or the U.S. Borrower (after a Qualified IPO) having no mandatory redemption, repurchase or similar requirements prior to 91 days after the latest to mature of any Tranche, Other Term Loan, if any, and Other Revolving Facility Loan, if any (without regard to the proviso to the definition of “Term Facility Maturity Date” or “Revolving Facility Maturity Date” or any similar qualification to the maturity date of any such Other Term Loan or Other Revolving Facility Loan), and upon which all dividends or distributions (if any) shall, prior to 91 days after the latest to mature of any Tranche, Other Term Loan, if any, and Other Revolving Facility Loan, if any (without regard to the proviso to the definition of “Term Facility Maturity Date” or “Revolving Facility Maturity Date” or any similar qualification to the maturity date of any such Other Term Loan or Other Revolving Facility Loan), be payable solely in additional shares of such equity security.   48 -------------------------------------------------------------------------------- “Permitted Holder” shall mean each of (a) the Fund and the Fund Affiliates and (b) the Management Group, with respect to not more than 10% of the total voting power of the Equity Interests of Holdings (prior to a Qualified IPO) or the U.S. Borrower. “Permitted Investments” shall mean: (1) U.S. dollars, pounds sterling, euros, or, in the case of any Foreign Subsidiary, such local currencies held by it from time to time in the ordinary course of business; (2) securities issued or directly and fully guaranteed or insured by the government of, or any agency or instrumentality thereof, the United States of America, Australia, Great Britain, Canada, the Netherlands or any other member state of the European Union, in each case with maturities not exceeding two years (or, in the case of any such U.S. securities held by Brazilian subsidiaries, five years) after the date of acquisition; (3) in the case of any Foreign Subsidiary, securities issued or directly and fully guaranteed or insured by the government of, or any agency or instrumentality thereof, Malaysia or Brazil, in each case with maturities not exceeding 270 days after the date of acquisition and held by it from time to time in the ordinary course of business; (4) certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances, in each case with maturities not exceeding one year and overnight bank deposits and demand deposits (in their respective local currencies), in each case with any commercial bank having capital and surplus in excess of $500.0 million or the foreign currency equivalent thereof and whose long-term debt is rated “A” or the equivalent thereof by Moody’s or S&P (or, in the case of an obligor domiciled outside of the United States, reasonably equivalent ratings of another internationally recognized credit rating agency); (5) repurchase obligations for underlying securities of the types described in clauses (2) and (4) above entered into with any financial institution meeting the qualifications specified in clause (4) above; (6) commercial paper issued by a corporation (other than an Affiliate of U.S. Borrower) rated at least “A-1” or the equivalent thereof by Moody’s or S&P (or, in the case of an obligor domiciled outside of the United States, reasonably equivalent ratings of another internationally recognized credit rating agency) and in each case maturing within one year after the date of acquisition; (7) readily marketable direct obligations issued by any state of the United States of America or any political subdivision thereof having one of the two highest rating categories obtainable from either Moody’s or S&P in each case with maturities not exceeding two years from the date of acquisition; (8) Indebtedness issued by persons (other than the Fund or any of its Affiliates) with a rating of “A” or higher from S&P or “A-2” or higher from Moody’s (or, in the case of an obligor domiciled outside of the United States, reasonably equivalent ratings of   49 -------------------------------------------------------------------------------- another internationally recognized credit rating agency) in each case with maturities not exceeding two years from the date of acquisition; and (9) investment funds investing at least 95% of their assets in securities of the types described in clauses (1) through (8) above. “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 and underwriting discounts, fees, commissions and expenses), (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 obligors that are not Loan Parties hereunder, 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 that are not Loan Parties 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 (including any intercreditor agreement) governing the Indebtedness being Refinanced; provided that the New Second Secured Notes or the Existing Borden Second Secured Notes or any Permitted Refinancing Indebtedness in respect thereof (or any portion thereof) may be Refinanced with Indebtedness that is secured by Liens that are senior in priority to the Liens securing the New Second Secured Notes or the Existing Borden Second Secured Notes on the Amendment Effective Date (or any remaining portion thereof), so long as the Liens securing such Indebtedness are subject to intercreditor terms that, vis-à-vis the Loans, are no less favorable to the Lenders than those set forth in the New Second Lien Intercreditor Agreement; provided, further, that any Lien on the Collateral securing Permitted Refinancing Indebtedness incurred under Section 6.01(b) shall be a Second-Priority Lien. “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. “PIK Preferred Stock” shall mean the Series A Floating Rate PIK Preferred Stock issued by the U.S. Borrower on May 20, 2005.   50 -------------------------------------------------------------------------------- “PIK Preferred Stock Documents” shall mean the certificate of designation governing the PIK Preferred Stock and all other instruments, agreements and other documents evidencing or governing the PIK Preferred Stock. “PIK Preferred Stock Redemption” shall mean the redemption of all issued and outstanding PIK Preferred Stock in accordance with the terms of the PIK Preferred Stock Documents. “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 and in respect of which Holdings (prior to a Qualified IPO), the U.S. Borrower, any Subsidiary or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA. “Platform” shall have the meaning assigned to such term in Section 9.18(b). “Pledged Collateral” shall have the meaning assigned to such term in the Collateral Agreement or a Foreign Pledge Agreement, as applicable. “PMP” shall (i) until the enactment of the AFS, which is expected to take place on January 1, 2007, mean a professional market party (professionele marktpartij) within the meaning of the Exemption Regulation and the Policy Guidelines the current reading of which is set out in Schedule 9.22 part I and (ii) after the enactment of the AFS mean a professional market party (professionele marktpartij) within the meaning of the AFS and any regulation promulgated thereunder, the current reading of which is set out in Schedule 9.22 part II, and as amended from time to time. “Policy Guidelines” shall mean the 2005 Dutch Central Bank’s Policy Guidelines (issued in relation to the Exemption Regulation) dated 29 December 2004 (Beleidsregel 2005 kernbegrippen markttoetreding en handhaving Wtk 1992) as amended from time to time. “Presumed Tax Rate” shall mean the highest effective marginal statutory combined U.S. federal, state and local income tax rate prescribed for an individual residing in New York City (taking into account (a) the deductibility of state and local income taxes for U.S. federal income tax purposes, assuming the limitation of Section 68(a)(2) of the Code applies and taking into account any impact of Section 68(f) of the Code, and (b) the character (long-term or short-term capital gain, dividend income or other ordinary income) of the applicable income). “primary obligor” shall have the meaning assigned to such term in the definition of the term “Guarantee.” “Principal Property” shall have the meaning assigned to such term in the Debenture Indentures. “Pro Forma Basis” shall mean, as to any person, for any events as described 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   51 -------------------------------------------------------------------------------- occurred on the first day of the four consecutive fiscal quarter period ended on or before the occurrence of such event (the “Reference Period”); provided for purposes of determining adjustments permitted by the second paragraph of this definition for any calculation made on a Pro Forma Basis for any period ending on or prior to June 30, 2007, the 2005 Transactions shall be deemed to have occurred subsequent to the commencement of the relevant four consecutive fiscal quarter period: (i) in making any determination of EBITDA, effect shall be given to any Asset Disposition, any acquisition (or any similar transaction or transactions not otherwise permitted under Section 6.04 or 6.05 that require a waiver or consent of the Required Lenders and such waiver or consent has been obtained), any dividend, distribution or other similar payment, any designation of any Subsidiary as an Unrestricted Subsidiary and any Subsidiary Redesignation, any mergers and consolidations, and any restructurings of the business of the U.S. Borrower or any of the Subsidiaries that are expected to have a continuing impact and are factually supportable, which would include cost savings resulting from head count reduction, closure of facilities and similar operational and other cost savings, which adjustments the U.S. Borrower determines are reasonable (the foregoing, together with any transactions related thereto or in connection therewith, the “relevant transactions” or “relevant pro forma event”), in each case that the U.S. Borrower or any of the Subsidiaries has made during the Reference Period (or, in the case of determinations made pursuant to the definition of the term “Permitted Business Acquisition,” or pursuant to Section 2.12(b), Section 6.01(w), Section 6.02(v) or Section 6.06(f), occurring during the Reference Period or thereafter and through and including the date upon which the respective Permitted Business Acquisition or incurrence of Indebtedness or Liens or Dividend is consummated), (ii) in making any determination on a Pro Forma Basis, (x) all Indebtedness (including Indebtedness issued, incurred or assumed as a result of, or to finance, any relevant transactions 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 not to finance any acquisition) issued, incurred, assumed or permanently repaid during the Reference Period (or, in the case of determinations made pursuant to the definition of the term “Permitted Business Acquisition,” or pursuant to Section 2.12(b), Section 6.01(w), Section 6.02(v) or Section 6.06(f), occurring during the Reference Period or thereafter and through and including the date upon which the respective Permitted Business Acquisition or incurrence of Indebtedness or Liens or Dividend is consummated) shall be deemed to have been issued, incurred, assumed or permanently 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 and (iii) with respect to (A) any Subsidiary Redesignation then being designated, effect shall be given to such Subsidiary Redesignation and all other Subsidiary Redesignations after the first day of the relevant Reference Period and on or prior to the date of the respective Subsidiary Redesignation then being designated, collectively, and (B) any designation of a Subsidiary as an Unrestricted Subsidiary, effect shall be given to such designation and all other designations of Subsidiaries as Unrestricted Subsidiaries after the first day of the relevant Reference Period and on or prior to the date of the then applicable designation of a Subsidiary as an Unrestricted Subsidiary, collectively. 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 the U.S. Borrower.   52 -------------------------------------------------------------------------------- Notwithstanding anything to the contrary in the first paragraph of this definition, any such pro forma calculation, for any fiscal period ending on or prior to the 24-month anniversary of the end of the fiscal quarter in which such relevant pro forma event occurs, may include adjustments appropriate, in the reasonable good faith determination of the U.S. Borrower, to reflect (1) operating expense reductions and other operating improvements or synergies reasonably expected to result from the relevant pro forma event (including, to the extent applicable, from the 2005 Transactions) and (2) all adjustments of the type used in connection with the calculation of “Pro Forma Adjusted EBITDA” as set forth under “Covenant Compliance” in the “Summary Historical and Pro Forma Financial and Other Data” portion of the “Offering Circular Summary” in the New Second Secured Notes Offering Memorandum to the extent reasonably expected to result from the relevant pro forma event, in each case in the 24-month period following the end of the Reference Period in which the applicable pro forma event occurred. The U.S. Borrower shall deliver to the Administrative Agent a certificate of a Financial Officer of the U.S. Borrower setting forth such demonstrable or additional operating expense reductions, other operating improvements or synergies and adjustments and information and calculations supporting them in reasonable detail. “Pro Forma Compliance” shall mean, at any date of determination, that the U.S. Borrower and its Subsidiaries shall be in compliance, on a Pro Forma Basis after giving effect on a Pro Forma Basis to the relevant transactions (including the assumption, the issuance, incurrence and permanent repayment of Indebtedness), with the covenant set forth in Section 6.11 recomputed as at the last day of the most recently ended fiscal quarter of the U.S. Borrower and its Subsidiaries for which the financial statements required pursuant to Section 5.04 have been delivered. “Projections” shall mean the projections of the U.S. Borrower 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 U.S. Borrower or any of the Subsidiaries prior to the Closing Date. “Qualified IPO” shall mean an underwritten public offering of the Equity Interests of the U.S. Borrower that generates gross cash proceeds of at least $250.0 million, provided that for purposes of Section 7.15(e) of the Collateral Agreement, “Qualified IPO” shall mean any underwritten initial public offering of Equity Interests of the U.S. Borrower. “Quebec Documents” shall mean (a) a Deed of Hypothec given by the Canadian Borrower in favor of the Administrative Agent, as the person holding the power of attorney (fondé de pouvoir) of the Lenders, (b) a Bond in the principal amount of C$1,200,000,000 issued by the Canadian Borrower in favor of the Administrative Agent, as agent, custodian and depository, and (c) the Bond Pledge Agreement entered into by the Canadian Borrower in favor of the Administrative Agent for the benefit of the Pledgees (as defined therein) in respect of such Bond. “Rate” shall have the meaning assigned to such term in the definition of the term “Type.”   53 -------------------------------------------------------------------------------- “Reaffirmation Agreement” shall mean the reaffirmation agreement dated as of the date hereof among Holdings, the Borrowers and JPMorgan Chase Bank, N.A. “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. “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. “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, depositing, emanating or migrating in, into, onto or through 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. “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 (other than a Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Code). “Required Lenders” shall mean, at any time, Lenders having (a) Loans (other than Swingline Loans) or B/As outstanding, (b) Revolving L/C Exposure, (c) Tranche C-3 L/C Exposure, (d) Swingline Exposure, (e) Available Unused Commitments and (f) Excess Tranche C-3 Credit-Linked Deposits that, taken together, represent more than 50% of the sum of (u) all Loans (other than Swingline Loans) and B/As outstanding, (v) Revolving L/C Exposure, (w) Tranche C-3 L/C Exposure, (x) Swingline Exposure, (y) the total Available Unused Commitments and (z) Excess Tranche C-3 Credit-Linked Deposits at such time. The Loans, B/As Revolving L/C Exposure, Tranche C-3 L/C Exposure, Swingline Exposure, Available Unused Commitment and Excess Tranche C-3 Credit-Linked Deposit of any Defaulting Lender shall be disregarded in determining Required Lenders at any time.   54 -------------------------------------------------------------------------------- “Required Percentage” shall mean, with respect to an Excess Cash Flow Period, 50%; provided that if the Senior Secured Bank Leverage Ratio at the end of any Excess Cash Flow Period (i) is less than or equal to 3.25 to 1.00 but greater than 3.00 to 1.0, the Required Percentage shall be 25% or (ii) is less than or equal to 3.00 to 1.00, the Required Percentage shall be 0%; provided that the Required Percentage with respect to each of (i) the period beginning on January 1, 2006 and ending on December 31, 2006 and (ii) the period beginning on January 1, 2007 and ending on December 31, 2007 shall be deemed to be 50% for purposes of the definition of the term “Cumulative Retained Excess Cash Flow Amount”. “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 Percentage” shall mean, with respect to any Excess Cash Flow Period, (a) 100% minus (b) the Required Percentage with respect to such Excess Cash Flow Period. “Reuters Screen CDOR Page” means the display designated as page CDOR on the Reuters Monitor Money Rates Service or such other page as may, from time to time, replace that page on that service for the purpose of displaying bid quotations for bankers’ acceptances accepted by leading Canadian banks. “Revolving Borrowing” shall mean a Borrowing comprised of Revolving Facility Loans. “Revolving Facility Commitment” shall mean, with respect to any Revolving Facility Lender, the sum of such Lender’s Canadian Tranche Commitment, such Lender’s European Tranche Commitment and such Lender’s U.S. Tranche Commitment. “Revolving Facility Exposure” shall mean, with respect to any Lender, the sum of such Lender’s Canadian Tranche Revolving Facility Exposure, such Lender’s European Tranche Revolving Facility Exposure and such Lender’s U.S. Tranche Revolving Facility Exposure. “Revolving Facility Lender” shall mean a Canadian Tranche Lender, a European Tranche Lender, a U.S. Tranche Lender or an Incremental Revolving Facility Lender. “Revolving Facility Loans” shall mean Canadian Tranche Revolving Facility Loans, European Tranche Revolving Facility Loans, U.S. Tranche Revolving Facility Loans and Other Revolving Facility Loans. “Revolving Facility Maturity Date” shall mean May 31, 2011; provided that if, on any Early Maturity Test Date, the aggregate principal amount of Early Maturity Notes that mature within 91 days after such Early Maturity Test Date exceeds $200.0 million, the Revolving Facility Maturity Date shall be such Early Maturity Test Date. “Revolving L/C Disbursement” shall mean any L/C Disbursement pursuant to a Canadian Tranche Letter of Credit or a European Tranche Letter of Credit, as applicable.   55 -------------------------------------------------------------------------------- “Revolving L/C Exposure” shall mean at any time the sum of the Canadian Tranche L/C Exposure and the European Tranche L/C Exposure. The Revolving L/C Exposure of any Revolving Facility Lender at any time shall mean the sum of its Canadian Tranche L/C Exposure and its European Tranche L/C Exposure. “Revolving Letter of Credit” shall mean a Canadian Tranche Letter of Credit or a European Tranche Letter of Credit, as applicable. “RPP” shall mean Resolution Performance Products, LLC, a Delaware limited liability company. “RPP 8% Notes” shall mean $140.0 million aggregate principal amount of RPP/RPP Capital Corporation 8% Senior Secured Notes due 2009. “RPP 9-1/2% Notes” shall mean $200.0 million aggregate principal amount of RPP/RPP Capital Corporation 9-1/2% Senior Second Secured Notes due 2010. “RSM” shall mean Resolution Specialty Materials, Inc., a Delaware corporation. “S&P” shall mean Standard & Poor’s Ratings Group, Inc. “Sale and Lease-Back Transaction” shall have the meaning assigned to such term in Section 6.03. “Schedule I Lender” shall mean any Lender named on Schedule I to the Bank Act (Canada). “Schedule I Reference Lenders” shall mean any Schedule I Lender as may be agreed by the Canadian Borrower and the Administrative Agent from time to time. “Schedule II/III Reference Lenders” shall mean JPMorgan Chase Bank, Toronto Branch, Credit Suisse Toronto Branch and Citibank Canada Branch. “SEC” shall mean the Securities and Exchange Commission or any successor thereto. “Second-Priority Lien” shall mean (a) Liens that are “Second-Priority Liens” (as defined in the New Second Lien Intercreditor Agreement) under the agreements that are subject to the terms of the New Second Lien Intercreditor Agreement and (b) other Liens (other than Liens securing the Obligations) that are subordinated to the Liens securing the Obligations pursuant to, and otherwise subject to the terms of, any other Intercreditor Agreement (it being understood that such Liens may be senior in priority to, or pari passu with, or junior in priority to, the Liens securing the New Second Secured Notes or the Existing Borden Second Secured Notes). “Secured Parties” shall mean the “Secured Parties” as defined in the Collateral Agreement.   56 -------------------------------------------------------------------------------- “Securities Act” shall mean the Securities Act of 1933, as amended. “Security Documents” shall mean the Mortgages, the Collateral Agreement, the U.S. Guarantee Agreement, the Foreign Guarantee Agreement, the Foreign Security Documents, the Foreign Pledge Agreements, the Reaffirmation Agreement, any Intercreditor Agreement and each of the security agreements, mortgages and other instruments and documents executed and delivered pursuant to any of the foregoing or pursuant to Section 5.10. “Security Trust Deed” shall mean a security trust deed entered into between the Administrative Agent, as security trustee thereunder, and the applicable grantors thereunder, in form and substance reasonably acceptable to the Administrative Agent. “Senior Secured Bank Debt” at any date shall mean the aggregate principal amount of Consolidated Total Debt outstanding at such date that consists of, without duplication, (i) Term Loans, Revolving Facility Exposure, Tranche C-3 L/C Exposure or Other Revolving Facility Loans and (ii) Indebtedness secured by a Lien (other than any Second-Priority Lien and other than Indebtedness of a Subsidiary that is not a Loan Party secured by a Lien on assets of a Subsidiary that is not a Loan Party) under Section 6.02(a), (c), (i), (j), (l) or (v) (in each case of (i) and (ii), other than letters of credit to the extent undrawn and not supporting Indebtedness of the type included in Consolidated Debt). “Senior Secured Bank Leverage Ratio” shall mean, on any date, the ratio of (a) Senior Secured Bank Debt as of such date to (b) EBITDA for the period of four consecutive fiscal quarters of the U.S. Borrower most recently ended as of such date, all determined on a consolidated basis in accordance with GAAP; provided that EBITDA shall be determined for the relevant Test Period on a Pro Forma Basis. “Statutory Reserves” shall mean, with respect to any currency, the aggregate of the maximum reserve, liquid asset, fees or similar requirements (including any marginal, special, emergency or supplemental reserves or other requirements) established by any central bank, monetary authority, the Board, the Financial Services Authority, the European Central Bank or other Governmental Authority for any category of deposits or liabilities customarily used to fund loans in such currency, expressed in the case of each such requirement as a decimal. Such reserve percentages shall, in the case of U.S. Dollar denominated Loans, include those imposed pursuant to Regulation D of the Board. Eurocurrency Loans shall be deemed to be subject to such reserve, liquid asset or similar requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under any applicable law, rule or regulation, including Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve, liquid asset or similar requirement. “Sterling” or “£” shall mean the lawful money of the United Kingdom. “Subordinated Notes” shall mean $328.0 million aggregate principal amount of RPP/RPP Capital Corporation 13-1/2% Senior Subordinated Notes due 2010 outstanding on the Closing Date.   57 -------------------------------------------------------------------------------- “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 the U.S. Borrower other than any Unrestricted Subsidiary. “Subsidiary Redesignation” shall have the meaning provided in the definition of “Unrestricted Subsidiary” contained in this Section 1.01. “Subsidiary Loan Party” shall mean each Subsidiary that is (a) a Domestic Subsidiary Loan Party or (b) a Foreign Subsidiary Loan Party. “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, the U.S. Borrower or any of the Subsidiaries shall be a Swap Agreement. “Swingline Borrowing” shall mean a Borrowing comprised of Swingline Loans. “Swingline Borrowing Request” shall mean a request by a Borrower substantially in the form of Exhibit D-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 initial aggregate amount of the Swingline Commitments is $30.0 million. “Swingline Exposure” shall mean, at any time, the sum of (a) the aggregate principal amount of all Swingline Loans denominated in U.S. Dollars outstanding at such time and (b) the U.S. Dollar Equivalent of the aggregate principal amount of all Swingline Loans denominated in an Alternative Currency outstanding at such time, in each case under the European Tranche. The Swingline Exposure of any Lender at any time shall be its European Tranche Percentage of the total Swingline Exposure at such time. “Swingline Lender” shall mean JPMorgan Chase Bank, N.A., in its capacity as a lender of Swingline Loans. “Swingline Loans” shall mean the swingline loans made to a Borrower pursuant to Section 2.04.   58 -------------------------------------------------------------------------------- “Syndication Agent” shall have the meaning assigned to such term in the preamble hereto. “Tax Distributions” shall mean (A) with respect to each tax year or portion thereof that any direct or indirect parent of the U.S. Borrower qualifies as a Flow Through Entity, the distribution by the U.S. Borrower to the holders of Equity Interests of such direct or indirect parent of the U.S. Borrower of an amount equal to the product of (i) the amount of aggregate net taxable income of the U.S. Borrower allocated to the holders of Equity Interests of the U.S. Borrower for such period and (ii) the Presumed Tax Rate for such period; and (B) with respect to any tax year or portion thereof that any direct or indirect parent of the U.S. Borrower does not qualify as a Flow Through Entity, the payment of dividends or other distributions to any direct or indirect parent company of the U.S. Borrower that files a consolidated U.S. federal tax return that includes the U.S. Borrower and the Subsidiaries in an amount not to exceed the amount that the U.S. Borrower and the Subsidiaries would have been required to pay in respect of federal, state or local taxes (as the case may be) in respect of such year if the U.S. Borrower and the Subsidiaries paid such taxes directly as a stand-alone taxpayer (or stand-alone group). “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. “Term Borrowing” shall mean a Borrowing comprised of Term Loans. “Term Facility Maturity Date” shall mean May 5, 2013; provided that if, on any Early Maturity Test Date, the aggregate principal amount of Early Maturity Notes that mature within 91 days after such Early Maturity Test Date exceeds $200.0 million, the Term Facility Maturity Date shall be such Early Maturity Test Date. “Term Loan Installment Date” shall have the meaning assigned to such term in Section 2.11(a). “Term Loans” shall mean Tranche C-1 Term Loans, Tranche C-2 Term Loans, Tranche C-4 Term Loans and Other Term Loans. “Test Period” shall mean, on any date of determination, the period of four consecutive fiscal quarters of the U.S. Borrower then most recently ended (taken as one accounting period). “Total Revolving Facility Commitments” shall mean, on any day, the sum of the Canadian Tranche Commitments, the European Tranche Commitments and the U.S. Tranche Commitments. “Total Revolving Facility Exposure” shall mean, at any time, the sum of the European Tranche Revolving Facility Exposure, the Canadian Tranche Revolving Facility Exposure and the U.S. Tranche Revolving Facility Exposure. “Total Tranche C-3 Credit-Linked Deposit” shall mean, at any time, the sum of all Tranche C-3 Credit-Linked Deposits at such time, as the same may be (i) reduced from time to time pursuant to Section 2.05(e) or Section 2.09 and (ii) increased from time to time pursuant to Section 2.05(e).   59 -------------------------------------------------------------------------------- “Tranche” shall mean a category of Commitments and extensions of credits thereunder. For purposes hereof, each of the following comprises a separate Tranche: (a) the European Tranche Commitments, the European Tranche Revolving Facility Loans, the European Tranche Letters of Credit and Swingline Loans made under the European Tranche Commitments, (b) the Canadian Tranche Commitments, the Canadian Tranche Revolving Facility Loans and the Canadian Tranche Letters of Credit and Obligations in respect of outstanding B/As, (c) the U.S. Tranche Commitments and the U.S. Tranche Revolving Facility Loans, (d) the Tranche C-1 Term Loan Commitments and the Tranche C-1 Term Loans, (e) the Tranche C-2 Term Loan Commitments and the Tranche C-2 Term Loans, (f) the Tranche C-3 Credit-Linked Deposits and Tranche C-3 Letters of Credit and (g) the Tranche C-4 Term Loan Commitments and the Tranche C-4 Term Loans. The categories of Commitments and extensions of credit described under clauses (a), (b), (c) and (f) of the immediately preceding sentence are, respectively, the “European Tranche”, the “Canadian Tranche”, the “U.S. Tranche” and “Tranche C-3”. “Tranche C-1 Term Loan Commitment” shall mean, with respect to each Lender, the commitment, if any, of such Lender under the May 2006 Amendment Agreement to make Tranche C-1 Term Loans under the May 2006 Credit Agreement, expressed as an amount representing the maximum aggregate permitted principal amount of the Tranche C-1 Term Loans to be made by such Lender under the May 2006 Credit Agreement. The initial amount of each Lender’s Tranche C-1 Term Loan Commitment is set forth on Schedule 1 to the May 2006 Amendment Agreement. The initial aggregate amount of the Lenders’ Tranche C-1 Term Loan Commitments is $1,335,000,000. “Tranche C-1 Term Loans” shall mean the term loans made by the Lenders to the U.S. Borrower pursuant to clauses (a)(i), (a)(ii) and (a)(iii) of Section 2.01 of the May 2006 Credit Agreement and the May 2006 Amendment Agreement. “Tranche C-2 Lender” shall mean a Lender with a Tranche C-2 Term Loan Commitment or an outstanding Tranche C-2 Term Loan. “Tranche C-2 Term Loan Commitment” shall mean, with respect to each Lender, the commitment, if any, of such Lender to make Tranche C-2 Term Loans under the May 2006 Credit Agreement, expressed as an amount representing the maximum aggregate permitted principal amount of the Tranche C-2 Term Loans to be made by such Lender under the May 2006 Credit Agreement. The initial amount of each Lender’s Tranche C-2 Term Loan Commitment is set forth on Schedule 1 to the May 2006 Amendment Agreement. The initial aggregate amount of the Lenders’ Tranche C-2 Term Loan Commitments is $290,000,000. “Tranche C-2 Term Loans” shall mean the term loans made by the Lenders to the Dutch Borrower pursuant to clause (a)(iv) of Section 2.01 of the May 2006 Credit Agreement and the May 2006 Amendment Agreement.   60 -------------------------------------------------------------------------------- “Tranche C-3 Credit-Linked Deposit” shall mean, as to each Tranche C-3 Lender, the cash deposit made by such Lender pursuant to Section 2.05 and the May 2006 Amendment Agreement, as such deposit may be (a) reduced from time to time pursuant to Section 2.05(e)(ii) or Section 2.09, (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04 and (c) increased from time to time pursuant to Section 2.05(e). The amount of each Tranche C-3 Lender’s Tranche C-3 Credit-Linked Deposit on the May 2006 Amendment Effective Date is set forth on Schedule 1 to the May 2006 Amendment Agreement, or in the Assignment and Acceptance pursuant to which such Tranche C-3 Lender shall have acquired its Tranche C-3 Credit-Linked Deposit, as applicable. The initial aggregate amount of the Tranche C-3 Credit-Linked Deposits is $50,000,000. “Tranche C-3 Credit-Linked Deposit Account” shall mean the account established by the Administrative Agent under its sole and exclusive control maintained at the office of JPMorgan Chase Bank, N.A., 270 Park Avenue, New York, NY 10017, designated as the “Hexion Tranche C-3 Credit-Linked Deposit Account” that shall be used solely to hold the Tranche C-3 Credit-Linked Deposits. “Tranche C-3 L/C Disbursement” shall mean any L/C Disbursement pursuant to a Tranche C-3 Letter of Credit. “Tranche C-3 L/C Exposure” shall mean, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Tranche C-3 Letters of Credit at such time and (b) the aggregate amount of all Tranche C-3 L/C Disbursements that have not yet been reimbursed by or on behalf of the U.S. Borrower at such time. The Tranche C-3 L/C Exposure of any Tranche C-3 Lender at any time shall be its Tranche C-3 Percentage of the total Tranche C-3 L/C Exposure at such time. “Tranche C-3 Lender” shall mean a Lender having a Tranche C-3 Credit-Linked Deposit or a participation in any Tranche C-3 Letter of Credit. “Tranche C-3 Letters of Credit” shall mean, at any time, Letters of Credit in an amount equal to the lesser of (i) the Total Tranche C-3 Credit-Linked Deposit and (ii) the aggregate amount of Letters of Credit (other than Canadian Tranche Letters of Credit) denominated in U.S. Dollars and issued for the account of the U.S. Borrower outstanding at such time. Letters of Credit (other than Canadian Tranche Letters of Credit) will from time to time be deemed to be Tranche C-3 Letters of Credit or European Tranche Letters of Credit in accordance with the provisions of Section 2.05(a). “Tranche C-3 Maturity Date” shall mean the Term Facility Maturity Date. “Tranche C-3 Percentage” shall mean, with respect to any Tranche C-3 Lender, the percentage of the total Tranche C-3 Credit-Linked Deposits represented by such Lender’s Tranche C-3 Credit-Linked Deposit. If the Tranche C-3 Credit-Linked Deposits shall have been applied in full to reimburse Tranche C-3 L/C Disbursements, the Tranche C-3 Percentage with respect to any Tranche C-3 Lender shall be determined based upon the Total Tranche C-3 Credit-Linked Deposit most recently in effect, giving effect to any assignments.   61 -------------------------------------------------------------------------------- “Tranche C-4 Delayed Draw Term Loan Commitment” shall mean, with respect to each Lender, the commitment, if any, of such Lender under the Amendment Agreement to make Tranche C-4 Delayed Draw Term Loans hereunder on or after the Amendment Effective Date, expressed as an amount representing the maximum aggregate permitted principal amount of the Tranche C-4 Delayed Draw Term Loans to be made by such Lender hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 2.21 or Section 9.04. The initial amount of each Lender’s Tranche C-4 Delayed Draw Term Loan Commitment is set forth on Schedule 1 to the Amendment Agreement, or in the Assignment and Assumption or Incremental Assumption Agreement pursuant to which such Lender shall have assumed its Tranche C-4 Delayed Draw Term Loan Commitment, as applicable. The initial aggregate amount of the Lenders’ Tranche C-4 Delayed Draw Term Loan Commitments is $0. “Tranche C-4 Delayed Draw Term Loans” shall mean the term loans made by the Lenders to the U.S. Borrower pursuant to clause (a)(ii) of Section 2.01 and the Amendment Agreement. “Tranche C-4 Initial Term Loan Commitment” shall mean, with respect to each Lender, the commitment, if any, of such Lender under the Amendment Agreement to make Tranche C-4 Initial Term Loans hereunder on the Amendment Effective Date, expressed as an amount representing the maximum aggregate permitted principal amount of the Tranche C-4 Initial Term Loans to be made by such Lender hereunder. The initial amount of each Lender’s Tranche C-4 Initial Term Loan Commitment is set forth on Schedule 1 to the Amendment Agreement. The initial aggregate amount of the Lenders’ Tranche C-4 Initial Term Loan Commitments is $375,000,000. “Tranche C-4 Initial Term Loans” shall mean the term loans made by the Lenders to the U.S. Borrower pursuant to clause (a)(i) of Section 2.01 and the Amendment Agreement. “Tranche C-4 Lender” shall mean a Lender with a Tranche C-4 Term Loan Commitment or an outstanding Tranche C-4 Term Loan. “Tranche C-4 Term Loan Commitment” shall mean a Tranche C-4 Delayed Draw Term Loan Commitment or a Tranche C-4 Initial Term Loan Commitment. “Tranche C-4 Term Loans” shall mean the Tranche C-4 Initial Term Loans and the Tranche C-4 Delayed Draw Term Loans. “Tranche Percentage” shall mean (a) with respect to any Revolving Lender holding any Commitment or Loan under the European Tranche or the Canadian Tranche, such Lender’s European Tranche Percentage or Canadian Tranche Percentage, as applicable and (b) with respect to any Tranche C-3 Lender, such Lender’s Tranche C-3 Percentage. “Transactions” shall mean, collectively, (a) the consummation of the Debt Tender Offer, (b) the Existing Borden Floating Rate Notes Redemption, (c) the sale and issuance of the New Second Secured Notes and the execution and delivery of the New Second Secured Notes Documents, (d) the entering into of the Amendment Agreement and the other Loan Documents   62 -------------------------------------------------------------------------------- and the incurrence of all Tranche C-4 Initial Term Loans hereunder on the Amendment Effective Date and the incurrence of all Tranche C-1 Delayed Draw Term Loans on and after the Amendment Effective Date, (e) the declaration and payment of a dividend or other distribution on or after the Amendment Effective Date in an amount not to exceed $500.0 million to shareholders of the U.S. Borrower and its direct and indirect parents and (f) the payment of all fees and expenses in connection therewith to be paid on, prior to or subsequent to the Amendment Effective Date. “Type”, when used in respect of any Loan, Borrowing or B/A Drawing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing, or on such B/A Drawing, is determined. For purposes hereof, the term “Rate” shall include the Adjusted Eurocurrency Rate, ABR, any Base Rate and the Discount B/A Rate. “U.K. Borrowers” shall have the meaning assigned to such term in the preamble hereto. “U.K. Debenture” shall mean a fixed and floating charge over substantially all of the applicable grantors’ assets from time to time in form and substance acceptable to the Administrative Agent. “Unrestricted Subsidiary” shall mean (i) any subsidiary of the U.S. Borrower identified on Schedule 1.01(d) hereto and (ii) any additional subsidiary of the U.S. Borrower designated as such by the U.S. Borrower that, together with all other Unrestricted Subsidiaries designated pursuant to this clause (ii), constitutes in the aggregate less than 5% of (1) aggregate net sales on a trailing twelve months’ basis and (2) Consolidated Total Assets at such date of determination; provided that, at any time an Unrestricted Subsidiary designation pursuant to this clause (ii) causes the aggregate sales or aggregate assets test set forth above to no longer be satisfied, the Unrestricted Subsidiary or Unrestricted Subsidiaries, as applicable, that has or have either the highest sales or the largest book value of assets, as applicable, of all such Unrestricted Subsidiaries as of the date of the most recent financial statements delivered pursuant to Section 5.04(a) or (b) shall automatically constitute a Subsidiary and cease to constitute an Unrestricted Subsidiary and the U.S. Borrower shall promptly cause the U.S. Guarantee Agreement or the Foreign Guarantee Agreement, as applicable, and appropriate Security Documents to be executed and delivered to the Administrative Agent (such that, following such conversion of each such Unrestricted Subsidiary to a Subsidiary, the Collateral and Guarantee Requirement shall be satisfied and the remaining Unrestricted Subsidiaries shall satisfy this definition); provided, further, that no Existing Notes Issuer or New Notes Issuer shall be an Unrestricted Subsidiary. The U.S. Borrower may designate any Unrestricted Subsidiary to be a Subsidiary for purposes of this Agreement (each, a “Subsidiary Redesignation”); provided, that (i) such Unrestricted Subsidiary, both before and after giving effect to such designation, shall be a Wholly Owned Subsidiary of the U.S. Borrower, (ii) no Default or Event of Default has occurred and is continuing or would result therefrom, (iii) immediately after giving effect to such Subsidiary Redesignation (as well as all other Subsidiary Redesignations theretofore consummated after the first day of such Reference Period), the U.S. Borrower shall be in Pro Forma Compliance, (iv) all representations and warranties contained herein and in the other Loan Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Subsidiary   63 -------------------------------------------------------------------------------- Redesignation (both before and after giving effect thereto), 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, and (v) the U.S. Borrower shall have delivered to the Administrative Agent an officer’s certificate executed by a Responsible Officer of the U.S. Borrower, certifying to the best of such officer’s knowledge, compliance with the requirements of preceding clauses (i) through (iv), inclusive, and containing the calculations and information required by the preceding clause (iii). “U.S.A. Patriot Act” shall mean the U.S.A. Patriot Act, Title III of Pub.L. 107-56 (signed into law October 26, 2001). “U.S. Base Rate” shall mean, for any day, the rate of interest per annum equal to the greater of (a) the interest rate per annum publicly announced from time to time by the Administrative Agent as its reference rate in effect on such day at its principal office in Toronto for determining interest rates applicable to commercial loans denominated in U.S. Dollars in Canada (each change in such reference rate being effective from and including the date such change is publicly announced as being effective) and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. “U.S. Base Rate Borrowing” shall mean a Borrowing consisting of U.S. Base Rate Loans. “U.S. Base Rate Loan” shall mean any Revolving Facility Loan bearing interest at a rate determined by reference to the U.S. Base Rate in accordance with the provisions of Article II. “U.S. Borrower” shall have the meaning assigned to such term in the preamble hereto. “U.S. Dollar Equivalent” shall mean, on any date of determination, (a) with respect to any amount in U.S. Dollars, such amount, and (b) with respect to any amount in any other currency, the equivalent in U.S. Dollars of such amount, determined by the Administrative Agent pursuant to Section 1.04 using the Exchange Rate with respect to such currency at the time in effect under the provisions of such Section. “U.S. Dollars” or “$” shall mean lawful money of the United States of America. “U.S. Guarantee Agreement” shall mean the U.S. Guarantee Agreement dated as of May 31, 2005, as amended, supplemented or otherwise modified from time to time, among Holdings, the U.S. Borrower, the Domestic Subsidiary Loan Parties and the Administrative Agent. “U.S. Lending Office” shall mean, as to any Lender, the applicable branch, office or Affiliate of such Lender designated by such Lender to make Loans to the U.S. Borrower. “U.S. Obligations” shall mean the Obligations (as defined in the Collateral Agreement) of each of the U.S. Borrower and the Domestic Subsidiary Loan Parties as they may   64 -------------------------------------------------------------------------------- exist from time to time other than (a) the Parallel Debt U.S. Obligations, (b) the Parallel Debt Foreign Obligations and (c) the Foreign Obligations. “U.S. Tranche” has the meaning assigned to such term under the definition of “Tranche”. “U.S. Tranche Commitment” shall mean, with respect to each U.S. Tranche Lender, the commitment of such U.S. Tranche Lender to make U.S. Tranche Revolving Facility Loans pursuant to Section 2.01, expressed as an amount representing the maximum aggregate permitted amount of such Lender’s U.S. Tranche Revolving Facility Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 2.21 or Section 9.04. The initial amount of each Lender’s U.S. Tranche Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance or Incremental Assumption Agreement pursuant to which such Lender shall have assumed its U.S. Tranche Commitment, as applicable. The aggregate amount of the Lenders’ U.S. Tranche Commitments as of the Amendment Effective Date is $50.0 million. “U.S. Tranche Lender” shall mean a Lender with a U.S. Tranche Commitment or with outstanding U.S. Tranche Revolving Facility Exposure. “U.S. Tranche Percentage” shall mean, with respect to any U.S. Tranche Lender, the percentage of the total U.S. Tranche Commitments represented by such Lender’s U.S. Tranche Commitment. If the U.S. Tranche Commitments have terminated or expired, the U.S. Tranche Percentages shall be determined based upon the U.S. Tranche Commitments most recently in effect, giving effect to any assignments pursuant to Section 9.04. “U.S. Tranche Revolving Facility Exposure” shall mean, at any time, the aggregate principal amount of the U.S. Tranche Revolving Facility Loans outstanding at such time. The U.S. Tranche Revolving Facility Exposure of any Lender at any time shall be such Lender’s U.S. Tranche Percentage of the total U.S. Tranche Revolving Facility Exposure at such time. “U.S. Tranche Revolving Facility Loan” shall mean a loan made by a U.S. Tranche Lender pursuant to Section 2.01(d). Each U.S. Tranche Revolving Facility Loan shall be a Eurocurrency Loan or an ABR Loan. “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. “Working Capital” shall mean, with respect to the U.S. Borrower and the Subsidiaries on a consolidated basis at any date of determination, Current Assets at such date of   65 -------------------------------------------------------------------------------- determination minus Current Liabilities at such date of determination; provided that, for purposes of calculating Excess Cash Flow, increases or decreases in Working Capital shall be calculated without regard to any changes in Current Assets or Current Liabilities as a result of (a) any reclassification in accordance with GAAP of assets or liabilities, as applicable, between current and noncurrent or (b) the effects of purchase accounting. 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 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 the U.S. Borrower notifies the Administrative Agent that the U.S. Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the Closing Date in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the U.S. Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. SECTION 1.03. 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 Transactions (or such portion thereof as shall be consummated as of the date of the applicable representation or warranty), unless the context otherwise requires. SECTION 1.04. Currency Translation. (a) For purposes of determining compliance as of any date with Section 6.01, 6.02, 6.03, 6.04, 6.05, 6.06, 6.07 or 6.10 (other than for purposes of calculating the Consolidated Leverage Ratio or the Senior Secured Bank Leverage Ratio, as used in any such Section, which shall be calculated in accordance with the definitions thereof), amounts incurred or outstanding in currencies other than U.S. Dollars shall be translated into U.S. Dollars at the exchange rates in effect on the first Business Day of the fiscal quarter in which such determination occurs or in respect of which such determination is being made, as such exchange rates shall be determined in good faith by the U.S. Borrower. No Default or Event of Default shall arise as a result of any limitation or threshold set forth in U.S. Dollars in Section 6.01, 6.02, 6.03, 6.04, 6.05, 6.06, 6.07 or 6.10 or paragraph (f) or (j) of Section 7.01 being exceeded solely as a result of changes in currency exchange rates from those rates applicable on the first day of the fiscal quarter in which such determination occurs or in respect of which such determination is being made.   66 -------------------------------------------------------------------------------- (b) (i) The Administrative Agent shall determine the U.S. Dollar Equivalent of any Letter of Credit denominated in any Alternative Currency as of each date (with such date to be reasonably determined by the Administrative Agent) that is on or about the date of each request for the issuance, amendment, renewal or extension of such Alternative Currency Letter of Credit, using the Exchange Rate for the applicable currency in relation to U.S. Dollars in effect on the date of determination, and each such amount shall be the U.S. Dollar Equivalent of such Letter of Credit until the next required calculation thereof pursuant to this Section 1.04(b)(i). The Administrative Agent shall in addition determine the U.S. Dollar Equivalent of any Letter of Credit denominated in any Alternative Currency as of the CAM Exchange Date as set forth in Section 10.02. (ii) The Administrative Agent shall determine the U.S. Dollar Equivalent of any Borrowing denominated in any Alternative Currency or any B/A accepted and purchased under Section 2.06 as of each date (with such date to be reasonably determined by the Administrative Agent) that is on or about the date of a Borrowing Request, Interest Election Request or request for an acceptance and purchase of B/As with respect to such Borrowing or B/A, in each case using the Exchange Rate for the applicable currency in relation to U.S. Dollars in effect on the date of determination, and each such amount shall be the U.S. Dollar Equivalent of such Borrowing or B/A until the next required calculation thereof pursuant to this Section 1.04(b)(ii). The Administrative Agent shall in addition determine the U.S. Dollar Equivalent of any Borrowing denominated in any Alternative Currency or any B/A accepted and purchased under Section 2.06 as of the CAM Exchange Date as set forth in Section 10.01. (iii) The U.S. Dollar Equivalent of any L/C Disbursement made by any Issuing Bank in any Alternative Currency and not reimbursed by the applicable Borrower shall be determined as set forth in paragraphs (e) or (m) of Section 2.05, as applicable. In addition, the U.S. Dollar Equivalent of the Revolving L/C Exposure shall be determined as set forth in paragraph (j) of Section 2.05, at the time and in the circumstances specified therein. (iv) The Administrative Agent shall notify the Borrowers, the applicable Lenders and the applicable Issuing Bank of each calculation of the U.S. Dollar Equivalent of each Letter of Credit, Borrowing, B/A accepted and purchased hereunder and L/C Disbursement. ARTICLE II The Credits SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein and in the Amendment Agreement: (a) each Lender listed on Schedule 1 to the Amendment Agreement agrees to make (i) Tranche C-4 Initial Term Loans to the U.S. Borrower in U.S. Dollars on the Amendment Effective Date from its U.S. Lending Office in a principal amount not to exceed its Tranche C-4 Initial Term Loan   67 -------------------------------------------------------------------------------- Commitment and (ii) Tranche C-4 Delayed Draw Term Loans to the U.S. Borrower on or prior to the Delayed Draw Expiration Date; provided that the U.S. Borrower shall make no more than three Borrowings of Tranche C-4 Delayed Draw Term Loans on or prior to the Delayed Draw Expiration Date; (b) each European Tranche Lender agrees from time to time during the Availability Period with respect to the European Tranche Commitments (i) to make European Tranche Revolving Facility Loans (A) in euro, U.S. Dollars or Sterling to each U.K. Borrower and (B) in euro to the Dutch Borrower, in each case from its Euro Lending Office and (ii) to make European Tranche Revolving Facility Loans in U.S. Dollars to the U.S. Borrower from its U.S. Lending Office, in an aggregate principal amount that will not result in (w) such Lender’s European Tranche Revolving Facility Exposure exceeding such Lender’s European Tranche Commitment, (x) the European Tranche Revolving Facility Exposure exceeding the total European Tranche Commitments, (y) the portion of the European Tranche Revolving Facility Exposure represented by Loans to or Revolving L/C Exposure in respect of (1) the Dutch Borrower exceeding $125.0 million, or (2) the U.K. Borrowers exceeding $75.0 million or (z) the Total Revolving Facility Exposure exceeding the Total Revolving Facility Commitments; and (c) each Canadian Tranche Lender agrees from time to time during the Availability Period with respect to the Canadian Tranche Commitments (i) to make Canadian Tranche Revolving Facility Loans in Canadian Dollars or U.S. Dollars to the Canadian Borrower from its Canadian Lending Office and/or to cause its Canadian Lending Office to accept and purchase or arrange for the acceptance and purchase of drafts drawn by the Canadian Borrower in Canadian Dollars as B/As and (ii) to make Canadian Tranche Revolving Facility Loans in U.S. Dollars to the U.S. Borrower from its U.S. Lending Office, in an aggregate principal amount that will not result in (A) such Lender’s Canadian Tranche Revolving Facility Exposure exceeding such Lender’s Canadian Tranche Commitment, (B) the Canadian Tranche Revolving Facility Exposure exceeding the total Canadian Tranche Commitments or (C) the Total Revolving Facility Exposure exceeding the Total Revolving Facility Commitments; (d) each U.S. Tranche Lender agrees from time to time during the Availability Period with respect to the U.S. Tranche Commitments to make U.S. Tranche Revolving Facility Loans in U.S. Dollars to the U.S. Borrower from its U.S. Lending Office in an aggregate principal amount that will not result in (A) such Lender’s U.S. Tranche Revolving Facility Exposure exceeding such Lender’s U.S. Tranche Commitment, (B) the U.S. Tranche Revolving Facility Exposure exceeding the total U.S. Tranche Commitments or (C) the Total Revolving Facility Exposure exceeding the Total Revolving Facility Commitments;   68 -------------------------------------------------------------------------------- (e) each Lender having an Incremental Term Loan Commitment or an Incremental Revolving Facility Commitment agrees, subject to the terms and conditions set forth in the applicable Incremental Assumption Agreement, to make Incremental Term Loans to the U.S. Borrower or the Dutch Borrower, as applicable, and/or Incremental Revolving Facility Loans to any Borrower, in an aggregate principal amount not to exceed its Incremental Term Loan Commitment or Incremental Revolving Facility Commitment, as the case may be; and (f) within the foregoing limits and subject to the terms and conditions set forth herein, the Borrowers may borrow, prepay and reborrow Revolving Facility Loans. Amounts repaid in respect of Term Loans may not be reborrowed. All Revolving Loans, Tranche C-1 Term Loans and Tranche C-2 Term Loans outstanding, and all Tranche C-3 Credit Linked Deposits funded, under the May 2006 Credit Agreement on and as of the Amendment Effective Date shall remain outstanding or funded, as applicable, hereunder on the terms set forth herein, except as otherwise provided herein. SECTION 2.02. Loans and Borrowings. (a) Each Loan shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the Lenders ratably in accordance with their respective Commitments of the applicable Class (or, in the case of Swingline Loans, in accordance with their respective Swingline Commitments); provided, however, that Revolving Facility Loans of any Tranche shall be made by the Revolving Facility Lenders ratably in accordance with their respective Tranche Percentages in respect of such Tranche 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 2.15, (i) in the case of the U.S. Borrower, each Borrowing (other than a Swingline Borrowing) shall be comprised entirely of ABR Loans or Eurocurrency Loans as the U.S. Borrower may request in accordance herewith; (ii) in the case of the Canadian Borrower, each Borrowing (A) denominated in U.S. Dollars shall be comprised entirely of U.S. Base Rate Loans or Eurocurrency Loans as the Canadian Borrower may request in accordance herewith and (B) denominated in Canadian Dollars shall be comprised entirely of Canadian Base Rate Loans; and (iii) in the case of the Dutch Borrower and the U.K. Borrowers, each Borrowing shall be comprised entirely of Base Rate Loans or Eurocurrency Loans as the applicable Borrower may request in accordance herewith. Each Swingline Borrowing made by the U.S. Borrower shall be an ABR Borrowing. Each Swingline Borrowing made by the Dutch Borrower or a U.K. Borrower shall be a Base Rate Borrowing. Each Lender at its option may make any ABR Loan, Base Rate 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 any 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 2.16 or 2.18 solely in respect of increased costs or taxes resulting from such exercise and existing at the time of such exercise.   69 -------------------------------------------------------------------------------- (c) At the commencement of each Interest Period for any Eurocurrency Revolving 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 (i) each ABR Revolving Borrowing or Base Rate Revolving 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 Minimum; provided that an ABR Revolving Borrowing or Base Rate Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the Canadian Tranche Commitments, the European Tranche Commitments or the U.S. Tranche Commitments, as applicable, or that is required to finance the reimbursement of an L/C Disbursement as contemplated by Section 2.05(e). Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of (i) ten Eurocurrency Borrowings outstanding under each of the Tranche C-1 Term Loans, the Tranche C-2 Term Loans, the Tranche C-4 Term Loans or any Other Term Loans and (ii) ten Eurocurrency Borrowings outstanding under each of the European Tranche, the Canadian Tranche, the U.S. Tranche or any Other Revolving Facility Loans. (d) Notwithstanding any other provision of this Agreement, no Borrower shall be entitled to request, or to elect to convert or continue, any Borrowing or B/A Drawing if the Interest Period or Contract Period requested with respect thereto would end after the Revolving Facility Maturity Date or the Term Facility Maturity Date, as applicable. SECTION 2.03. Requests for Borrowings. To request a Revolving Borrowing and/or a Term Borrowing, the applicable Borrower shall notify the Administrative Agent of such request (as provided in Section 9.01 and, unless otherwise agreed upon by the Administrative Agent, in Schedule 2.03) by telephone (a)(i) in the case of a Eurocurrency Borrowing (other than any Eurocurrency Borrowing on the Amendment Effective Date), not later than 11:00 a.m., Local Time, three Business Days before the date of the proposed Borrowing or (ii) in the case of any Eurocurrency Borrowing on the Amendment Effective Date, not later than 11:00 a.m., Local Time, one Business Day before the proposed Borrowing, or (b) in the case of an ABR Borrowing or Base Rate Borrowing, not later than 12:00 p.m., Local Time, one Business Day before the date of the proposed Borrowing; provided that any such notice of an ABR Revolving Borrowing or a Base Rate Borrowing to finance the reimbursement of an L/C Disbursement as contemplated by Section 2.05(e) may be given not later than 11:00 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 applicable Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) the Borrower requesting such Borrowing; (ii) the Class of such Borrowing;   70 -------------------------------------------------------------------------------- (iii) the currency and aggregate amount of the requested Borrowing; (iv) the date of such Borrowing, which shall be a Business Day; (v) whether such Borrowing is to be an ABR Borrowing, a Base Rate Borrowing or a Eurocurrency Borrowing; (vi) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and (vii) the location and number of the applicable Borrower’s account to which funds are to be disbursed. If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be (i) in the case of a Revolving Borrowing by the U.S. Borrower, an ABR Borrowing and (ii) in the case of any other Revolving Borrowing, a Base Rate Borrowing. If no Interest Period is specified with respect to any requested Eurocurrency Borrowing, then the applicable Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing. SECTION 2.04. Swingline Loans. (a) Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans in U.S. Dollars to the U.S. Borrower, in euro to the Dutch Borrower, and in euro, U.S. Dollars and Sterling to the U.K. Borrowers, from time to time during the Availability Period with respect to the European Tranche Commitment, in an aggregate principal amount at any time outstanding that will not result in (i) the Swingline Exposure exceeding the Swingline Commitment, (ii) the European Tranche Revolving Facility Exposure exceeding the total European Tranche Commitments or (iii) the Total Revolving Facility Exposure exceeding the Total Revolving Facility Commitments; provided that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Borrowing. Each Swingline Borrowing shall be in an amount that is an integral multiple of $100,000, €100,000 or £100,000, as the case may be, and not less than $1,000,000, €1,000,000 or £1,000,000, as the case may be. Within the foregoing limits and subject to the terms and conditions set forth herein, the U.S. Borrower, the Dutch Borrower and the U.K. Borrowers may borrow, prepay and reborrow Swingline Loans. (b) To request a Swingline Borrowing, the applicable Borrower shall notify the Administrative Agent, JPMorgan Europe Limited and the Swingline Lender of such request by telephone (confirmed by a Swingline Borrowing Request by telecopy), not later than 1:00 p.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 Borrower requesting such Swingline Borrowing, (ii) the requested date (which shall be a Business Day), (iii) the currency and amount of the requested Swingline Borrowing and (iv) in the case of a Swingline Borrowing to be made by the Dutch Borrower or a U.K. Borrower, the Interest Period to be applicable thereto, which shall be a period contemplated   71 -------------------------------------------------------------------------------- by clause (b) of the definition of “Interest Period”. The Swingline Lender shall consult with the Administrative Agent as to whether the making of the Swingline Loan is in accordance with the terms of this Agreement prior to the Swingline Lender funding such Swingline Loan. The 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 applicable 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) The Swingline Lender may by written notice given to the Administrative Agent not later than 12:00 p.m., Local Time, on any Business Day require the European Tranche 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 European Tranche 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 European Tranche Lender’s European Tranche Percentage of such Swingline Loan or Loans. Each European Tranche Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent for the account of the Swingline Lender, such European Tranche Lender’s European Tranche Percentage of such Swingline Loan or Loans. Each European Tranche 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 European Tranche Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.07 with respect to Loans made by such European Tranche Lender (and Section 2.07 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the European Tranche Lenders. The Administrative Agent shall notify the U.S. 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 Swingline Lender. Any amounts received by the Swingline Lender from any Borrower (or other party on behalf of such Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the European Tranche Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear; provided that any such payment so remitted shall be repaid to the Swingline Lender or to the Administrative Agent, as applicable, if and to the extent such payment is required to be refunded to the applicable Borrower for any reason. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve any Borrower of any default in the payment thereof.   72 -------------------------------------------------------------------------------- (d) All Swingline Loans outstanding under the May 2006 Credit Agreement on the Amendment Effective Date shall remain outstanding hereunder on the terms set forth herein, except as otherwise provided herein. SECTION 2.05. Letters of Credit. (a) General. Subject to the terms and conditions set forth herein (including, with respect to issuances of Tranche C-3 Letters of Credit, Section 2.23), each Borrower may request the issuance of Revolving Letters of Credit under either the European Tranche denominated in any Alternative Currency or U.S. Dollars or under the Canadian Tranche denominated in U.S. Dollars or Canadian Dollars (provided that, in the case of Canadian Dollar-denominated Revolving Letters of Credit for the account of the Canadian Borrower, an Issuing Bank in respect thereof has been agreed and designated), and the U.S. Borrower may request issuance of Tranche C-3 Letters of Credit denominated in U.S. Dollars, in each case for its own account (or, in the case of Revolving Letters of Credit, for the account of a Subsidiary, so long as such Borrower and such Subsidiary are co-applicants), in a form reasonably acceptable to the applicable Issuing Bank, at any time and from time to time during the Availability Period for such Tranche and prior to the date that is five Business Days prior to (i) the Revolving Facility Maturity Date, in the case of the Canadian Tranche and European Tranche, or (ii) the Tranche C-3 Maturity Date, in the case of Tranche C-3. For purposes hereof, (i) all Letters of Credit (other than Canadian Tranche Letters of Credit) that are denominated in U.S. Dollars and issued for the account of the U.S. Borrower shall at all times and from time to time be deemed to be Tranche C-3 Letters of Credit in the amount specified in the definition of Tranche C-3 Letters of Credit and be deemed to be European Tranche Letters of Credit only to the extent, and in an amount by which, the aggregate amount of outstanding Letters of Credit (other than Canadian Tranche Letters of Credit) that are denominated in U.S. Dollars and issued for the account of the U.S. Borrower exceeds such amount specified in the definition of Tranche C-3 Letters of Credit, (ii) drawings under any Letter of Credit (other than Canadian Tranche Letters of Credit) that are denominated in U.S. Dollars and issued for the account of the U.S. Borrower shall be deemed to have been made under European Tranche Letters of Credit for so long as, and to the extent that, there are any undrawn European Tranche Letters of Credit outstanding that are denominated in U.S. Dollars and issued for the account of the U.S. Borrower (and thereafter shall be deemed to have been made under Tranche C-3 Letters of Credit) and (iii) any Letter of Credit (other than any Canadian Tranche Letter of Credit) that is denominated in U.S. Dollars and issued for the account of the U.S. Borrower and that expires or terminates will be deemed to be a European Tranche Letter of Credit, for so long as, and to the extent that, there are outstanding European Tranche Letters of Credit that are denominated in U.S. Dollars and issued for the account of the U.S. Borrower immediately prior to such expiration or termination; provided, however, that, at any time during which an Event of Default shall have occurred and be continuing, (A) Letters of Credit (other than Canadian Tranche Letters of Credit) that are denominated in U.S. Dollars and issued for the account of the U.S. Borrower shall be deemed to be European Tranche Letters of Credit and Tranche C-3 Letters of Credit, (B) drawings under Letters of Credit (other than Canadian Tranche Letters of Credit) that are denominated in U.S. Dollars and issued for the account of the U.S. Borrower shall be deemed to have been made under European Tranche Letters of Credit and Tranche C-3 Letters of Credit and (C) any Letter of Credit (other than any Canadian Tranche Letter of Credit) that is denominated in U.S. Dollars and issued for the account of the U.S. Borrower and that expires or terminates shall be deemed to be a European Tranche Letter of Credit and a Tranche C-3 Letter of Credit, in each case pro rata based upon (1) the total European Tranche Commitments at such   73 -------------------------------------------------------------------------------- time and (2) the sum of the Total Tranche C-3 Credit-Linked Deposit and the amount of the Total Tranche C-3 Credit-Linked Deposit that shall have been applied to reimburse outstanding Tranche C-3 L/C Disbursements at such time. To the extent necessary to implement the foregoing, the identification of a Letter of Credit as a European Tranche Letter of Credit or a Tranche C-3 Letter of Credit may change from time to time and a portion of a Letter of Credit may be deemed to be a Tranche C-3 Letter of Credit and the remainder be deemed to be a European Tranche Letter of Credit. Notwithstanding the foregoing, the entire face amount of any Letter of Credit with an expiration date after the Revolving Facility Maturity Date shall at all times be deemed to be a Tranche C-3 Letter of Credit, subject to the limitations set forth in clause (i) of the third sentence of this paragraph (a). 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 such Borrower to, or entered into by such Borrower with, an Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. (b) Notice of Issuance, Amendment, Renewal, Extension: Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal (other than an automatic renewal in accordance with paragraph (c) of this Section) or extension of an outstanding Letter of Credit), the applicable Borrower 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 (three 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 whether such Letter of Credit is to be issued or maintained under the Canadian Tranche, 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 currency in which such Letter of Credit is to be denominated (which shall be U.S. Dollars or (i) in the case of a Letter of Credit issued under the European Tranche for the account of any Foreign Subsidiary Borrower, euro or Sterling or (ii) in the case of a Letter of Credit issued under the Canadian Tranche for the account of the Canadian Borrower, Canadian Dollars), the name and address of the beneficiary thereof and such other information as shall be necessary to issue, amend, renew or extend such Letter of Credit. If requested by the applicable Issuing Bank, the applicable Borrower 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 applicable Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the Canadian Tranche L/C Exposure shall not exceed $35.0 million or the European Tranche L/C Exposure shall not exceed $65.0 million, as applicable, (ii) the Canadian Tranche Revolving Facility Exposure or the European Tranche Revolving Facility Exposure, as applicable, shall not exceed the total Canadian Tranche Commitments or total European Tranche Commitments, as applicable, (iii) the Tranche C-3 L/C Exposure shall not exceed the Total Tranche C-3 Credit-Linked Deposit and (iv) the Total Revolving Facility Exposure shall not exceed the Total Revolving Facility Commitments.   74 -------------------------------------------------------------------------------- (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) (A) with respect to any Revolving Letter of Credit, the date that is five Business Days prior to the Revolving Facility Maturity Date and (B) with respect to any Tranche C-3 Letter of Credit, the date that is five Business Days prior to the Tranche C-3 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 applicable date referred to in clause (ii) of this paragraph (c)). (d) Participations. (i) By the issuance of a Revolving Letter of Credit (or an amendment to a Revolving Letter of Credit increasing the amount thereof) and without any further action on the part of the applicable Issuing Bank or the Revolving Facility Lenders under the applicable Tranche, such Issuing Bank hereby grants to each such Revolving Facility Lender, and each such Revolving Facility Lender hereby acquires from such Issuing Bank, a participation in such Revolving Letter of Credit equal to such Revolving Facility Lender’s Tranche Percentage in respect of such Tranche of the aggregate amount available to be drawn under such Revolving Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Facility Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent in U.S. Dollars, for the account of the applicable Issuing Bank, such Revolving Facility Lender’s Tranche Percentage of (i) each Revolving L/C Disbursement made by such Issuing Bank in U.S. Dollars and (ii) the U.S. Dollar Equivalent, using the Exchange Rates in effect on the date such payment is required, of each Revolving L/C Disbursement made by such Issuing Bank in an Alternative Currency and, in each case, not reimbursed by the applicable Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to such Borrower for any reason (or if such Revolving L/C Disbursement or reimbursement payment was refunded in an Alternative Currency, the U.S. Dollar Equivalent thereof using the Exchange Rate in effect on the date of such refund). Each Revolving Facility Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Revolving Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Revolving Letter of Credit or the occurrence and continuance of a Default or Event of Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (ii) Each Tranche C-3 Lender hereby acknowledges that it holds a participation in each Tranche C-3 Letter of Credit equal to such Tranche C-3 Lender’s Tranche C-3 Percentage of the aggregate amount available to be drawn under such Tranche C-3 Letter of Credit. The Administrative Agent hereby acknowledges that it holds the Tranche C-3 Credit-Linked Deposit of each Tranche C-3 Lender. Each Tranche C-3 Lender hereby absolutely and unconditionally agrees that if an Issuing Bank makes a Tranche C-3 L/C Disbursement that is not reimbursed by the U.S. Borrower on the date due as provided in paragraph (e) of this Section, or is required to refund any reimbursement payment in respect of a Tranche C-3 L/C Disbursement to the U.S. Borrower for any reason, the   75 -------------------------------------------------------------------------------- Administrative Agent shall reimburse the applicable Issuing Bank for the amount of such Tranche C-3 L/C Disbursement from such Tranche C-3 Lender’s Tranche C-3 Credit-Linked Deposit on deposit in the Tranche C-3 Credit-Linked Deposit Account. In the event the Tranche C-3 Credit-Linked Deposit Account is charged by the Administrative Agent to reimburse the applicable Issuing Bank for an unreimbursed Tranche C-3 L/C Disbursement, the U.S. Borrower shall have the right, at any time prior to the Tranche C-3 Maturity Date, to pay over to the Administrative Agent in reimbursement thereof an amount equal to the amount so charged, and such payment shall be deposited by the Administrative Agent in the Tranche C-3 Credit-Linked Deposit Account. Each Tranche C-3 Lender acknowledges and agrees that its obligation to acquire and fund participations in respect of Tranche C-3 Letters of Credit pursuant to this subparagraph (ii) is unconditional and irrevocable and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Tranche C-3 Letter of Credit or the occurrence and continuance of a Default or Event of Default or the return of the Tranche C-3 Credit-Linked Deposits, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Without limiting the foregoing, each Tranche C-3 Lender irrevocably authorizes the Administrative Agent to apply amounts of its Tranche C-3 Credit-Linked Deposit as provided in this subparagraph (ii). (e) Reimbursement. (i) If the applicable Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, the applicable Borrower shall reimburse such L/C Disbursement by paying to the Administrative Agent an amount equal to such L/C Disbursement, in the currency in which such L/C Disbursement is made, not later than 2:00 P.M., Local Time, on (A) the Business Day that the applicable Borrower receives notice under paragraph (g) of this Section of such L/C Disbursement, if such notice is received on such day prior to 10:00 A.M., Local Time, or (B) if clause (A) does not apply, the Business Day immediately following the date the applicable Borrower receives such notice; provided that the applicable Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or 2.04 that such payment be financed with an ABR Revolving Borrowing, a Base Rate Revolving Borrowing or a Swingline Borrowing, as applicable, in an equivalent amount and, to the extent so financed, such Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Borrowing, Base Rate Borrowing or Swingline Borrowing. (ii) If a Borrower fails to reimburse any Revolving L/C Disbursement when due, then (A) if such payment relates to an Alternative Currency Letter of Credit, automatically and with no further action required, such Borrower’s obligation to reimburse the applicable Revolving L/C Disbursement shall be permanently converted into an obligation to reimburse the U.S. Dollar Equivalent, calculated using the Exchange Rates on the date when such payment was due, of such Revolving L/C Disbursement and (B) in the case of each Revolving L/C Disbursement, the Administrative Agent shall promptly notify the applicable Issuing Bank and each Revolving Facility Lender under the applicable Tranche of the applicable Revolving L/C Disbursement, the payment then due from the applicable Borrower in respect thereof and such Lender’s Tranche Percentage thereof. Promptly following receipt of such notice, each Revolving Facility Lender under the applicable Tranche shall pay to the Administrative Agent its Tranche   76 -------------------------------------------------------------------------------- Percentage in U.S. Dollars of the payment then due from such Borrower in the same manner as provided in Section 2.07 with respect to Loans made by such Lender (and Section 2.07 shall apply, mutatis mutandis, to the payment obligations of the Revolving Facility Lenders), and the Administrative Agent shall promptly pay to the applicable Issuing Bank the amounts so received by it from such Revolving Facility Lenders. Promptly following receipt by the Administrative Agent of any payment from a Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the applicable Issuing Bank or, to the extent that 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 Revolving Facility Lender pursuant to this paragraph to reimburse an Issuing Bank for any Revolving L/C Disbursement (other than the funding of an ABR Revolving Borrowing, Base Rate Revolving Borrowing or a Swingline Borrowing as contemplated above) shall not constitute a Loan and shall not relieve the applicable Borrower of its obligation to reimburse such Revolving L/C Disbursement. If the applicable Borrower’s reimbursement of, or obligation to reimburse, any amounts in any Alternative Currency would subject the Administrative Agent, the applicable Issuing Bank or any Lender to any stamp duty, ad valorem charge or similar tax that would not be payable if such reimbursement were made or required to be made in U.S. Dollars, such Borrower shall, at its option, either (x) pay the amount of any such tax requested by the Administrative Agent, the relevant Issuing Bank or Lender or (y) reimburse each Revolving L/C Disbursement made in such Alternative Currency in U.S. Dollars, in an amount equal to the U.S. Dollar Equivalent, calculated using the applicable Exchange Rate on the date such Revolving L/C Disbursement is made, of such Revolving L/C Disbursement. (iii) If the U.S. Borrower fails to make (or cause another account party to make) any payment due under paragraph (e)(i) above with respect to a Tranche C-3 Letter of Credit, the Administrative Agent shall notify each Tranche C-3 Lender of the applicable Tranche C-3 L/C Disbursement, the payment then due from the U.S. Borrower in respect thereof and such Lender’s Tranche C-3 Percentage thereof, and the Administrative Agent shall promptly pay to the applicable Issuing Bank each Tranche C-3 Lender’s Tranche C-3 Percentage of such Tranche C-3 L/C Disbursement from such Tranche C-3 Lender’s Tranche C-3 Credit-Linked Deposit. Promptly following receipt by the Administrative Agent of any payment by the U.S. Borrower in respect of any Tranche C-3 L/C Disbursement, the Administrative Agent shall distribute such payment to the applicable Issuing Bank or, to the extent payments have been made from the Tranche C-3 Credit-Linked Deposits, to the Tranche C-3 Credit-Linked Deposit Account to be added to the Tranche C-3 Credit-Linked Deposits of the Tranche C-3 Lenders in accordance with their Tranche C-3 Percentages. The U.S. Borrower acknowledges that each payment made pursuant to this subparagraph (iii) in respect of any Tranche C-3 L/C Disbursement is required to be made for the benefit of the distributees indicated in the immediately preceding sentence. Any payment made from the Tranche C-3 Credit-Linked Deposit Account, or from funds of the Administrative Agent, pursuant to this paragraph to reimburse an Issuing Bank for any Tranche C-3 L/C Disbursement shall not constitute a Loan and shall not relieve the U.S. Borrower of its obligation to reimburse such Tranche C-3 L/C Disbursement.   77 -------------------------------------------------------------------------------- (f) Obligations Absolute. The obligation of each 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 applicable Borrower’s obligations hereunder. 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, or any of the circumstances referred to in clauses (i), (ii) or (iii) of the first sentence; provided that the foregoing shall not be construed to excuse the applicable Issuing Bank from liability to a Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by each Borrower to the extent permitted by applicable law) suffered by such Borrower that are determined by a final and binding decision of a court of competent jurisdiction to have been caused by (i) such Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof 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 that 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 and the applicable 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   78 -------------------------------------------------------------------------------- shall not relieve the applicable Borrower of its obligation to reimburse such Issuing Bank and the applicable Revolving Facility Lenders or Tranche C-3 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 applicable Borrower 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 such Borrower reimburses such L/C Disbursement, (i) if such L/C Disbursement is a Revolving L/C Disbursement made in U.S. Dollars, and at all times following the conversion to U.S. Dollars of a Revolving L/C Disbursement made in an Alternative Currency pursuant to paragraph (e) above, at the rate per annum then applicable to ABR Revolving Loans (in the case of the U.S. Borrower) or Base Rate Loans (in the case of other Borrowers), (ii) if such L/C Disbursement is a Revolving L/C Disbursement made in an Alternative Currency, at all times prior to its conversion to U.S. Dollars pursuant to paragraph (e) above, at the applicable Base Rate plus the Applicable Margin applicable to Eurocurrency Revolving Loans at such time (or, in the case of a Revolving L/C Disbursement made in Canadian Dollars, at the Canadian Base Rate plus the Applicable Margin applicable to Canadian Base Rate Loans at such time) and (iii) if such L/C Disbursement is a Tranche C-3 L/C Disbursement, at the rate per annum then applicable to ABR Term Loans; provided that, in each case, if such L/C Disbursement is not reimbursed by the applicable Borrower when due pursuant to paragraph (e) (i) of this Section, then Section 2.14(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 Revolving Facility Lender pursuant to paragraph (e) (ii) of this Section or from the Tranche C-3 Credit-Linked Deposit of any Tranche C-3 Lender pursuant to paragraph (e)(iii) of this Section to reimburse such Issuing Bank shall be for the account of such Revolving Facility Lender or Tranche C-3 Lender to the extent of such payment. (i) Replacement of an Issuing Bank. An Issuing Bank with respect to any one or more of the Canadian Tranche, the European Tranche or Tranche C-3, may be replaced at any time by written agreement among the U.S. 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. Any Issuing Bank in respect of the European Tranche shall be a PMP. At the time any such replacement shall become effective, the Borrowers shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.13(b). 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 under the applicable Tranche thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or to 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.   79 -------------------------------------------------------------------------------- (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 U.S. Borrower receives notice from the Administrative Agent (or, if the maturity of the Loans has been accelerated, Tranche C-3 Lenders and Revolving Facility Lenders with L/C Exposure representing greater than 50% of the total L/C Exposure) demanding the deposit of cash collateral pursuant to this paragraph, or if the original Revolving Facility Maturity Date and Term Facility Maturity Date shall be changed to an earlier date pursuant to the proviso to the definition of the terms “Revolving Facility Maturity Date” and “Term Facility Maturity Date”, the Borrowers shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash in U.S. Dollars equal to the aggregate L/C Exposure as of such date plus any accrued and unpaid interest thereon; provided that (i) the portions of such amount attributable to undrawn Alternative Currency Letters of Credit or L/C Disbursements in an Alternative Currency that the Borrowers are not late in reimbursing shall be deposited in the applicable Alternative Currencies in the actual amounts of such undrawn Letters of Credit and L/C Disbursements and (ii) upon the occurrence of any Event of Default with respect to any 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, without demand or other notice of any kind. For the purposes of this paragraph, the Alternative Currency Revolving L/C Exposure shall be calculated using the Exchange Rates on the date notice demanding cash collateralization is delivered to a Borrower. Each such deposit pursuant to this paragraph shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Borrowers 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 U.S. Borrower, in each case, in Permitted Investments and at the risk and expense of the Borrowers, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account with respect to Letters of Credit issued under any Tranche shall be applied by the Administrative Agent to reimburse each Issuing Bank for L/C Disbursements made in respect of Letters of Credit issued under such Tranche 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 Borrowers for the Revolving L/C Exposure and Tranche C-3 L/C Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Tranche C-3 Lenders and Revolving Facility Lenders with L/C Exposure representing greater than 50% of the total L/C Exposure), be applied to satisfy other obligations of the Borrowers under this Agreement. If a 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 such Borrower within three Business Days after all Events of Default have been cured or waived. (k) Additional Issuing Banks. From time to time, the U.S. Borrower may by notice to the Administrative Agent designate up to four Lenders (in addition to JPMorgan   80 -------------------------------------------------------------------------------- Chase Bank, N.A.), each of which agrees (in its sole discretion) to act in such capacity and each of which is reasonably satisfactory to the Administrative Agent as an Issuing Bank in respect of any one or more of the Canadian Tranche, the European Tranche or Tranche C-3. 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 with respect to the applicable Tranche hereunder for all purposes. (l) Issuing Bank Agreements. Unless otherwise requested by the Administrative Agent, each Issuing Bank shall report in writing to the Administrative Agent (i) on the first Business Day of each week, the daily activity (set forth by day) in respect of Letters of Credit during the immediately preceding week, including all issuances, extensions, amendments and renewals, all expirations and cancellations and all disbursements and reimbursements, (ii) on or prior to each Business Day on which such Issuing Bank expects to issue, amend, renew or extend any Letter of Credit under any Tranche, 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 under any Tranche and outstanding under such Tranche after giving effect to such issuance, amendment, renewal or extension occurred (and whether the amount thereof changed), it being understood that such Issuing Bank shall not permit any issuance, renewal, extension or amendment resulting in an increase in the amount of any Letter of Credit to occur without first obtaining written (or, with respect to any Issuing Bank, if the Administrative Agent so agrees with respect to such Issuing Bank, telephonic) confirmation from the Administrative Agent that it is then permitted under this Agreement, (iii) on each Business Day on which such Issuing Bank makes any L/C Disbursement in respect of any Letter of Credit issued under a Tranche, the identity of such Tranche, the date of such L/C Disbursement and the amount of such L/C Disbursement, (iv) on any Business Day on which a Borrower fails to reimburse an L/C Disbursement required to be reimbursed to such Issuing Bank on such day, the date of such failure, the applicable Borrower and the amount and currency of such L/C Disbursement and (v) on any other Business Day, such other information as the Administrative Agent shall reasonably request. (m) Conversion. In the event that the Loans become immediately due and payable on any date pursuant to Section 7.01, all amounts (i) that a Borrower is at the time or thereafter becomes required to reimburse or otherwise pay to the Administrative Agent in respect of L/C Disbursements made under any Alternative Currency Letter of Credit (other than amounts in respect of which such Borrower has deposited cash collateral pursuant to paragraph (j) above, if such cash collateral was deposited in the applicable Alternative Currency to the extent so deposited or applied), (ii) that the Revolving Facility Lenders are at the time or thereafter become required to pay to the Administrative Agent and the Administrative Agent is at the time or thereafter becomes required to distribute to the applicable Issuing Bank pursuant to paragraph (e) of this Section in respect of unreimbursed L/C Disbursements made under any Alternative Currency Letter of Credit and (iii) of each Revolving Facility Lender’s participation in any Alternative Currency Letter of Credit under which an L/C Disbursement has been made shall, automatically and with no further action required, be converted into the U.S. Dollar Equivalent, calculated using the Exchange Rates on such date (or in the case of any L/C Disbursement made after such date, on the   81 -------------------------------------------------------------------------------- date such L/C Disbursement is made), of such amounts. On and after such conversion, all amounts accruing and owed to the Administrative Agent, the applicable Issuing Bank or any Lender in respect of the obligations described in this paragraph shall accrue and be payable in U.S. Dollars at the rates otherwise applicable hereunder. (n) All Letters of Credit outstanding under the May 2006 Credit Agreement on the Amendment Effective Date shall remain outstanding hereunder on the terms set forth herein, except as otherwise provided herein. SECTION 2.06. Canadian Bankers’ Acceptances. (a) Each acceptance and purchase of B/As of a single Contract Period pursuant to Section 2.01(c) or Section 2.08 shall be made ratably by the Canadian Tranche Lenders in accordance with the amounts of their Canadian Tranche Commitments. The failure of any Canadian Tranche Lender to accept any B/A required to be accepted by it shall not relieve any other Canadian Tranche Lender of its obligations hereunder; provided that the Canadian Tranche Commitments are several and no Canadian Tranche Lender shall be responsible for any other Canadian Tranche Lender’s failure to accept B/As as required hereunder. (b) The B/As of a single Contract Period accepted and purchased on any date shall be in an aggregate amount that is an integral multiple of C$1,000,000 and not less than C$1,000,000. The face amount of each B/A shall be C$100,000 or any whole multiple thereof. If any Canadian Tranche Lender’s ratable share of the B/As of any Contract Period to be accepted on any date would not be an integral multiple of C$100,000, the face amount of the B/As accepted by such Lender may be increased or reduced to the nearest integral multiple of C$100,000 by the Administrative Agent in its sole discretion. B/As of more than one Contract Period may be outstanding at the same time; provided that there shall not at any time be more than a total of five B/A Drawings outstanding. (c) To request an acceptance and purchase of B/As, the Canadian Borrower shall notify the Administrative Agent of such request by telephone or by facsimile not later than 10:00 a.m., Local Time, one Business Day before the date of such acceptance and purchase. Each such request shall be irrevocable and, if telephonic, shall be confirmed promptly by hand delivery or facsimile to the Administrative Agent of a written request in a form approved by the Administrative Agent and signed by the Canadian Borrower. Each such telephonic and written request shall specify the following information: (i) the aggregate face amount of the B/As to be accepted and purchased; (ii) the date of such acceptance and purchase, which shall be a Business Day; (iii) the Contract Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Contract Period” (and which shall in no event end after the Revolving Facility Maturity Date); and (iv) the location and number of the Canadian Borrower’s account to which any funds are to be disbursed, which shall comply with the requirements of Section 2.07. If no Contract Period is specified with respect to any requested acceptance and purchase of   82 -------------------------------------------------------------------------------- B/As, then the Canadian Borrower shall be deemed to have selected a Contract Period of 30 days’ duration. Promptly following receipt of a request in accordance with this paragraph, the Administrative Agent shall advise each Canadian Tranche Lender of the details thereof and of the amount of B/As to be accepted and purchased by such Lender. (d) The Canadian Borrower hereby appoints each Canadian Tranche Lender as its attorney to sign and endorse on its behalf, manually or by facsimile or mechanical signature, as and when deemed necessary by such Lender, blank forms of B/As. It shall be the responsibility of each Canadian Tranche Lender to maintain an adequate supply of blank forms of B/As for acceptance under this Agreement. The Canadian Borrower recognizes and agrees that all B/As signed and/or endorsed on its behalf by any Canadian Tranche Lender shall bind the Canadian Borrower as fully and effectually as if manually signed and duly issued by authorized officers of the Canadian Borrower. Each Canadian Tranche Lender is hereby authorized to issue such B/As endorsed in blank in such face amounts as may be determined by such Lender to comply with any request of the Canadian Borrower hereunder; provided that the aggregate face amount thereof is equal to the aggregate face amount of B/As required to be accepted by such Lender. No Canadian Tranche Lender shall be liable for any damage, loss or claim arising by reason of any loss or improper use of any such instrument unless such loss or improper use results from the gross negligence or willful misconduct of such Lender. Each Canadian Tranche Lender shall maintain a record with respect to B/As (i) received by it from the Administrative Agent in blank hereunder, (ii) voided by it for any reason, (iii) accepted and purchased by it hereunder and (iv) canceled at their respective maturities. Upon request by the Canadian Borrower, a Lender shall cancel all forms of B/A that have been pre-signed or pre-endorsed on behalf of the Canadian Borrower and that are held by such Lender and are not required to be issued pursuant to this Agreement. (e) Drafts of the Canadian Borrower to be accepted as B/As hereunder shall be signed as set forth in paragraph (d) above. Notwithstanding that any person whose signature appears on any B/A may no longer be an authorized signatory for any of the Lenders or the Canadian Borrower at the date of issuance of such B/A, such signature shall nevertheless be valid and sufficient for all purposes as if such authority had remained in force at the time of such issuance and any such B/A so signed shall be binding on the Canadian Borrower. (f) Upon acceptance of a B/A by a Lender, such Lender shall purchase, or arrange the purchase of, such B/A from the Canadian Borrower at the Discount B/A Rate for such Lender applicable to such B/A accepted by it and provide to the Administrative Agent the Discount Proceeds (net of applicable acceptance fees) for the account of the Canadian Borrower as provided in Section 2.07. The acceptance fee payable by the Canadian Borrower to a Lender under Section 2.13(c) in respect of each B/A accepted by such Lender shall be set off against the Discount Proceeds payable by such Lender under this paragraph. Notwithstanding the foregoing, in the case of any B/A Drawing resulting from the conversion or continuation of a B/A Drawing or Canadian Tranche Revolving Facility Loan pursuant to Section 2.08, the net amount that would otherwise be payable to the Canadian Borrower by each Lender pursuant to this paragraph will be applied as provided in Section 2.08(f).   83 -------------------------------------------------------------------------------- (g) Each Lender may at any time and from time to time hold, sell, rediscount or otherwise dispose of any or all B/A’s accepted and purchased by it hereunder. (h) Each B/A accepted and purchased hereunder shall mature at the end of the Contract Period applicable thereto. (i) The Canadian Borrower waives presentment for payment and any other defense to payment of any amounts due to a Lender in respect of a B/A accepted and purchased by it pursuant to this Agreement that might exist solely by reason of such B/A being held, at the maturity thereof, by such Lender in its own right and the Canadian Borrower agrees not to claim any days of grace if such Lender as holder sues the Canadian Borrower on the B/A for payment of the amounts payable by the Canadian Borrower thereunder. On the specified maturity date of a B/A, or such earlier date as may be required pursuant to the provisions of this Agreement, the Canadian Borrower shall pay the Lender that has accepted and purchased such B/A the full face amount of such B/A, and after such payment the Canadian Borrower shall have no further liability in respect of such B/A and such Lender shall be entitled to all benefits of, and be responsible for all payments due to third parties under, such B/A. (j) At the option of the Canadian Borrower and any Lender, B/As under this Agreement to be accepted by that Lender may be issued in the form of depository bills for deposit with The Canadian Depository for Securities Limited pursuant to the Depository Bills and Notes Act (Canada) or bills of exchange pursuant to the Bills of Exchange Act. All depository bills so issued and all bills of exchange shall be governed by the provisions of this Section 2.06. If a Canadian Tranche Lender is not a bank under the Bank Act (Canada) or if a Canadian Tranche Lender notifies the Administrative Agent in writing that it is otherwise unable to accept B/As, such Canadian Tranche Lender will, instead of accepting and purchasing B/As, make a Loan (a “B/A Equivalent Loan”) to the Canadian Borrower in the amount and for the same term as the draft that such Canadian Tranche Lender would otherwise have been required to accept and purchase hereunder. Each such Canadian Tranche Lender will provide to the Administrative Agent the Discount Proceeds of such B/A Equivalent Loan for the account of the Canadian Borrower in the same manner as such Canadian Tranche Lender would have provided the Discount Proceeds in respect of the draft that such Canadian Tranche Lender would otherwise have been required to accept and purchase hereunder. Each such B/A Equivalent Loan will bear interest at the same rate that would result if such Canadian Tranche Lender had accepted (and been paid an acceptance fee) and purchased (on a discounted basis) a B/A for the relevant Contract Period (it being the intention of the parties that each such B/A Equivalent Loan shall have the same economic consequences for the Lenders and the Canadian Borrower as the B/A that such B/A Equivalent Loan replaces). All such interest shall be paid in advance on the date such B/A Equivalent Loan is made, and will be deducted from the principal amount of such B/A Equivalent Loan in the same amount and manner in which the deduction based on the Discount B/A Rate and the applicable acceptance fee of a B/A would be deducted from the face amount of the B/A. Subject to the repayment requirements of this Agreement, on   84 -------------------------------------------------------------------------------- the last day of the relevant Contract Period for such B/A Equivalent Loan, the Canadian Borrower shall be entitled to convert each such B/A Equivalent Loan into another type of Loan, or to roll over each such B/A Equivalent Loan into another B/A Equivalent Loan, all in accordance with the applicable provisions of this Agreement. (k) All B/As outstanding under the May 2006 Credit Agreement on the Amendment Effective Date shall remain outstanding hereunder on the terms set forth herein, except as otherwise provided herein. SECTION 2.07. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it and disburse the Discount Proceeds (net of applicable acceptance fees) of each B/A to be accepted and purchased 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 or Discount Proceeds (net of applicable acceptance fees) available to the applicable Borrower by promptly crediting the amounts so received, in like funds, to an account of such Borrower designated by such Borrower in the applicable Borrowing Request; provided that ABR Revolving Loans, Base Rate Revolving Borrowings 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 Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing or acceptance and purchase of B/As that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing or the applicable Discount Proceeds (net of applicable acceptance fees), 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 applicable Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing or the applicable Discount Proceeds (net of applicable acceptance fees) available to the Administrative Agent, then the applicable Lender and the applicable 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 such Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of (A) (1) in the case of a Borrowing by the U.S. Borrower, the Federal Funds Effective Rate, and (2) in the case of any other amount, the rate reasonably determined by the Administrative Agent to be the cost to it of funding such amount, and (B) a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, (ii) in the case of a Borrower, (1) if such amount is a Borrowing made to the U.S. Borrower, the interest rate applicable to ABR Loans, (2) if such amount is a Borrowing made in U.S. Dollars to the Canadian Borrower, the interest rate applicable to U.S. Base Rate Loans, (3) if such amount is a B/A Drawing or a Canadian Dollar-denominated Borrowing made to the Canadian Borrower, the interest rate applicable to Canadian Base Rate Loans and (4) if such amount is a Borrowing made to the Dutch Borrower or a U.K. Borrower, the interest rate applicable to the applicable Base Rate Loans. If such Lender pays such amount to the Administrative   85 -------------------------------------------------------------------------------- Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing or such Lender’s purchase of B/As. If such Borrower pays such amount to the Administrative Agent, then such amount shall constitute a reduction of such Borrowing or of the face amount of such B/As. SECTION 2.08. 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. Each B/A Drawing shall have a Contract Period as specified in the applicable request therefor. Thereafter, the applicable Borrower may elect to convert such Borrowing or B/A Drawing to a different Type or to continue such Borrowing or B/A Drawing and, in the case of a Eurocurrency Borrowing, may elect Interest Periods therefor, all as provided in this Section, it being understood that no B/A Drawing may be converted or continued other than at the end of the Contract Period applicable thereto. The applicable Borrower may elect different options with respect to different portions of the affected Borrowing or B/A Drawing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing or accepting B/As comprising such B/A Drawing, as the case may be, and the Loans or B/As resulting from an election made with respect to any such portion shall be considered a separate Borrowing or B/A Drawing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued. (b) To make an election pursuant to this Section, a Borrower shall notify the Administrative Agent of such election (as provided in Section 9.01 and, unless otherwise agreed upon by the Administrative Agent, in Schedule 2.03) by telephone (i) in the case of an election that would result in a Borrowing, 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 and (ii) in the case of an election that would result in a B/A Drawing or the continuation of a B/A Drawing, by the time that a request would be required under Section 2.06 if such Borrower were requesting an acceptance and purchase of B/As 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 applicable Borrower. Notwithstanding any other provision of this Section, no Borrower shall be permitted to (i) change the currency of any Borrowing, (ii) elect an Interest Period for Eurocurrency Loans that does not comply with Section 2.02(d) or Contract Period for B/As that does not comply with 2.06(c)(iii) or (iii) convert any Borrowing or B/A Drawing to a Borrowing or B/A Drawing not available under the Class of Commitments pursuant to which such Borrowing or B/A Drawing was made. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing or B/A Drawing 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 or B/A Drawing   86 -------------------------------------------------------------------------------- (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing or B/A Drawing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting outstanding credit extension is to be an ABR Borrowing, a Eurocurrency Borrowing, a Base Rate Borrowing or a B/A Drawing; and (iv) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”, and in the case of an election of a B/A Drawing, the Contract Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Contract Period”. If any such Interest Election Request requests a Eurocurrency Borrowing or a B/A Drawing but does not specify an Interest Period or a Contract Period, then the applicable Borrower shall be deemed to have selected an Interest Period or Contract Period, as applicable, of one month’s or 30 days’ duration, as applicable. (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 or B/A Drawing. (e) If a Borrower fails to deliver a timely Interest Election Request with respect to a Eurocurrency Borrowing or a B/A Drawing prior to the end of the Interest Period or Contract Period applicable thereto, then, unless such Borrowing or B/A Drawing is repaid as provided herein, at the end of such Interest Period such Borrowing or B/A Drawing shall (i) in the case of a Borrowing denominated in U.S. Dollars by the U.S. Borrower, be converted to an ABR Borrowing, (ii) in the case of a Borrowing by the Dutch Borrower or a U.K. Borrower, be continued as a Base Rate Borrowing, (iii) in the case of a Borrowing denominated in U.S. Dollars by the Canadian Borrower, be converted to a U.S. Base Rate Borrowing, and (iv) in the case of a Borrowing or B/A Drawing denominated in Canadian Dollars, be converted to a Canadian Base Rate 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 U.S. 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 (A) in the case of such a Borrowing by the U.S. Borrower, be converted to an ABR Borrowing at the end of the Interest Period applicable thereto, (B) in the case of such a Borrowing by the Canadian Borrower, be converted to a U.S. Base Rate Borrowing at the end of the Interest Period applicable thereto or (C) in the case of such a Borrowing by the Dutch Borrower or a U.K. Borrower, be continued as a Base Rate Borrowing.   87 -------------------------------------------------------------------------------- (f) Upon the conversion of any Canadian Tranche Borrowing (or portion thereof), or the continuation of any B/A Drawing (or portion thereof), to or as a B/A Drawing, the net amount that would otherwise be payable to the Canadian Borrower by each Lender pursuant to Section 2.06(f) in respect of such new B/A Drawing shall be applied against the principal of the Canadian Tranche Revolving Facility Loan made by such Lender as part of such Canadian Tranche Borrowing (in the case of a conversion), or the reimbursement obligation owed to such Lender under Section 2.06(i) in respect of the B/As accepted by such Lender as part of such maturing B/A Drawing (in the case of a continuation), and the Canadian Borrower shall pay to such Lender an amount equal to the difference between the principal amount of such Canadian Tranche Revolving Facility Loan or the aggregate face amount of such maturing B/As, as the case may be, and such net amount. SECTION 2.09. Termination and Reduction of Commitments; Return of Tranche C-3 Credit-Linked Deposits. (a) Unless previously terminated, (i) the Revolving Facility Commitments shall terminate on the Revolving Facility Maturity Date, (ii) the Tranche C-4 Initial Term Loan Commitments shall terminate at 5:00 p.m., New York City time, on the Amendment Effective Date and (iii) the Tranche C-4 Delayed Draw Term Loan Commitments shall terminate at 5:00 p.m., New York City time, on the Delayed Draw Expiration Date. (b) Any Borrower may at any time terminate, or from time to time reduce, the Tranche C-4 Delayed Draw Term Loan Commitments or the Commitments of any Tranche of the Revolving Facility Commitments; provided that (i) each reduction of the Commitments of any Class 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 any such Tranche of the Revolving Facility Commitments) and (ii) the Borrowers shall not terminate or reduce any Tranche of the Revolving Facility Commitments if, after giving effect to any concurrent prepayment of the Revolving Facility Loans in accordance with Section 2.12, (A) the total European Tranche Revolving Facility Exposure would exceed the total European Tranche Commitments, (B) the total Canadian Tranche Revolving Facility Exposure would exceed the total Canadian Tranche Commitments or (C) the total U.S. Tranche Revolving Facility Exposure would exceed the total U.S. Tranche Commitments. The U.S. Borrower may at any time or from time to time direct the Administrative Agent to reduce the Total Tranche C-3 Credit-Linked Deposit; provided that (i) each reduction of the Tranche C-3 Credit-Linked Deposits 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 Total Tranche C-3 Credit-Linked Deposit) and (ii) the U.S. Borrower shall not direct the Administrative Agent to reduce the Tranche C-3 Credit-Linked Deposits if, after giving effect to such reduction (and to the provisions of Section 2.05(a)), the aggregate Tranche C-3 L/C Exposure would exceed the Total Tranche C-3 Credit-Linked Deposit or the European Tranche Revolving Facility Exposure would exceed the total European Tranche Commitments. In the event the Tranche C-3 Credit-Linked Deposits shall be reduced as provided in the immediately preceding sentence, the Administrative Agent will return all amounts in the Tranche C-3 Credit-Linked Deposit Account in excess of the reduced Total Tranche C-3 Credit-Linked Deposit to the Tranche C-3 Lenders, ratably in accordance with their Tranche C-3 Percentages of the Total Tranche C-3 Credit-Linked Deposit (as determined immediately prior to such reduction).   88 -------------------------------------------------------------------------------- (c) The applicable Borrower shall notify the Administrative Agent of any election to terminate or reduce the Revolving Facility Commitments or the Total Tranche C-3 Credit-Linked Deposit 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 a Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of any Tranche of the Revolving Facility Commitments or of a reduction of the Total Tranche C-3 Credit-Linked Deposit to zero delivered by a Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by such 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 of any Class or reduction of the Total Tranche C-3 Credit-Linked Deposit pursuant to this Section 2.09 shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class. SECTION 2.10. Repayment of Loans and B/As; Evidence of Debt. (a) Each Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Revolving Facility Lender the then unpaid principal amount of each Revolving Facility Loan of such Lender to such Borrower on the 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 to such Borrower as provided in Section 2.11, (iii) in the case of the Canadian Borrower, to the Administrative Agent for the account of each Lender the face amount of each B/A, if any, accepted by such Lender from the Canadian Borrower as provided in Section 2.06(i), and (iv) to the Swingline Lender the then unpaid principal amount of each Swingline Loan to such Borrower on the earlier of (x) the Revolving Facility Maturity Date, (y) 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 and (z) in the case of a Swingline Loan to the Dutch Borrower or a U.K. Borrower, the last day of the Interest Period applicable to such Swingline Loan; provided that on each date that a Revolving Borrowing is made by the U.S. Borrower, the U.S. 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 or B/A accepted by such Lender, including the amounts and currencies 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 currency thereof, the Class and Type thereof and the Interest Period (if any) applicable thereto, and the amount of each B/A and the Contract Period applicable thereto, (ii) the amount of any principal or interest, or other amount in respect of any B/A, due and payable or to become due and payable from each Borrower to each Lender hereunder and (iii) any amount received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.   89 -------------------------------------------------------------------------------- (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, currencies 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 of any Class made by it be evidenced by a promissory note (a “Note”). In such event, each Borrower under such Class 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 and reasonably acceptable to the applicable Borrower. 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). SECTION 2.11. Repayment of Term Loans, B/As, Revolving Facility Loans and Tranche C-3 Credit-Linked Deposits. (a) (i) Subject to the other paragraphs of this Section, the U.S. Borrower shall repay Tranche C-1 Term Borrowings and Tranche C-4 Term Borrowings and the Dutch Borrower shall repay Tranche C-2 Term Borrowings on each date set forth below (each such date being referred to as a “Term Loan Installment Date”) (x) in the case of Tranche C-1 Term Borrowings, in the aggregate principal amount equal to the product of (A) the percentage set forth below opposite such Term Loan Installment Date and (B) the aggregate principal amount of the Tranche C-1 Term Loans made on or prior to June 15, 2006, (y), in the case of Tranche C-2 Term Borrowings, in the aggregate principal amount equal to the product of (A) the percentage set forth below opposite such Term Loan Installment Date and (B) the aggregate principal amount of the Tranche C-2 Term Loans made on the May 2006 Amendment Effective Date, and (z) in the case of Tranche C-4 Term Borrowings, in the aggregate principal amount equal to the product of (A) the percentage set forth below opposite such Term Loan Installment Date and (B) the sum of (I) the aggregate principal amount of the Tranche C-4 Initial Term Loans made on the Amendment Effective Date and (II) the aggregate principal amount of Tranche C-4 Delayed Draw Term Loans made on or prior to the earlier of the Delayed Draw Expiration Date and such Term Loan Installment Date:   Date    Amount of Tranche C-1 Term Borrowings to Be Repaid     Amount of Tranche C-2 Term Borrowings to Be Repaid     Amount of Tranche C-4 Term Borrowings to Be Repaid   September 30, 2006    0.25 %   0.25 %   —     December 31, 2006    0.25 %   0.25 %   0.25 % March 31, 2007    0.25 %   0.25 %   0.25 % June 30, 2007    0.25 %   0.25 %   0.25 % September 30, 2007    0.25 %   0.25 %   0.25 % December 31, 2007    0.25 %   0.25 %   0.25 % March 31, 2008    0.25 %   0.25 %   0.25 % June 30, 2008    0.25 %   0.25 %   0.25 % September 30, 2008    0.25 %   0.25 %   0.25 % December 31, 2008    0.25 %   0.25 %   0.25 % March 31, 2009    0.25 %   0.25 %   0.25 % June 30, 2009    0.25 %   0.25 %   0.25 % September 30, 2009    0.25 %   0.25 %   0.25 % December 31, 2009    0.25 %   0.25 %   0.25 % March 31, 2010    0.25 %   0.25 %   0.25 % June 30, 2010    0.25 %   0.25 %   0.25 % September 30, 2010    0.25 %   0.25 %   0.25 % December 31, 2010    0.25 %   0.25 %   0.25 % March 31, 2011    0.25 %   0.25 %   0.25 % June 30, 2011    0.25 %   0.25 %   0.25 % September 30, 2011    0.25 %   0.25 %   0.25 % December 31, 2011    0.25 %   0.25 %   0.25 % March 31, 2012    0.25 %   0.25 %   0.25 % June 30, 2012    0.25 %   0.25 %   0.25 % September 30, 2012    0.25 %   0.25 %   0.25 % December 31, 2012    0.25 %   0.25 %   0.25 % March 31, 2013    0.25 %   0.25 %   0.25 % Term Facility Maturity Date    93.25 %   93.25 %   93.50 %   90 -------------------------------------------------------------------------------- To the extent not previously paid, outstanding Term Loans shall be due and payable on the Term Facility Maturity Date. (ii) In the event that any Incremental Term Loans are made on an Increased Amount Date, the U.S. Borrower shall repay such Incremental Term Loans on the dates and in the amounts set forth in the Incremental Assumption Agreement. (b) To the extent not previously paid, outstanding Revolving Facility Loans shall be due and payable on the Revolving Facility Maturity Date; provided that any Other Revolving Facility Loans shall be due and payable as set forth in the relevant Incremental Assumption Agreement. (c) Prepayment of the Borrowings from: (i) all Net Proceeds pursuant to Section 2.12(b) and Excess Cash Flow pursuant to Section 2.12(c) to be applied to prepay Term Borrowings of any Class shall be applied (1) to reduce in forward order of maturity the next eight unpaid scheduled amortization payments under paragraph (a) above in respect of the Term Borrowings of such Class, and (2) thereafter, to reduce on a pro rata basis (based on the amount of such amortization payments) the remaining scheduled amortization payments in respect of the Term Borrowings of such Class. (ii) any optional prepayments of the Term Loans pursuant to Section 2.12(a) shall be applied to the remaining installments thereof as directed by the U.S. Borrower.   91 -------------------------------------------------------------------------------- (d) Prior to any repayment of any Borrowing or amounts owing in respect of outstanding B/A Drawings, or any reduction of Tranche C-3 Credit-Linked Deposits, hereunder, the applicable Borrower shall select the Borrowing or Borrowings, B/A Drawing or B/A Drawings and/or Tranche C-3 Credit-Linked Deposits to be repaid or reduced and shall notify the Administrative Agent by telephone (confirmed by telecopy) of such selection (i) in the case of an ABR Borrowing, a Base Rate Borrowing or a B/A Drawing, not later than 12:00 p.m., Local Time, one Business Day before the scheduled date of such repayment and (ii) in the case of a Eurocurrency Borrowing or Tranche C-3 Credit-Linked Deposit, not later than 11:00 a.m., Local Time, three Business Days before the scheduled date of such repayment or reduction. Any mandatory prepayment of Term Borrowings shall be applied so that the aggregate amount of such prepayment is allocated among the Tranche C-1 Term Borrowings, Tranche C-2 Term Borrowings, Tranche C-4 Term Borrowings and Other Term Loans of each Class, if any, pro rata based on the aggregate principal amount of outstanding Borrowings of each such Class. In the case of prepayments under Section 2.12(a), the Borrowers may in their sole discretion select the Borrowing or Borrowings to be prepaid. Each repayment of a Borrowing or amounts owing in respect of outstanding B/A Drawings shall be applied ratably to the Loans included in the repaid Borrowing or the B/As included in such B/A Drawing and each reduction of the Total Tranche C-3 Credit-Linked Deposit shall be applied ratably to the Tranche C-3 Credit-Linked Deposits of the Tranche C-3 Lenders. Notwithstanding anything to the contrary in the immediately preceding sentence, prior to any repayment of a Swingline Borrowing hereunder, the U.S. 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 12:00 p.m., Local Time, on the scheduled date of such repayment. Repayments of Borrowings shall be accompanied by accrued interest on the amount repaid. (e) For the avoidance of doubt, and notwithstanding anything to the contrary set forth in this Section 2.11 (including the amortization schedule set forth above), if the original Term Facility Maturity Date and the original Revolving Facility Maturity Date shall be changed to an earlier date pursuant to the provisos to the definitions of the terms Term Facility Maturity Date and Revolving Facility Maturity Date, then, to the extent not previously paid, outstanding Term Loans, Revolving Facility Loans, B/As and Swingline Loans shall be due and payable on such earlier date; provided that any Other Revolving Facility Loans and Other Term Loans shall be due and payable as set forth in the relevant Incremental Assumption Agreement. (f) Amounts to be applied pursuant to this Section or Section 7.01 to prepay or repay amounts to become due with respect to outstanding B/As shall be deposited in the Prepayment Account (as defined below). On the last day of the Contract Period of each B/A to be prepaid or repaid, the Administrative Agent shall apply any cash on deposit in the Prepayment Account to amounts due in respect of the relevant B/As until all amounts due in respect of the relevant outstanding B/As have been satisfied (with any remaining funds being returned to the Canadian Borrower) or until all the allocable cash on deposit has been exhausted. For purposes of this Agreement, the term “Prepayment Account” shall mean an account established by the Canadian Borrower with the Administrative Agent and over which the Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal for application in accordance with this paragraph (f). The   92 -------------------------------------------------------------------------------- Administrative Agent will, at the request of the Canadian Borrower, use commercially reasonable efforts to invest amounts on deposit in the Prepayment Account in short-term, cash equivalent investments selected by the Administrative Agent in consultation with the Canadian Borrower that mature prior to the last day of the applicable Contract Periods of the B/As to be prepaid; provided that the Administrative Agent shall have no obligation to invest amounts on deposit in the Prepayment Account if a Default or Event of Default shall have occurred and be continuing. The Canadian Borrower shall indemnify the Administrative Agent for any losses relating to the investments made at the request or direction of the Canadian Borrower so that the amount available to prepay amounts due in respect of B/As on the last day of the applicable Contract Period is not less than the amount that would have been available had no investments been made pursuant thereto. Other than any interest earned on such investments (which shall be for the account of the Canadian Borrower, to the extent not necessary for the prepayment of B/As in accordance with this Section), the Prepayment Account shall not bear interest. Interest or profits, if any, on such investments shall be deposited in the Prepayment Account and reinvested and disbursed as specified above. If the maturity of the Loans and all amounts due hereunder has been accelerated pursuant to Section 7.01, the Administrative Agent may, in its sole discretion, apply all amounts on deposit in the Prepayment Account to satisfy any of the Obligations of the Canadian Borrower in respect of Canadian Tranche Loans and B/As (and the Canadian Borrower hereby grants to the Administrative Agent a security interest in the Prepayment Account to secure such Obligations). (g) The Administrative Agent shall return Tranche C-3 Credit-Linked Deposits in the aggregate amount of $500,000 to the Tranche C-3 Lenders on June 30 of each year, beginning on June 30, 2006. To the extent not previously returned, all Tranche C-3 Credit-Linked Deposits shall be returned to the Tranche C-3 Lenders on the Tranche C-3 Maturity Date. Any optional return of Tranche C-3 Credit-Linked Deposits effected pursuant to Section 2.09 shall be applied to reduce the subsequent scheduled returns of Tranche C-3 Credit-Linked Deposits to be effected pursuant to this Section as directed by the U.S. Borrower. Each return of Tranche C-3 Credit-Linked Deposits pursuant to this Section 2.11(g) shall be accompanied by accrued interest on the amount of Tranche C-3 Credit-Linked Deposits paid to but excluding the date of return. SECTION 2.12. Prepayment of Loans. (a) The Borrowers 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 2.17), 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 2.11(d). (b) The U.S. Borrower shall apply all Net Proceeds promptly upon receipt thereof to prepay Term Borrowings in accordance with paragraphs (c) and (d) of Section 2.11; provided that the U.S. Borrower shall not be so required to apply cash proceeds that constitute Net Proceeds pursuant to clause (b) of the definition thereof to prepay Term Borrowings if, on the date of receipt thereof, and after giving effect to the incurrence, issuance or sale of Indebtedness that produces such Net Proceeds on a Pro Forma Basis, the Senior Secured Bank Leverage Ratio on the last day of the U.S.   93 -------------------------------------------------------------------------------- Borrower’s then most recently completed fiscal quarter for which financial statements are available shall be less than or equal to 3.00 to 1.00. (c) Within five (5) Business Days after financial statements are required to be delivered under Section 5.04(a) with respect to each Excess Cash Flow Period (commencing with the Excess Cash Flow Period beginning on January 1, 2008), the U.S. Borrower shall calculate Excess Cash Flow for such Excess Cash Flow Period and shall apply an amount equal to the amount by which (A) the Required Percentage of such Excess Cash Flow exceeds (B) the aggregate principal amount of voluntary prepayments of Term Loans pursuant to Section 2.12(a) and permanent voluntary reductions of Revolving Facility Commitments pursuant to Section 2.09(b) to the extent that an equal amount of Revolving Facility Loans was simultaneously repaid pursuant to Section 2.12(a), in each case during such Excess Cash Flow Period, to prepay Term Borrowings in accordance with paragraphs (c) and (d) of Section 2.11. Not later than the date on which the payment is required to be made pursuant to the foregoing sentence for each applicable Excess Cash Flow Period, the U.S. Borrower will deliver to the Administrative Agent a certificate signed by a Financial Officer of the U.S. Borrower setting forth the amount, if any, of Excess Cash Flow for such fiscal year and the calculation thereof in reasonable detail. (d) (i) In the event and on such occasion that (A) the total European Tranche Revolving Facility Exposure exceeds the total European Tranche Commitments, (B) the total Canadian Tranche Revolving Facility Exposure exceeds the total Canadian Tranche Commitments or (C) the total U.S. Tranche Revolving Facility Exposure exceeds the total U.S. Tranche Commitments, the Borrowers under the applicable Tranche shall prepay Revolving Borrowings or Swingline Borrowings (or, if no such Borrowings are outstanding, deposit cash collateral in an account with the Administrative Agent pursuant to Section 2.05(j)) in an aggregate amount equal to such excess; provided that if such excess arises solely as a result of currency rate fluctuations, such prepayment or deposit, as the case may be, shall not be required to be made until the third Business Day after the Administrative Agent shall have delivered to the Borrowers written notice of such required prepayment or deposit. SECTION 2.13. Fees. (a) (i) The U.S. Borrower agrees to pay to each Lender in respect of a Tranche of Revolving Loans (other than any Defaulting Lender), through the Administrative Agent, three 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 Revolving Facility Commitments of all the Lenders in respect of such Tranche shall be terminated as provided herein, a commitment fee (a “Commitment Fee”) on the daily amount of the Available Unused Commitment of such Lender attributable to such Tranche during the preceding quarter (or other period ending with the date on which the last of the Commitments of such Lender in respect of such Tranche shall be terminated) at a rate equal to 0.50% per annum. 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 Fee, the outstanding Swingline Loans during the period for which such Lender’s Commitment Fee is calculated shall be deemed to be zero. The Commitment Fee due to each Lender in respect of any Tranche of Revolving Loans shall commence to accrue on the Closing Date and shall cease to accrue on the   94 -------------------------------------------------------------------------------- date on which the last of the Commitments of such Lender in respect of such Tranche shall be terminated as provided herein. For purposes of computing the average daily amount of any Revolving L/C Exposure for any period under this Section 2.13(a)(i) and under Section 2.13(b), the average daily amount of Alternative Currency Revolving L/C Exposure for such period shall be calculated by multiplying (i) the average daily balance of each Alternative Currency Letter of Credit (expressed in the currency in which such Alternative Currency Letter of Credit is denominated) by (ii) the Exchange Rate for the Alternative Currency in which such Letter of Credit is denominated in effect on the last Business Day of such period or by such other reasonable method that the Administrative Agent deems appropriate. Any Commitment Fee paid in respect of the Canadian Tranche (i) shall be paid to each Canadian Tranche Lender’s Canadian Lending Office to the extent paid by the Canadian Borrower and (ii) shall be paid to each Canadian Tranche Lender’s U.S. Lending Office to the extent paid by the U.S. Borrower. (ii) The U.S. Borrower agrees to pay to each Tranche C-4 Lender, through the Administrative Agent, a commitment fee, three 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 Tranche C-4 Delayed Draw Term Loan Commitments of all the Tranche C-4 Lenders shall be terminated as provided herein, which shall accrue at a rate equal to 0.50% per annum, on the average daily unused amount of the Tranche C-4 Delayed Draw Term Loan Commitment of such Tranche C-4 Lender during the period from and including the Amendment Effective Date to the Delayed Draw Expiration Date. (b) The U.S. Borrower from time to time agrees to pay (i) to each Revolving Facility Lender (other than any Defaulting Lender) in respect of a Tranche, through the Administrative Agent, three 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 Revolving Facility Commitments in respect of such Tranche of all the Lenders shall be terminated as provided herein, a fee (an “L/C Participation Fee”) on such Lender’s Tranche Percentage of the daily aggregate Revolving L/C Exposure with respect to such Tranche (excluding the portion thereof attributable to unreimbursed Revolving L/C Disbursements), during the preceding quarter (or shorter period ending with the Revolving Facility Maturity Date or the date on which the Revolving Facility Commitments in respect of such Tranche shall be terminated) at the rate per annum equal to the Applicable Margin for Eurocurrency Revolving Borrowings effective for each day in such period (provided that, solely in respect of the CIGNA L/C, such rate per annum shall be equal to such Applicable Margin minus 0.50%) and (ii) to each Issuing Bank in respect of any Tranche of the Revolving Facility, for its own account, (x) three 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 Revolving Facility Commitments in respect of such Tranche of all the Lenders shall be terminated as provided herein, a fronting fee in respect of each Revolving Letter of Credit issued by such Issuing Bank for the period from and including the date of issuance of such Revolving Letter of Credit to and including the termination of such Revolving Letter of Credit, computed at a rate equal to 1/4 of 1% per annum of the daily average stated amount of such Revolving Letter of Credit (or as otherwise agreed with such Issuing Bank), plus (y) in connection with the issuance, amendment or transfer of any such Letter of Credit or any Revolving L/C Disbursement thereunder, such Issuing Bank’s customary documentary and   95 -------------------------------------------------------------------------------- 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 Canadian Borrower agrees to pay to the Administrative Agent, for the account of each Canadian Tranche Lender, on each date on which B/As drawn by the Canadian Borrower are accepted hereunder, in Canadian Dollars, an acceptance fee computed by multiplying the face amount of each such B/A by the product of (i) the Applicable Margin for B/A Drawings on such date and (ii) a fraction, the numerator of which is the number of days in the Contract Period applicable to such B/A and the denominator of which is 365. (d) The U.S. Borrower agrees to pay (i) in addition to the fees payable to the Tranche C-3 Lenders pursuant to Section 2.23(b), to the Administrative Agent for the account of each Tranche C-3 Lender, three 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 Tranche C-3 Credit-Linked Deposit shall be terminated as provided herein, a participation fee with respect to its participations in Tranche C-3 Letters of Credit, which shall accrue at the Applicable Margin from time to time in effect in respect of Eurocurrency Term Loans on the daily amount of such Tranche C-3 Lender’s Tranche C-3 Credit-Linked Deposit during the period from and including the Amendment Effective Date to but excluding the date on which the entire amount of such Lender’s Tranche C-3 Credit-Linked Deposit is returned to it and (ii) to each Issuing Bank, for its own account, (x) three 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 Tranche C-3 Credit-Linked Deposits shall be terminated as provided herein, a fronting fee in respect of each Tranche C-3 Letter of Credit issued by such Issuing Bank for the period from and including the date of issuance of such Tranche C-3 Letter of Credit to and including the termination of such Tranche C-3 Letter of Credit, computed at a rate equal to 1/4 of 1% per annum of the daily average stated amount of such Tranche C-3 Letter of Credit (or as otherwise agreed with such Issuing Bank), plus (y) in connection with the issuance, amendment or transfer of any such Letter of Credit or any Tranche C-3 L/C Disbursement thereunder, such Issuing Bank’s customary documentary and processing charges; provided that all such fees shall be payable on the date on which the Tranche C-3 Credit-Linked Deposits are returned to the Tranche C-3 Lenders and any such fees accruing after the date on which the Tranche C-3 Credit-Linked Deposits are returned to the Tranche C-3 Lenders shall be payable on demand. Any other fees payable to any Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand. All participation fees and fronting fees in respect of Tranche C-3 Letters of Credit that are payable on a per annum basis shall be computed on the basis of the number of days elapsed in a year of 360 days. (e) The U.S. Borrower agrees to pay to the Administrative Agent, for the account of the Administrative Agent, the fees set forth in the Fee Letter dated as of October 11, 2006, as amended, restated, supplemented or otherwise modified from time to time, at the times specified therein (the “Administrative Agent Fees”).   96 -------------------------------------------------------------------------------- (f) 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 2.14. Interest. (a) The Loans comprising each ABR Borrowing (including each Swingline Loan to the U.S. Borrower) shall bear interest at the ABR plus the Applicable Margin, the Loans comprising each U.S. Base Rate Borrowing shall bear interest at the U.S. Base Rate plus the Applicable Margin, the Loans comprising each Canadian Base Rate Borrowing shall bear interest at the Canadian Base Rate plus the Applicable Margin and the Loans comprising each other Base Rate Borrowing (including each Swingline Loan to the Dutch Borrower or a U.K. Borrower) shall bear interest at the applicable Base Rate plus the Applicable Margin. (b) The Loans comprising each Eurocurrency Borrowing shall bear interest at the Adjusted Eurocurrency Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin. (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or Tranche C-3 L/C Disbursements or any Fees or other amount payable by the applicable 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, (ii) in the case of overdue unreimbursed amounts with respect to any Tranche C-3 L/C Disbursement, 2% plus the rate otherwise applicable to such Tranche C-3 L/C Disbursement as provided in Section 2.05(h) or (iii) in the case of any other amount, 2% plus the interest rate that would have applied had such amount, during the period of non-payment, constituted (A) in the case of an amount owed by the U.S. Borrower, an ABR Loan or (B) in the case of any other amount, a Base Rate Loan to the Borrower that owes such amount in the currency of the overdue amount; 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 Revolving Facility Loans in respect of any Tranche, upon termination of the Revolving Facility Commitments in respect of such Tranche and (iii) in the case of the Term Loans, on the Term Facility 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 Revolving Loan or a Base Rate Revolving Loan under any Tranche prior to the end of the Availability Period in respect of such Tranche), 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.   97 -------------------------------------------------------------------------------- (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that (i) interest on Loans denominated in Sterling and (ii) interest computed by reference to (A) the ABR at times when the ABR is based on the Prime Rate, (B) the U.S. Base Rate at times when the U.S. Base Rate is based on the rate described in clause (a) of the definition thereof or (C) the Canadian Base Rate, in each case shall be computed on the basis of a year of 365 days, 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 ABR, Adjusted Eurocurrency Rate or Base Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. (f) For the purposes of the Interest Act (Canada) and disclosure thereunder, whenever any interest or any fee to be paid hereunder or in connection herewith is to be calculated on the basis of a 360-day or 365-day year, the yearly rate of interest to which the rate used in such calculation is equivalent is the rate so used multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by 360 or 365, as the case may be. The rates of interest under this Agreement are nominal rates, and not effective rates or yields. The principle of deemed reinvestment of interest does not apply to any interest calculation under this Agreement. SECTION 2.15. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurocurrency Borrowing denominated in any currency or, with respect to the Benchmark LIBOR Rate, on any day: (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 Eurocurrency Rate, the LIBO Rate or the EURO LIBO Rate, as applicable, for such currency for such Interest Period or the Benchmark LIBOR Rate for such day, as applicable; or (b) the Administrative Agent is advised by the Required Lenders or the Majority Lenders under any Tranche that the Adjusted Eurocurrency Rate, the LIBO Rate or the EURO LIBO Rate, as applicable, for such currency for such Interest Period or the Benchmark LIBOR Rate for such day, as applicable, will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing or such Tranche C-3 Credit-Linked Deposit, as applicable, for such Interest Period or such day, as applicable; then the Administrative Agent shall give notice thereof to the Borrowers and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrowers and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurocurrency Borrowing denominated in such currency shall be ineffective and such Borrowing shall be converted to or continued as on the last day of the Interest Period applicable thereto (A) if such Borrowing is a Borrowing by the U.S. Borrower, an ABR Borrowing, and (B) if such Borrowing is a Borrowing by the Dutch Borrower or a U.K. Borrower, or a Canadian Tranche Borrowing denominated in U.S. Dollars, a Base Rate   98 -------------------------------------------------------------------------------- Borrowing, (ii) if any Borrowing Request requests a Eurocurrency Borrowing in such currency, (A) if such Borrowing is a Borrowing by the U.S. Borrower, such Borrowing shall be made as an ABR Borrowing, and (B) if such Borrowing is a Borrowing by the Dutch Borrower or a U.K. Borrower, or a Canadian Tranche Borrowing denominated in U.S. Dollars, a Base Rate Borrowing and (iii) the Tranche C-3 Credit-Linked Deposits shall be invested so as to earn a return equal to 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. SECTION 2.16. Increased Costs. Except for Taxes, which shall be governed exclusively by Section 2.18: (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 Eurocurrency Rate) 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 or B/A Drawings made by such Lender or any Letter of Credit or participation therein or any Tranche C-3 Credit-Linked Deposit; 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 obtaining funds for the purchase of B/As (or of maintaining its obligation to make any such Loan or to accept and purchase B/As) or to increase the cost to such Lender or Issuing Bank of participating in, issuing or maintaining any Letter of Credit or any Tranche C-3 Credit-Linked Deposit 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 applicable Borrower 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 or Swingline Loans held by, or Tranche C-3 Credit-Linked Deposits of, 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 Borrowers 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.   99 -------------------------------------------------------------------------------- (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 U.S. Borrower and shall be conclusive absent manifest error. The Borrowers 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 2.16, such Lender or Issuing Bank shall notify the U.S. 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 Borrowers 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 the U.S. 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 2.17. 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 a Borrower pursuant to Section 2.20 or the CAM Exchange, then, in any such event, the Borrowers 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 that would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted Eurocurrency 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 that would accrue on such principal amount for such period at the interest rate that such Lender would bid were it to bid, at the commencement of such period, for deposits in the applicable currency of a comparable amount and period from other banks in the Eurocurrency market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to 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 2.18. Taxes. (a) Any and all payments by or on account of any obligation of any Loan Party hereunder or under any other Loan Documents shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if a   100 -------------------------------------------------------------------------------- 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 payable under this Section) the Administrative Agent, any Lender or any Issuing Bank, as applicable, receives an amount equal to the sum it would have received had no such deductions 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) Any and all payments by or on account of any obligation of the Administrative Agent pursuant to Section 2.23(b) hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Administrative Agent shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the Administrative Agent shall so notify the U.S. Borrower and advise it of the additional amount required to be paid so that the sum payable by the Administrative Agent pursuant to Section 2.23(b) after making all required deductions (including deductions applicable to additional sums payable under this Section) to the Tranche C-3 Lenders is an amount from the Administrative Agent equal to the sum they would have received from the Administrative Agent had no deductions been made, (ii) the U.S. Borrower shall pay such additional amount to the Administrative Agent, (iii) the Administrative Agent shall make all required deductions, (iv) the Administrative Agent shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law and (v) the U.S. Borrower shall indemnify, within 10 days after written demand therefor, the Administrative Agent for the full amount of any deductions paid by the Administrative Agent with respect to any payments made on account of any obligation of the Administrative Agent pursuant to Section 2.23(b). (c) In addition, the Loan Parties shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (d) Each Loan Party shall indemnify the Administrative Agent, 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 the Administrative Agent, such Lender or such Issuing Bank, as applicable, on or with respect to any payment by or on account of any obligation of such Loan Party hereunder or under any other Loan Documents (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. (e) 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.   101 -------------------------------------------------------------------------------- (f) Any Foreign Lender that is entitled to an exemption from or reduction of withholding Tax under the law of the jurisdiction in which a Borrower under a Tranche in which such Lender participates 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 or as may reasonably be requested by such Borrower, such properly completed and executed documentation prescribed by applicable law 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 be disadvantageous to such Lender in any material respect. (g) If the Administrative Agent or a Lender determines, 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 2.18, 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 2.18 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender (including any Taxes imposed with respect to such refund) as is determined by the Administrative Agent or Lender in good faith and in its sole 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 the Administrative 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 the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This Section shall not be construed to require the Administrative Agent or any Lender to make available its Tax returns (or any other information relating to its Taxes which it deems confidential) to the Loan Parties or any other person. SECTION 2.19. 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, face amount of B/As, interest, fees or reimbursement of L/C Disbursements, or of amounts payable under Section 2.16, 2.17 or 2.18, 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 such Borrower by the Administrative Agent, except payments to be made directly to the applicable Issuing Bank or the Swingline Lender as expressly provided herein and except   102 -------------------------------------------------------------------------------- that payments pursuant to Sections 2.16, 2.17, 2.18 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 under each Loan Document of principal or interest in respect of any Loan or amounts owing in respect of any B/A Drawing (or of any breakage indemnity in respect of any Loan or B/A Drawing) shall be made in the currency of such Loan or B/A Drawing; all other payments hereunder and under each other Loan Document shall be made in U.S. Dollars, except as otherwise expressly provided herein. Any payment required to be made by the Administrative Agent hereunder shall be deemed to have been made by the time required if the 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 the 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, face amount of B/As, 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, face amount of B/As and unreimbursed L/C Disbursements then due from such Borrower hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal, face amount of B/As and unreimbursed L/C Disbursements then due to such parties. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Term Loans, Revolving Facility Loans, amounts owing in respect of B/A Drawings 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, Revolving Facility Loans, amounts owing in respect of B/A Drawings and participations in L/C Disbursements and Swingline Loans and accrued interest thereon under any Tranche than the proportion received by any other Lender under such Tranche, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Term Loans, Revolving Facility Loans, amounts owing in respect of B/A Drawings and participations in L/C Disbursements and Swingline Loans of other Lenders under such Tranche to the extent necessary so that the benefit of all such payments shall be shared by the Lenders under such Tranche ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Term Loans, Revolving Facility Loans, amounts owing in respect of B/A Drawings and participations in L/C Disbursements and Swingline Loans under such Tranche; 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 a Borrower pursuant to and in accordance with the   103 -------------------------------------------------------------------------------- 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 the U.S. 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 a 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 the greater of (A) (1) in the case of Loans to the U.S. Borrower, the Federal Funds Effective Rate, (2) in the case of any other Loans or amounts owing in respect of B/A Drawings, the rate reasonably determined by the Administrative Agent to be the cost to it of funding such amount, (3) in the case of any other amounts denominated in U.S. Dollars, the Federal Funds Effective Rate, and (4) in the case of any other amount denominated in a currency other than U.S. Dollars, the rate reasonably determined by the Administrative Agent to be the cost to it of funding such amount, and (B) 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), 2.07(b) or 2.19(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. SECTION 2.20. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.16, or if any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.18 or 2.23, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans or Tranche C-3 Credit-Linked Deposits 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 2.16, 2.18 or 2.23, 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   104 -------------------------------------------------------------------------------- respect. The applicable 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 2.16, or if any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.18 or 2.23, or is a Defaulting Lender, then the U.S. 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) the U.S. 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, amounts owing in respect of B/A Drawings 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, amounts owing in respect of B/A Drawings and accrued interest and fees) or the applicable 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 2.16 or payments required to be made pursuant to Section 2.18 or 2.23, such assignment will result in a reduction in such compensation or payments. Nothing in this Section 2.20 shall be deemed to prejudice any rights that a Borrower may have against any Lender that is a Defaulting Lender. (c) If any Lender (i) has failed to consent to a proposed amendment, waiver, discharge or termination that pursuant to the terms of Section 9.08 requires the consent of all the Lenders affected and with respect to which the Required Lenders shall have granted their consent or (ii) was in breach of its representation made pursuant to Section 9.22 (any such Lender referred to in clause (i) or (ii), a “Non-Consenting Lender”), then provided no Event of Default then exists, the U.S. Borrower shall have the right (unless in the case of clause (i) such Non-Consenting Lender grants such consent) to replace such Non-Consenting Lender by requiring such Non-Consenting Lender to assign its Loans, Commitments and unreimbursed Tranche C-3 Credit-Linked Deposits hereunder to one or more assignees reasonably acceptable to the Administrative Agent; provided that: (a) all Obligations of the 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 Borrowers, the Administrative Agent, such Non-Consenting Lender and the replacement Lender shall otherwise comply with Section 9.04. SECTION 2.21. Incremental Commitments. (a) The U.S. Borrower or the Dutch Borrower may, by written notice to the Administrative Agent from time to time, request Incremental Term Loan Commitments and/or Incremental Revolving Facility Commitments in an amount not to exceed the Incremental Amount from one or more Incremental Term Lenders and/or Incremental Revolving Facility Lenders (which may include any existing Lender) willing to provide such Incremental Term Loans and/or Incremental Revolving Facility Loans, as the   105 -------------------------------------------------------------------------------- case may be, in their own discretion; provided that each Incremental Revolving Facility Lender shall be subject to the approval of the Administrative Agent (which approval shall not be unreasonably withheld). Such notice shall set forth (i) the amount of the Incremental Term Loan Commitments and/or Incremental Revolving Facility Commitments being requested (which shall be in minimum increments of $1.0 million and a minimum amount of $25.0 million or equal to the remaining Incremental Amount), (ii) the date on which such Incremental Term Loan Commitments and/or Incremental Revolving Facility Commitments are requested to become effective (the “Increased Amount Date”) and (iii) (a) whether such Incremental Term Loan Commitments are to be Tranche C-1 Term Loan Commitments, Tranche C-2 Term Loan Commitments, Tranche C-4 Term Loan Commitments or commitments to make term loans with pricing and/or amortization terms different from the Tranche C-1 Term Loans, the Tranche C-2 Term Loans and the Tranche C-4 Term Loans (“Other Term Loans”) and/or (b) whether such Incremental Revolving Facility Commitments are to be Canadian Tranche Commitments, European Tranche Commitments, U.S. Tranche Commitments or commitments to make revolving loans with pricing and/or amortization terms different from the Canadian Tranche Revolving Facility Loans, European Tranche Revolving Facility Loans and U.S. Tranche Revolving Facility Loans (“Other Revolving Facility Loans”). (b) The U.S. Borrower and each Incremental Term Lender and/or Incremental Revolving Facility Lender shall execute and deliver to the Administrative Agent an Incremental Assumption Agreement and such other documentation as the Administrative Agent shall reasonably specify to evidence the Incremental Term Loan Commitment of such Incremental Term Lender and/or Incremental Revolving Facility Commitment of such Incremental Revolving Facility Lender. Each Incremental Assumption Agreement shall specify the terms of the Incremental Term Loans and/or Incremental Revolving Facility Loans to be made thereunder; provided that (i) the Other Term Loans and Other Revolving Facility Loans shall rank pari passu or junior in right of payment and of security with the Tranche C-1 Term Loans, Tranche C-2 Term Loans, Tranche C-4 Term Loans and Revolving Facility Loans and (except as to pricing and amortization) shall have the same terms as the Tranche C-1 Term Loans, Tranche C-2 Term Loans or Tranche C-4 Term Loans, as applicable, (ii) the final maturity date of (a) any Other Term Loans shall be no earlier than the Term Loan Maturity Date and/or (b) any Other Revolving Facility Loans shall be no earlier than the Revolving Facility Maturity Date; provided that any Other Term Loans and any Other Revolving Facility Loans may provide for an acceleration of their maturity to an Early Maturity Test Date if, on such Early Maturity Test Date, the aggregate principal amount of Early Maturity Notes that mature within 91 days after such Early Maturity Test Date exceeds $200.0 million, (iii) the weighted average life to maturity of any Other Term Loans shall be no shorter than the weighted average life to maturity of the Term Loans and (iv) the Other Revolving Facility Loans shall require no scheduled amortization or mandatory commitment reductions prior to the Revolving Facility Maturity Date; provided further that the interest rate margin (which shall be deemed to include all upfront or similar fees or original issue discount payable to all Lenders providing such Other Term Loan and/or Other Revolving Facility Loan) in respect of any Other Term Loan and/or Other Revolving Facility Loan shall be the same as that applicable to the Term Loans and/or the Revolving Facility Loans; except that the interest rate margin in respect of any Other Term Loan and/or Other Revolving Facility Loan (which shall be deemed to include all upfront or similar fees or original issue discount   106 -------------------------------------------------------------------------------- payable to all Lenders providing such Other Term Loan and/or Other Revolving Facility Loan) may exceed the Applicable Margin for the Term Loans and/or the Revolving Facility Loans (which shall, for such purposes only, be deemed to include all upfront or similar fees or original issue discount payable to all Lenders providing the Term Loans and/or the Revolving Facility Loans), respectively, by no more than  1/2 of 1% (it being understood that any such increase may take the form of original issue discount (“OID”), with OID being equated to the interest rates in a manner reasonably determined by the Administrative Agent based on an assumed four-year life to maturity), or if it does so exceed such Applicable Margin (which shall, for such purposes only, be deemed to include all upfront or similar fees or original issue discount payable to all Lenders providing the Term Loans and/or the Revolving Facility Loans), such Applicable Margin shall be increased so that the interest rate margin in respect of such Other Term Loan or Other Revolving Facility Loan, as the case may be (which shall be deemed to include all upfront or similar fees or original issue discount payable to all Lenders providing such Other Term Loan and/or Other Revolving Facility Loan), is no more than  1/2 of 1% higher than the Applicable Margin for the Term Loans or the Revolving Facility Loans, respectively (which shall, for such purposes only, be deemed to include all upfront or similar fees or original issue discount payable to all Lenders providing the Term Loans and/or the Revolving Facility Loans). The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Incremental Assumption Agreement. Each of the parties hereto hereby agrees that, upon the effectiveness of any Incremental Assumption Agreement, this Agreement shall be amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Incremental Term Loan Commitments and/or Incremental Revolving Loan Commitments evidenced thereby as provided for in Section 9.08(e). Any such deemed amendment may be memorialized in writing by the Administrative Agent with the U.S. Borrower’s consent (not to be unreasonably withheld) and furnished to the other parties hereto. (c) Notwithstanding the foregoing, no Incremental Term Loan Commitment or Incremental Revolving Facility Commitment shall become effective under this Section 2.21 unless (i) on the date of such effectiveness, the conditions set forth in paragraphs (b) and (c) of Section 4.01 shall be satisfied and the Administrative Agent shall have received a certificate to that effect dated such date and executed by a Financial Officer of the U.S. Borrower, (ii) the Administrative Agent shall have received legal opinions, board resolutions and other closing certificates and documentation as required by the relevant Incremental Assumption Agreement and consistent with those delivered on the Closing Date under Section 4.02 of the 2005 Credit Agreement and such additional documents and filings (including amendments to the Mortgages and other Security Documents and title endorsement bringdowns) as the Administrative Agent may reasonably require to assure that the Incremental Term Loans and/or Incremental Revolving Facility Loans are secured by the Collateral ratably with (or, to the extent agreed by the applicable Incremental Term Lenders or Incremental Revolving Facility Lenders in the applicable Incremental Assumption Agreement, junior to) the existing Term Loans and Revolving Facility Loans and (iii) the U.S. Borrower would be in Pro Forma Compliance after giving effect to such Incremental Term Loan Commitment and/or Incremental Revolving Facility Commitments and the Incremental Term Loans and/or Incremental Revolving Facility Loans to be made thereunder and the application of the proceeds therefrom as if made and applied on such date.   107 -------------------------------------------------------------------------------- (d) Each of the parties hereto hereby agrees that the Administrative Agent may take any and all action as may be reasonably necessary to ensure that all Incremental Term Loans and/or Incremental Revolving Facility Loans (other than Other Term Loans or Other Revolving Facility Loans), when originally made, are included in each Borrowing of outstanding Term Loans or Revolving Facility Loans under the same Tranche on a pro rata basis, and the Borrowers agree that Section 2.17 shall apply to any conversion of Eurocurrency Loans to ABR Loans or Base Rate Loans reasonably required by the Administrative Agent to effect the foregoing. 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 Closing 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 Borrowers through the Administrative Agent, any obligations of such Lender to make or continue Eurocurrency Loans or to convert ABR Borrowings or Base Rate Borrowings to Eurocurrency Borrowings shall be suspended until such Lender notifies the Administrative Agent and the Borrowers that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrowers shall upon demand from such Lender (with a copy to the Administrative Agent), either convert all Eurocurrency Borrowings of such Lender to ABR Borrowings or Base Rate 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, the Borrowers shall also pay accrued interest on the amount so prepaid or converted. SECTION 2.23. Credit-Linked Deposit Account. (a) The Tranche C-3 Credit-Linked Deposits shall be held by the Administrative Agent in the Tranche C-3 Credit-Linked Deposit Account, and no party other than the Administrative Agent shall have a right of withdrawal from the Tranche C-3 Credit-Linked Deposit Account or any other right or power with respect to the Tranche C-3 Credit-Linked Deposits, except as expressly set forth in Section 2.05, 2.09 or 2.12. Notwithstanding any provision in this Agreement to the contrary, the sole funding obligation of each Tranche C-3 Lender in respect of its participation in Tranche C-3 Letters of Credit shall be satisfied in full upon the funding of its Tranche C-3 Credit-Linked Deposit on the May 2006 Amendment Effective Date. (b) Each of the U.S. Borrower, the Administrative Agent, each Issuing Bank issuing any Tranche C-3 Letter of Credit and each Tranche C-3 Lender hereby acknowledges and agrees that each Tranche C-3 Lender is funding its Tranche C-3 Credit-Linked Deposit to the Administrative Agent for application in the manner contemplated by Section 2.05 and that the Administrative Agent has agreed to invest the Tranche C-3 Credit-Linked Deposits so as to earn a return (except during periods when, and to the extent to which, such Tranche C-3 Credit-Linked Deposits are used to cover unreimbursed Tranche C-3 L/C Disbursements, and subject to Section 2.15) for the Tranche C-3 Lenders equal to a rate per annum, reset daily on each Business Day for the period until the next following Business Day, equal to (i) such day’s rate for one month LIBOR deposits (the “Benchmark   108 -------------------------------------------------------------------------------- LIBOR Rate”) computed on the basis of the actual number of days elapsed in a year of 365 days (or 366 days in a leap year) minus (ii) 0.10%. Such interest will be paid to the Tranche C-3 Lenders by the Administrative Agent quarterly in arrears when Letter of Credit fees are payable pursuant to Section 2.13. In addition to the foregoing payments by the Administrative Agent, the U.S. Borrower agrees to make payments to the Tranche C-3 Lenders quarterly in arrears when Letter of Credit fees are payable pursuant to Section 2.13 (and together with the payment of such fees) in an amount equal to 0.10% per annum on the amounts of their respective Tranche C-3 Credit-Linked Deposits. (c) The U.S. Borrower shall have no right, title or interest in or to the Tranche C-3 Credit-Linked Deposits and no obligations with respect thereto (except for the reimbursement obligations provided in Section 2.05 and the obligation to pay fees as provided in this Section 2.23), it being acknowledged and agreed by the parties hereto that the making of the Tranche C-3 Credit-Linked Deposits by the Tranche C-3 Lenders, the provisions of this Section 2.23 and the application of the Tranche C-3 Credit-Linked Deposits in the manner contemplated by the May 2006 Amendment Agreement and Section 2.05 constitute agreements among the Administrative Agent, each Issuing Bank issuing any Tranche C-3 Letter of Credit and each Tranche C-3 Lender with respect to the funding obligations of each Tranche C-3 Lender in respect of its participation in Tranche C-3 Letters of Credit and do not constitute any loan or extension of credit to the U.S. Borrower. (d) Subject to the U.S. Borrower’s compliance with the cash-collateralization requirements set forth in Section 2.05(j), the Administrative Agent shall return any remaining Tranche C-3 Credit-Linked Deposits to the Tranche C-3 Lenders following the occurrence of the Tranche C-3 Maturity Date. SECTION 2.24. Additional Reserve Costs. (a) If and so long as any Lender is required to make special deposits with the Bank of England, to maintain reserve asset ratios or to pay fees, in each case in respect of such Lender’s Loans, such Lender may require the relevant Borrower to pay, contemporaneously with each payment of interest on each of such Loans, additional interest on such Loans 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 G, provided that no Lender may request the payment of any amount under this paragraph to the extent resulting from a requirement imposed (other than as provided in Section 2.16) on such Lender by any Governmental Authority (and not on Lenders or any class of Lenders generally) in respect of a concern expressed by such Governmental Authority with such Lender specifically, including with respect to its financial health. (b) If and so long as any Lender is required to comply with reserve assets, liquidity, cash margin or other requirements of any monetary or other authority (including any such requirement imposed by the European Central Bank or the European System of Central Banks, but excluding requirements reflected in the Mandatory Costs Rate) in respect of any of such Lender’s Loans such Lender may require the relevant Borrower to pay, contemporaneously with each payment of interest on each of such Lender’s Loans subject to such requirements, additional interest on such Loans at a rate per annum specified by such Lender to be the cost to such Lender of complying with such requirements in   109 -------------------------------------------------------------------------------- relation to such Loans, provided that no Lender may request the payment of any amount under this paragraph to the extent resulting from a requirement imposed (other than as provided in Section 2.16) on such Lender by any Governmental Authority (and not on Lenders or any class of Lenders generally) in respect of a concern expressed by such Governmental Authority with such Lender specifically, including with respect to its financial health. (c) Any additional interest owed pursuant to paragraph (a) or (b) above shall be determined by the relevant Lender, acting in good faith, which determination shall be conclusive absent manifest error, and notified to the relevant Borrower (with a copy to the Administrative Agent) at least five Business Days before each date on which interest is payable for the relevant Loans, and such additional interest so notified to the relevant Borrower by such Lender shall be payable to such Lender on each date on which interest is payable for such Loans. ARTICLE III Representations and Warranties Each 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 (prior to a Qualified IPO), the U.S. Borrower and each of the Material Subsidiaries (a) is a limited liability company, unlimited company, corporation or partnership duly organized, validly existing and in good standing (or, if applicable in a foreign jurisdiction, enjoys the equivalent status under the laws of any jurisdiction of organization outside the United States) 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 (prior to a Qualified IPO), the U.S. Borrower and each of the Subsidiary Loan Parties of each of the Loan Documents to which it is a party, and the borrowings hereunder and the transactions forming a part of the Transactions (a) have been duly authorized by all corporate, stockholder or limited liability company or partnership action required to be obtained by Holdings, the U.S. Borrower and such Subsidiary Loan Parties and (b) will not (i) violate (A) any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents or by-laws of Holdings, the U.S. Borrower or any such Subsidiary Loan Parties, (B) any applicable order of any court or any rule, regulation or order of any Governmental Authority or (C) any provision of any indenture, certificate of designation for preferred stock, agreement or other instrument to which Holdings, the U.S. Borrower or any such Subsidiary Loan Party is a party or by which any of them or any of their   110 -------------------------------------------------------------------------------- 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, certificate of designation for preferred stock, agreement or other instrument, where, other than in the case of the Existing Borden Second Secured Notes, the New Second Secured Notes and the Debentures, 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 (prior to a Qualified IPO), the U.S. Borrower or any such Subsidiary Loan Parties, other than the Liens created by the Loan Documents and Liens permitted by Section 6.02. SECTION 3.03. Enforceability. This Agreement has been duly executed and delivered by Holdings and each 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), (iii) implied covenants of good faith and fair dealing and (iv) except to the extent set forth in the applicable Foreign Pledge Agreements, any foreign laws, rules and regulations as they relate to pledges of Equity Interests in Foreign Subsidiaries that are not Loan Parties. 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 Transactions, except for (a) the filing of Uniform Commercial Code financing statements and equivalent filings in foreign jurisdictions, (b) filings with the United States Patent and Trademark Office and the United States Copyright Office and comparable offices in foreign jurisdictions and equivalent filings in foreign jurisdictions, (c) recordation of the Mortgages, (d) such as have been made or obtained and are in full force and effect, (e) such other actions, consents and approvals with respect to which the failure to be obtained or made could not reasonably be expected to have a Material Adverse Effect and (f) filings or other actions listed on Schedule 3.04. SECTION 3.05. Financial Statements. (a) The U.S. Borrower has heretofore furnished to the Lenders: (i) The unaudited pro forma combined balance sheet (the “Pro Forma Balance Sheet”) and the related pro forma combined statements of operations (the “Pro Forma Income Statements” and, together with the Pro Forma Balance Sheet, the “Pro Forma Financial Statements”) of the U.S. Borrower, together with its consolidated subsidiaries, in the case of the Pro Forma Balance Sheet, as at June 30, 2006, and in the case of the Pro Forma Income Statements, for the six months ended June 30, 2006 and the twelve months ended December 31, 2005 (in each case including the notes thereto), copies of which   111 -------------------------------------------------------------------------------- have heretofore been furnished to each Lender (via inclusion in the Information Memorandum), have been prepared giving effect to the Transactions as set forth in the Information Memorandum (as if such events had occurred, in the case of the Pro Forma Balance Sheet, on such date and, in the case of the Pro Forma Income Statements, on the first date of such six- or twelve-month period, as applicable). The Pro Forma Financial Statements have been prepared in good faith based on assumptions believed by Holdings and the U.S. Borrower to have been reasonable as of the date of delivery thereof (it being understood that such assumptions are based on good faith estimates of certain items and that the actual amount of such items is subject to change). The Pro Forma Balance Sheet presents fairly in all material respects on a pro forma basis the estimated financial position of the U.S. Borrower and its consolidated subsidiaries as at June 30, 2006, assuming that the events specified in the second preceding sentence had actually occurred at such date, and the Pro Forma Income Statements present fairly in all material respects on a pro forma basis the results of operations of U.S. Borrower and its consolidated subsidiaries for such six- or twelve-month period, as applicable, assuming that the events specified in the second preceding sentence had actually occurred on the first day of such six- or twelve-month period, as applicable. (ii) The financial statements (other than the Pro Forma Financial Statements) set forth in the New Second Secured Notes Offering Memorandum present fairly the financial condition and results of operations of each of the Combined Group, the Canadian Borrower, the U.S. Borrower, RSM and the German Guarantor, as applicable, as of and on such dates set forth on such financial statements (subject, in the case of interim financial statements, to normal year-end audit adjustments). All such financial statements have been prepared in accordance with GAAP applied consistently throughout the periods involved (subject to (i) in the case of interim financial statements, normal year-end adjustments, (ii) adjustments, reclassifications and exceptions set forth in the 2005 Transaction Agreement and the schedules and exhibits thereto and (iii) in the case of interim financial statements, the absence of notes) except as disclosed therein. (b) None of the U.S. Borrower or the Subsidiaries has any material Guarantees, contingent liabilities and 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, that are not reflected in the financial statements referred to in the preceding clauses (a)(i) and (ii). During the period from December 31, 2005, to and including the Amendment Effective Date there has been no disposition by any of Holdings or any of its subsidiaries of any material part of its business or property that is not reflected in the financial statements referred to in the preceding clauses (a)(i) and (ii). SECTION 3.06. No Material Adverse Change or Material Adverse Effect. Since December 31, 2005, there has been no event, development or circumstance that has had or would reasonably be expected to have a Material Adverse Effect. SECTION 3.07. Title to Properties; Possession Under Leases. (a) Each of the U.S. Borrower and the Subsidiaries has valid fee simple title to, or valid leasehold interests in, or easements or other limited property interests in, all its properties and assets (including all   112 -------------------------------------------------------------------------------- Mortgaged Properties), except for minor defects in title that do not materially interfere with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes and except where the failure to have such title, interests or easements could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. All such properties and assets held in fee simple are free and clear of Liens, other than Liens expressly permitted by Section 6.02 or arising by operation of law. (b) None of the U.S. Borrower or the Subsidiaries have defaulted under any leases to which it is a party, except for such defaults as would not reasonably be expected to 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. Except as set forth on Schedule 3.07(b), each of the U.S. Borrower and each of the 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) Each of the U.S. Borrower and the Subsidiaries owns or possesses, or could obtain ownership or possession of or rights under, on terms not materially adverse to it, all patents, trademarks, service marks, trade names, copyrights, licenses and rights with respect thereto necessary for the present conduct of its business, without any conflict (of which the U.S. Borrower has been notified in writing) with the rights of others, and free from any burdensome restrictions on the present conduct of the their businesses, except where such conflicts and restrictions could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (d) As of the Amendment Effective Date, none of the U.S. Borrower or the Subsidiaries has received any written notice of any pending or contemplated condemnation proceeding affecting any material portion of the Mortgaged Properties or any sale or disposition thereof in lieu of condemnation that remains unresolved as of the Amendment Effective Date. (e) None of the U.S. Borrower or the 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. SECTION 3.08. Subsidiaries. (a) Schedule 3.08(a) 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. (b) 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, any Borrower or any of the Subsidiaries,   113 -------------------------------------------------------------------------------- except rights of employees to purchase Equity Interests of Holdings in connection with the 2005 Transactions or as set forth on Schedule 3.08(b). (c) As of the Amendment Effective Date, no direct or indirect subsidiary of the U.S. Borrower is an Indenture Restricted Subsidiary. SECTION 3.09. Litigation; Compliance with Laws. (a) As of the Amendment Effective Date except as set forth on Schedule 3.09, there are no actions, suits or proceedings at law or in equity or, to the knowledge of any Borrower, investigations by or on behalf of any Governmental Authority or in arbitration now pending, or, to the knowledge of any Borrower, threatened in writing against or affecting Holdings (prior to a Qualified IPO) or any Borrower or any of its subsidiaries or any business, property or rights of any such person (i) that involve any Loan Document or the Transactions or (ii) as to which an adverse determination is reasonably probable and which, if adversely determined, could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or materially adversely affect the Transactions. On the date of any Borrowing (other than any Borrowing of Tranche C-4 Delayed Draw Term Loans) after the Amendment Effective Date, there are no actions, suits or proceedings at law or in equity or, to the knowledge of any Borrower, investigations by or on behalf of any Governmental Authority or in arbitration now pending, or, to the knowledge of any Borrower, threatened in writing against or affecting Holdings (prior to a Qualified IPO) or any Borrower or any of its subsidiaries or any business, property or rights of any such person as to which an adverse determination is reasonably probable and which, if adversely determined, could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (b) None of Holdings (prior to a Qualified IPO), the U.S. Borrower, the Subsidiaries or 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 law, rule or regulation (including any zoning, building, ordinance, code or approval or any building permit, but excluding any Environmental Laws, which are covered by Section 3.16) 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 3.10. Federal Reserve Regulations. (a) None of Holdings (prior to a Qualified IPO), the U.S. Borrower or the 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.   114 -------------------------------------------------------------------------------- SECTION 3.11. Investment Company Act. None of Holdings (prior to a Qualified IPO), the U.S. Borrower or the Subsidiaries is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended. SECTION 3.12. Use of Proceeds. The proceeds of the Tranche C-4 Initial Term Loans will be used (i) on the Amendment Effective Date to fund the Transactions and (ii) for general corporate purposes. The proceeds of the Tranche C-4 Delayed Draw Term Loans will be used to finance the Debt Tender Offer and the Existing Borden Floating Rate Notes Redemption. The proceeds of the Revolving Facility Loans will be used for general corporate purposes (including for the repurchase of the Industrial Revenue Bonds and Permitted Business Acquisitions). The Borrowers will use the proceeds of the Swingline Loans, and may request the issuance of Letters of Credit, solely for general corporate purposes (including for the back-up or replacement of existing letters of credit). SECTION 3.13. Tax Returns. Except as would not reasonably be expected to have a Material Adverse Effect and except as set forth on Schedule 3.13: (a) Each of Holdings (prior to a Qualified IPO), the U.S. Borrower and the 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 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 (prior to a Qualified IPO), the U.S. Borrower or any of the Subsidiaries (as the case may be) has set aside on its books adequate reserves in accordance with GAAP; (b) Each of Holdings (prior to a Qualified IPO), the U.S. Borrower and the 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 (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 U.S. Borrower or any of the Subsidiaries (as the case may be) has set aside on its books adequate reserves in accordance with GAAP); and (c) as of the Amendment Effective Date, with respect to each of Holdings, the U.S. Borrower and the 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 limitations 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.   115 -------------------------------------------------------------------------------- SECTION 3.14. No Material Misstatements. (a) All written information (other than the Projections, estimates and information of a general economic nature or general industry nature) (the “Information”) concerning Holdings, the U.S. Borrower, the Subsidiaries, the 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 and made available to any Lenders or the Administrative Agent in connection with the Transactions or the other transactions contemplated hereby, when taken as a whole, was 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, taken as a whole, 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, taken as a whole, not materially misleading in light of the circumstances under which such statements were made. (b) Any Projections and estimates and information of a general economic nature prepared by or on behalf of the U.S. Borrower or any of its representatives and that have been made available to any Lenders or the Administrative Agent in connection with the Transactions or the other transactions contemplated hereby (i) have been prepared in good faith based upon assumptions believed by the U.S. Borrower to be reasonable as of the date thereof (it being understood that actual results may vary materially from the Projections), as of the date such Projections and estimates were furnished to the Initial Lenders 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 U.S. Borrower. SECTION 3.15. Employee Benefit Plans. (a) 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) each of Holdings (prior to a Qualified IPO), the U.S. Borrower, the 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 and any similar applicable law; (ii) no Reportable Event has occurred during the past five years as to which Holdings (prior to a Qualified IPO), the U.S. Borrower, a Subsidiary or any ERISA Affiliate was required to file a report with the PBGC, other than reports that have been filed; (iii) the present value of all benefit liabilities under each Plan of Holdings (prior to a Qualified IPO), the U.S. Borrower, the Subsidiaries 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, does not exceed the value of the assets of such Plan, and 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, does not exceed the value of the assets of all such underfunded Plans; (iv) no ERISA Event has occurred or is reasonably expected to occur; and (v) none of Holdings (prior to a Qualified IPO), the U.S. Borrower, the Subsidiaries or the ERISA Affiliates has received any written notification that any Multiemployer Plan is in reorganization or has been terminated within the meaning of Title IV of ERISA, or has knowledge that any Multiemployer Plan is reasonably expected to be in reorganization or to be terminated. (b) Each of Holdings (prior to a Qualified IPO), the U.S. Borrower and the Subsidiaries is in compliance (i) with all applicable provisions of law and all applicable   116 -------------------------------------------------------------------------------- regulations and published interpretations thereunder with respect to any employee pension benefit plan or other employee benefit plan governed by the laws of a jurisdiction other than the United States and (ii) with the terms of any such plan, except, in each case, for such noncompliance that could not reasonably be expected to have a Material Adverse Effect. (c) None of Holdings (prior to a Qualified IPO), the U.S. Borrower or any of the Subsidiaries is or has at any time been an employer (for the purposes of sections 38 to 51 of the Pensions Act 2004) of an occupational pension scheme that is not a money purchase scheme (both terms as defined in the Pension Schemes Act 1993), and none of Holdings (prior to a Qualified IPO), the U.S. Borrower or any of the Subsidiaries is or has at any time been “connected” with or an “associate” of (as those terms are used in sections 39 and 43 of the Pensions Act 2004) such an employer, other than any such scheme, connection or association that could not reasonably be expected to have a Material Adverse Effect. SECTION 3.16. Environmental Matters. Except as disclosed on Schedule 3.16 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 the U.S. Borrower or any of the Subsidiaries, and there are no judicial, administrative or other actions, suits or proceedings pending or, to the knowledge of Holdings (prior to a Qualified IPO), the U.S. Borrower or any of the Subsidiaries, threatened, that allege a violation of or liability under any Environmental Laws, in each case relating to the U.S. Borrower or any of the Subsidiaries, (ii) each of the U.S. Borrower and the Subsidiaries has obtained and maintained all permits, licenses and other approvals necessary for its operations to comply with all Environmental Laws and is, and during the term of all applicable statutes of limitation, has been, in compliance with the terms of such permits, licenses and other approvals and with all other Environmental Laws, (iii) there has been no material written environmental assessment or audit conducted since January 1, 2002, by the U.S. Borrower or any of the Subsidiaries of any property currently owned or leased by the U.S. Borrower or any of the Subsidiaries that has not been made available to the Administrative Agent prior to the date hereof, (iv) to the knowledge of Holdings (prior to a Qualified IPO), the U.S. Borrower or any of the Subsidiaries, no Hazardous Material is located at, on or under any property currently or, to the knowledge of any Borrower, formerly owned, operated or leased by the U.S. Borrower or any of its Subsidiaries that would reasonably be expected to give rise to any cost, liability or obligation of the U.S. Borrower or any of the Subsidiaries under any Environmental Laws, and no Hazardous Material has been generated, owned, treated, stored, handled or controlled by the U.S. Borrower or any of its 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 the U.S. Borrower or any of the Subsidiaries under any Environmental Laws, and (v) there are no written agreements in which the U.S. Borrower or any of the Subsidiaries has expressly assumed or undertaken responsibility, and such assumption or undertaking of responsibility has not expired or otherwise terminated, for any known or reasonably likely 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 date hereof.   117 -------------------------------------------------------------------------------- SECTION 3.17. Security Documents. (a) The Collateral Agreement is effective to create in favor of the Administrative Agent (for the benefit of the Secured Parties) a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof to the extent intended to be created thereby. 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 Administrative 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 with respect to the U.S. Borrower in appropriate form are filed in the offices specified on Schedule 6 of the Perfection Certificate with respect to the U.S. Borrower, the Administrative Agent (for the benefit of the Secured Parties) shall have a fully perfected Lien on, and security interest in (to the extent required thereby), 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 Uniform Commercial Code 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 permitted by Section 6.02 and Liens having priority by operation of law). (b) [reserved]. (c) [reserved]. (d) 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 Administrative Agent (for the benefit of the Secured Parties) shall have a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties thereunder in the domestic Intellectual Property (to the extent intended to be created thereby), 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 thereunder after the Closing Date) except Liens permitted by Section 6.02 and Liens having priority by operation of Law. (e) [reserved]. (f) Each Foreign Pledge Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof to the fullest extent permissible under applicable law. In the case of the Pledged Collateral described in a Foreign Pledge Agreement, when certificates representing such Pledged Collateral (if any) are delivered to the Administrative Agent, the Administrative Agent shall have a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and the proceeds thereof, as security for (i) in the case of Pledged Collateral   118 -------------------------------------------------------------------------------- owned by Domestic Loan Parties, the Obligations and (ii) in the case of Pledged Collateral owned by Foreign Subsidiary Loan Parties, all Obligations of Foreign Subsidiary Loan Parties, in each case (subject to Section 6.02) prior and superior in right to any other person and, in respect of Foreign Security Documents only, subject to (A) registration of undisclosed pledges and, where applicable, pledges of tangible assets with the governmental tax authorities, (B) recordation of notarial share pledges in the relevant shareholders registers, (C) execution and recordation of notarial mortgages in the relevant land registries, (D) recordation of intellectual property pledges with the relevant intellectual property registers and (E) notification of debtors of certain receivables. (g) [reserved]. (h) The Mortgages executed and delivered on the Closing Date are, and the Mortgages executed and delivered after the Closing Date pursuant to Section 5.10 shall be, effective to create in favor of the Administrative 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 are filed or recorded in the proper real estate filing or recording offices, the Administrative Agent (for the benefit of the Secured Parties) shall have a fully perfected Lien on, and security interest 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 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 permitted by Section 6.02 and Liens having priority by operation of law. (i) After taking the actions specified for perfection therein, each Security Document (excluding the Collateral Agreement, the Foreign Pledge Agreements, and the Mortgages, each of which is covered by another paragraph of this Section 3.17), when executed and delivered, will be effective under applicable law to create in favor of the Administrative Agent (for the benefit of the Secured Parties) a legal, valid and enforceable security interest in the Collateral subject thereto (to the extent intended to be created thereby), and will constitute a fully perfected Lien on and security interest in all right, title and interest of the Loan Parties in the Collateral subject thereto (to extent required thereby), prior and superior to the rights of any other person, except for rights secured by Liens permitted by Section 6.02 and Liens having priority by operation of law. (j) Notwithstanding anything herein (including this Section 3.17) or in any other Loan Document to the contrary, other than to the extent set forth in the applicable Foreign Pledge Agreements, no Borrower or any other Loan Party makes any representation or warranty as to the effects of perfection or non-perfection, the priority or the enforceability of any pledge of or security interest in any Equity Interests of any Foreign Subsidiary that is not a Loan Party, or as to the rights and remedies of the Agents or any Lender with respect thereto, under foreign law. SECTION 3.18. Location of Real Property. The Perfection Certificate lists completely and correctly as of the Amendment Effective Date all material real property owned by Holdings, the U.S. Borrower and the Subsidiary Loan Parties and the addresses thereof. As of   119 -------------------------------------------------------------------------------- the Closing Date, Holdings, the U.S. Borrower and the Subsidiary Loan Parties own in fee all the real property set forth as being owned by them on such Schedules. SECTION 3.19. Solvency. (a) Immediately after giving effect to the Transactions, (i) the fair value of the assets of each Borrower (individually) and Holdings, the U.S. Borrower and the Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, direct, subordinated, contingent or otherwise, of each Borrower (individually) and Holdings, the U.S. Borrower and the Subsidiaries on a consolidated basis, respectively; (ii) the present fair saleable value of the property of each Borrower (individually) and Holdings, the U.S. Borrower and the Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability of each Borrower (individually) and Holdings, the U.S. Borrower and the 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) each Borrower (individually) and Holdings, the U.S. Borrower and the 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) each Borrower (individually) and Holdings, the U.S. Borrower and the Subsidiaries on a consolidated basis 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 (prior to a Qualified IPO) or any Borrower intends to, or believes that it or any Subsidiary Loan Party 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 Loan Party and the timing and amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such Subsidiary Loan Party. SECTION 3.20. Labor Matters. Except as, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes pending or threatened against Holdings (prior to a Qualified IPO), the U.S. Borrower or any of the Subsidiaries; (b) the hours worked and payments made to employees of Holdings (prior to a Qualified IPO), the U.S. Borrower and the Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable law dealing with such matters; (c) all payments due from Holdings (prior to a Qualified IPO), the U.S. Borrower or any of the Subsidiaries or for which any claim may be made against Holdings (prior to a Qualified IPO), the U.S. Borrower or any of the 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 (prior to a Qualified IPO), the U.S. Borrower or such Subsidiary to the extent required by GAAP; and (d) Holdings (prior to a Qualified IPO), the U.S. Borrower and the Subsidiaries are in compliance with all applicable laws, agreements, policies, plans and programs relating to employment and employment practices. Except as would not reasonably be expected to have a Material Adverse Effect and except as set forth on Schedule 3.20, consummation of the 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 (prior to a Qualified IPO), the U.S. Borrower or any of the Subsidiaries (or any predecessor) is a party or by which Holdings (prior to a Qualified IPO), the U.S. Borrower or any of the Subsidiaries (or any predecessor) is bound.   120 -------------------------------------------------------------------------------- SECTION 3.21. Insurance. Schedule 3.21 sets forth a true, complete and correct description of all material insurance maintained by or on behalf of Holdings, the U.S. Borrower or the Subsidiaries as of the Amendment Effective Date. As of such date, such insurance is in full force and effect. The U.S. Borrower believes that the insurance maintained by or on behalf of Holdings (prior to a Qualified IPO), the U.S. Borrower and the Subsidiaries is adequate. SECTION 3.22. [reserved]. SECTION 3.23. First-Lien Indebtedness; Senior Debt. The Obligations (other than Obligations in respect of the Tranche C-2 Term Loans) constitute (i) “First-Lien Indebtedness” (or the equivalent thereof) under and as defined in each Intercreditor Agreement and (ii) “First-Priority Lien Obligations” (or the equivalent thereof) under the Existing Borden Second Secured Notes Documents and the New Second Secured Notes Documents and with respect to any Permitted Refinancing Indebtedness with respect to the Existing Borden Second Secured Notes or the New Second Secured Notes, and with respect to any Indebtedness secured by Liens pursuant to Section 6.02(w). SECTION 3.24. Dutch Banking Act. The Dutch Borrower is in compliance with the applicable provisions of the Dutch Banking Act and any implementing regulation including the Exemption Regulation. ARTICLE IV Conditions of Lending The obligations of (a) the Lenders (including the Swingline Lender) to make Loans, accept and purchase or arrange for the acceptance and purchase of B/As and fund Tranche C-3 Credit-Linked Deposits and (b) any Issuing Bank to issue, amend, extend or renew Letters of Credit or increase the stated amounts of Letters of Credit hereunder (each, a “Credit Event”) are subject to the satisfaction of the following conditions: SECTION 4.01. All Non-Delayed Draw Credit Events. On the date of each Borrowing (other than any Borrowing of Tranche C-4 Delayed Draw Term Loans) and B/A Drawing and on the date of each issuance, amendment, extension or renewal of a Letter of Credit: (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 a B/A, a request therefor as required by Section 2.06(c) or, in the case of the issuance, amendment, extension or renewal of a Letter of Credit, the applicable Issuing Bank and the Administrative Agent shall have received a notice requesting the issuance, amendment, extension or renewal of such Letter of Credit as required by Section 2.05(b).   121 -------------------------------------------------------------------------------- (b) The representations and warranties set forth in the Loan Documents (other than, with respect to any Borrowing of Tranche C-4 Term Loans on the Amendment Effective Date, the representation and warranty set forth in Section 3.06) shall be true and correct in all material respects, in each case on and as of the date of such Borrowing, B/A Drawing 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 (i) increase in the stated amount of such Letter of Credit or (ii) extension of the expiration 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, B/A Drawing 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 (i) increase in the stated amount of such Letter of Credit or (ii) extension of the expiration of such Letter of Credit), as applicable, no Event of Default or Default shall have occurred and be continuing. Each Borrowing (other than any Borrowing of Tranche C-4 Delayed Draw Term Loans) and B/A Drawing and each issuance, amendment, extension or renewal of a Letter of Credit (other than an amendment, extension or renewal of a Letter of Credit without any (i) increase in the stated amount of such Letter of Credit or (ii) extension of the expiration of such Letter of Credit) shall be deemed to constitute a representation and warranty by each of the Borrowers 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. [reserved] SECTION 4.02A. Delayed Draw Credit Events. Except as set forth in Section 4.02A(d) below, on the date of each Borrowing of Tranche C-4 Delayed Draw Term Loans: (a) The Administrative Agent shall have received a Borrowing Request as required by Section 2.03. (b) At the time of such Borrowing, no preliminary injunction or temporary restraining order restricting or purporting to restrict such Borrowing shall be in effect. (c) At the time of and immediately after such Borrowing, no Event of Default under Section 7.01(h) or (i) shall have occurred and be continuing. (d) On the applicable Notice Date, in the case of any Borrowing of Tranche C-4 Delayed Draw Term Loans, the conditions set forth in Section 4.01(b) and (c) shall have been satisfied or waived.   122 -------------------------------------------------------------------------------- ARTICLE V Affirmative Covenants Each Borrower covenants and agrees with each Lender that so long as this Agreement shall remain in effect (other than in respect of contingent indemnification and expense reimbursement obligations for which no claim has been made) 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 Borrower will, and will cause each of the Material 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, (i) except as otherwise expressly permitted under Section 6.05, (ii) except for the liquidation or dissolution of Subsidiaries if the assets of such Subsidiaries to the extent they exceed estimated liabilities are acquired by the U.S. Borrower or a Wholly Owned Subsidiary of the U.S. Borrower in such liquidation or dissolution; provided that Subsidiaries that are Loan Parties may not be liquidated into Subsidiaries that are not Loan Parties, and (iii) except (other than with respect to the Borrowers) where the failure to do so would not reasonably be expected to have a Material Adverse Effect. (b) Except where the failure to do so would not reasonably be expected to have a Material Adverse Effect, 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, 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 material 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) Maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by similarly situated companies engaged in the same or similar businesses operating in the same or similar locations and, with respect to the Collateral of the Domestic Loan Parties, and, with respect to the Collateral of the Foreign Subsidiary Loan Parties, to the extent such concept or a concept comparable thereto exists in the relevant jurisdiction of any Foreign Subsidiary Loan Party, cause all such property and property casualty insurance policies to be endorsed or otherwise amended to include a “standard” or “New York” lender’s loss payable   123 -------------------------------------------------------------------------------- endorsement (or comparable provision applicable in the relevant foreign jurisdiction), in form and substance reasonably satisfactory to the Administrative Agent. (b) In connection with the covenants set forth in this Section 5.02, it is understood and agreed that: (i) none of the Administrative Agent, the Lenders, any 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 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 Administrative Agent, 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 Borrower hereby agrees, 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 Administrative Agent, 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 under this Section 5.02 shall in no event be deemed a representation, warranty or advice by the Administrative Agent or the Lenders that such insurance is adequate for the purposes of the business of Holdings (prior to a Qualified IPO), the U.S. Borrower and the Subsidiaries or the protection of their properties. SECTION 5.03. Taxes. Pay and discharge promptly when due all material Taxes 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 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 so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings, and the U.S. Borrower or the affected Subsidiary, as applicable, shall have set aside on its books adequate reserves in accordance with GAAP with respect thereto. 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, if applicable, such shorter period as the SEC shall specify for the filing of Annual Reports on Form 10-K or, if applicable, such longer period permitted under Rule 12b-25 under the Exchange Act) after the end of each fiscal year, (i) a consolidated balance sheet and related statements of operations, cash flows and owners’ equity showing the financial position of the U.S. Borrower and its subsidiaries as of the close of such fiscal year and the consolidated results of its operations during such year and setting forth in comparative form the corresponding figures for the prior fiscal year and (ii) management’s discussion and analysis of significant operational and financial developments during such fiscal year, which   124 -------------------------------------------------------------------------------- consolidated balance sheet and related statements of operations, cash flows and owners’ equity shall be audited by independent public accountants of recognized national standing 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 the U.S. Borrower and its subsidiaries on a consolidated basis in accordance with GAAP (it being understood that the delivery by the U.S. Borrower of Annual Reports on Form 10-K of the U.S. Borrower 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) within 45 days (or, if applicable, such shorter period as the SEC shall specify for the filing of Quarterly Reports on Form 10-Q or, if applicable, such longer period permitted under Rule 12b-25 under the Exchange Act) after the end of each of the first three fiscal quarters of each fiscal year, (i) a consolidated balance sheet and related statements of operations and cash flows showing the financial position of the U.S. Borrower and its subsidiaries as of the close of such fiscal quarter and the consolidated results of its 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 and (ii) management’s discussion and analysis of significant operational and financial developments during such quarterly period, all of which shall be in reasonable detail and which consolidated balance sheet and related statements of operations and cash flows shall be certified by a Financial Officer of the U.S. Borrower on behalf of the U.S. Borrower as fairly presenting, in all material respects, the financial position and results of operations of the U.S. Borrower and its 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 the U.S. Borrower of Quarterly Reports on Form 10-Q of the U.S. Borrower 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 paragraph (a) or (b) above, a certificate of a Financial Officer of the U.S. Borrower (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, (ii) setting forth computations of the Consolidated Leverage Ratio in reasonable detail as of the end of the applicable fiscal period and (iii) setting forth computations in reasonable detail demonstrating compliance with the covenant contained in Section 6.11 and (y) concurrently with any delivery of financial statements under paragraph (a) above, if the accounting firm agrees to provide such report after the U.S.   125 -------------------------------------------------------------------------------- Borrower’s commercially reasonable efforts to obtain such report, a report 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 resulting from non-compliance with the covenant contained in Section 6.11 (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 (prior to a Qualified IPO), the U.S. Borrower or any of its subsidiaries with the SEC, or after an initial public offering, distributed to its stockholders generally, as applicable; provided, however, that such reports, proxy statements, filings and other materials required to be delivered pursuant to this clause (d) shall be deemed delivered for purposes of this Agreement when posted to the website of the U.S. Borrower; (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 the U.S. Borrower and its subsidiaries delivered pursuant to paragraph (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 the U.S. Borrower 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, a detailed consolidated quarterly budget for such fiscal year and, as soon as available, significant revisions, if any, of such budget and quarterly projections with respect to such fiscal year, including a description of underlying assumptions with respect thereto (collectively, the “Budget”); (g) [reserved]; (h) upon the reasonable request of the Administrative Agent, deliver an updated Perfection Certificate (or, to the extent such request relates to specified information contained in the Perfection Certificate, such information) reflecting all changes since the date of the information most recently received pursuant to this paragraph (h) or Section 5.10(f); (i) promptly, a copy of all reports submitted to the Board of Directors (or any committee thereof) of any of the U.S. Borrower or any Subsidiary in connection with any material interim or special audit made by independent accountants of the books of the U.S. Borrower or any Subsidiary;   126 -------------------------------------------------------------------------------- (j) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of Holdings (prior to a Qualified IPO), the U.S. Borrower or any of its 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 (k) promptly upon request by the Administrative Agent, copies of: (i) each Schedule B (Actuarial Information) to the most recent 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, a plan administrator or any governmental agency, or provided to any Multiemployer Plan by Holdings (prior to a Qualified IPO), the U.S. Borrower, a Subsidiary or any ERISA Affiliate, 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. SECTION 5.05. Litigation and Other Notices. Furnish to the Administrative Agent written notice of the following promptly after any Responsible Officer of Holdings (prior to a Qualified IPO) or any 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 (prior to a Qualified IPO), the U.S. Borrower or any of its subsidiaries as to which an adverse determination is reasonably probable and that, if adversely determined, would reasonably be expected to have a Material Adverse Effect; (c) any other development specific to Holdings (prior to a Qualified IPO), the U.S. Borrower or any of its subsidiaries that is not a matter of general public knowledge and that has had, or would reasonably be expected to have, a Material Adverse Effect; and (d) the development of any ERISA Event that, together with all other ERISA Events that have developed or 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, except where the   127 -------------------------------------------------------------------------------- failure to do so 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 (prior to a Qualified IPO), any Borrower or any of the Subsidiaries at reasonable times, upon reasonable prior notice to Holdings (prior to a Qualified IPO) or such 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 Administrative Agent or, upon the occurrence and during the continuance of an Event of Default, any Lender upon reasonable prior notice to Holdings (prior to a Qualified IPO) or such Borrower to discuss the affairs, finances and condition of Holdings (prior to a Qualified IPO), any 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 in the manner set forth in Section 3.12. SECTION 5.09. Compliance with Environmental Laws. Comply with all Environmental Laws applicable to its operations and properties; and comply with and obtain and renew all material permits, licenses and other approvals required pursuant to Environmental Law for its operations and properties, 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. (b) If any asset (other than real property, which is covered by Section 5.10(c) below) that has an individual fair market value in an amount greater than $15.0 million is acquired by Holdings (prior to a Qualified IPO), any Borrower or any other Loan Party after the Amendment Effective 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 and other than assets that (i) are subject to secured financing arrangements containing restrictions permitted by Section 6.09(c) pursuant to which a Lien on such assets securing the Obligations is not permitted or (ii) are not required to become   128 -------------------------------------------------------------------------------- subject to the Liens of the Administrative Agent pursuant to Section 5.10(g) or the Security Documents), 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, and all subject to paragraph (g) below. (c) Promptly notify the Administrative Agent of the acquisition of, and, upon the written request of the Administrative Agent, grant and cause each of the Subsidiary Loan Parties to grant to the Administrative Agent security interests and mortgages in, such real property of the U.S. Borrower or any such Subsidiary Loan Parties as are not covered by the original Mortgages (other than assets that (i) are subject to permitted secured financing arrangements containing restrictions permitted by Section 6.09(c) pursuant to which a Lien on such assets securing the Obligations is not permitted or (ii) are not required to become subject to the Liens of the Administrative Agent pursuant to Section 5.10(g) or the Security Documents), to the extent acquired after the Amendment Effective Date and having a value at the time of acquisition in excess of $15.0 million pursuant to documentation in such form as is reasonably satisfactory to the Administrative 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 Administrative 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 (g) below. Unless otherwise waived by the Administrative Agent, with respect to each such Additional Mortgage, the U.S. Borrower shall deliver to the Administrative Agent contemporaneously therewith a title insurance policy and a survey meeting the requirements of subsection (g) of the definition of the term “Collateral and Guarantee Requirement” if reasonably available with respect to property outside the United States. (d) If any newly formed or acquired or any existing direct or indirect Subsidiary of Holdings (prior to a Qualified IPO) or the U.S. Borrower (with any Subsidiary Redesignation resulting in an Unrestricted Subsidiary becoming a Subsidiary being deemed to constitute the acquisition of a Subsidiary) becomes a Subsidiary Loan Party, within fifteen Business Days after the date such Subsidiary becomes a Subsidiary Loan Party, notify the Administrative Agent and the Lenders thereof and, within 30 Business Days after the date such Subsidiary becomes a Subsidiary Loan Party or such longer period as the Administrative Agent shall agree, 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, subject to Section 5.10(g). (e) If any newly formed or acquired or any existing Foreign Subsidiary of Holdings (prior to a Qualified IPO) or the U.S. Borrower (with any Subsidiary   129 -------------------------------------------------------------------------------- Redesignation resulting in an Unrestricted Subsidiary becoming a Subsidiary being deemed to constitute the acquisition of a Subsidiary) becomes a “first tier” Material Foreign Subsidiary of any Loan Party, within fifteen Business Days after the date such Subsidiary becomes a Material Foreign Subsidiary, notify the Administrative Agent and the Lenders thereof and, within 30 Business Days after the date such Subsidiary becomes a Material Foreign Subsidiary of any Loan Party or such longer period as the Administrative Agent shall agree, cause the Collateral and Guarantee Requirement to be satisfied with respect to any Equity Interest in such Subsidiary owned by or on behalf of any Loan Party, subject to Section 5.10(g). (f) (i) Furnish to the Administrative 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 U.S. 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 Uniform Commercial Code or otherwise that are required in order for the Administrative Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral for the benefit of the applicable Secured Parties (to the extent intended to be created by the Security Documents) and (ii) promptly notify the Administrative Agent if any material portion of the Collateral is damaged or destroyed. (g) The Collateral and Guarantee Requirement and the other provisions of this Section 5.10 (other than paragraph (h) below) need not be satisfied with respect to (i) any real property held by the U.S. Borrower or any of the Subsidiaries as a lessee under a lease, (ii) any Equity Interests acquired after the Closing Date in accordance with this Agreement if, and to the extent that, and for so long as (a) such Equity Interests constitute less than 100% of all applicable Equity Interests of such person and the person holding the remainder of such Equity Interests is not an Affiliate, (b) doing so would violate applicable law or a contractual obligation binding on such Equity Interests and (c) with respect to contractual obligations, such 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 Equity Interests, (iii) any assets acquired after the 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 of the type permitted pursuant to Section 6.01(i) or (j) or that is secured by a Lien of the type permitted pursuant to Section 6.02(i) or (j)), (iv) any Principal Property, (v) any Equity Interests or evidences of Indebtedness of Indenture Restricted Subsidiaries owned by the U.S. Borrower or any Indenture Restricted Subsidiary and (vi) any Subsidiary or asset with respect to which the Administrative Agent determines in its reasonable discretion that the cost of the satisfaction of the Collateral and Guarantee Requirement or the provisions of this Section 5.10 or of any Security Document with respect thereto is excessive in relation to the value of the security afforded thereby. (h) Prior to a Qualified IPO, ensure that all outstanding Equity Interests of the U.S. Borrower (other than options and management shares) that are (i) sold by Holdings   130 -------------------------------------------------------------------------------- or (ii) newly issued by the U.S. Borrower shall have been pledged to the Administrative Agent for the benefit of the Secured Parties to secure the Obligations pursuant to a security document not materially less favorable to the Secured Parties than the Collateral Agreement and in form and substance reasonably satisfactory to the Administrative Agent, and the Administrative Agent shall have received certificates or other instruments representing all such Equity Interests, together with stock powers or other instruments of transfer with respect thereto endorsed in blank. (i) Within ninety (90) days after the Amendment Effective Date (subject to extension by the Administrative Agent in its reasonable discretion), deliver each Security Document set forth on Schedule 5.10(i). SECTION 5.11. Fiscal Year; Accounting. In the case of the U.S. Borrower, cause its fiscal year to end on December 31 (or such other fiscal year end as is specified in a written notice delivered to the Administrative Agent by the U.S. Borrower; provided that such other fiscal year end is reasonably acceptable to the Administrative Agent). SECTION 5.12. Rating. In the case of the U.S. Borrower, use commercially reasonable efforts to maintain (i) ratings from each of Moody’s and S&P for the Term Loans, (ii) corporate credit ratings from S&P for the U.S. Borrower and (iii) corporate family ratings from Moody’s for the U.S. Borrower. SECTION 5.13. Lender Meetings. In the case of the U.S. Borrower, upon the request of the Administrative Agent, participate in a meeting of the Administrative Agent and the Lenders once during each fiscal year to be held at such time and location as may be agreed upon by the U.S. Borrower and the Administrative Agent. SECTION 5.14. German Guarantor. Use all commercially reasonable efforts to cause the following to be satisfied as soon as practicable after the Amendment Effective Date: (a) the supervisory board of the German Guarantor shall have approved its execution of each Loan Document to which it shall be a party, (b) the Administrative Agent shall have received from the German Guarantor a counterpart of the Foreign Guarantee Agreement and each other Loan Document to be entered into by the German Guarantor signed on behalf of the German Guarantor, (c) the Administrative Agent shall have received, on behalf of itself, the Lenders and each Issuing Bank on such date, a favorable written opinion of legal counsel to the German Guarantor in the United States and Germany in form and substance reasonably satisfactory to the Administrative Agent and covering such matters relating to the Loan Documents as the Administrative Agent shall reasonably request, (d) the Administrative Agent shall have received, in the case of the German Guarantor and each Subsidiary Loan Party that is a subsidiary of the German Guarantor, each of the items referred to in clauses (i), (ii), (iii) and (iv) of Section 4.02(d) of the 2005 Credit Agreement (with references therein to the “Closing Date” to be deemed references to the date upon which the conditions set forth in this Section 5.14 are satisfied, and disregarding the first parenthetical in Section 4.02(d) of the 2005 Credit Agreement), (e) the Collateral and Guarantee Requirement shall have been satisfied with respect to the German Guarantor and each Subsidiary Loan Party that is a subsidiary of the German Guarantor (with references therein to the “Closing Date” to be deemed references to the date upon which the conditions set forth in this Section 5.14 are satisfied, and disregarding the second   131 -------------------------------------------------------------------------------- parenthetical in paragraph (b) and the third parenthetical in paragraph (c) of the Collateral and Guarantee Requirement) and (f) unless otherwise agreed upon by the Administrative Agent, all actions required by Sections 5.10(b) and (c) by the German Guarantor and each such Subsidiary Loan Party that is a subsidiary of the German Guarantor shall have been completed. SECTION 5.15. [reserved]. SECTION 5.16. Financial Assistance. Except where the failure to do so could not reasonably be expected to have a Material Adverse Effect, comply in all respects with Sections 151 to 158 of the United Kingdom Companies Act 1985 and any equivalent legislation in other jurisdictions, including in relation to the execution of the Security Documents and payment of amounts due under this Agreement. SECTION 5.17. U.K. Pension Matters. (a) Except where the failure to do so could not reasonably be expected to have a Material Adverse Effect, ensure that all pension schemes operated by or maintained for the benefit of the U.S. Borrower and the Subsidiaries and/or any of their respective employees are fully funded based on the minimum funding requirement under section 56 of the Pensions Act 1995 or the statutory funding objective under section 222 of the Pensions Act 2004 and that no action or omission is taken by any member of the Group in relation to such a pension scheme that has or is reasonably likely to have a Material Adverse Effect (including the termination or commencement of winding-up proceedings of any such pension scheme or the U.S. Borrower or any Subsidiary ceasing to employ any member of such a pension scheme). (b) Except where the failure to do so could not reasonably be expected to have a Material Adverse Effect, ensure that none of the U.S. Borrower or any Subsidiary is or has been at any time an employer (for the purposes of sections 38 to 51 of the Pensions Act 2004) of an occupational pension scheme that is not a money purchase scheme (both terms as defined in the Pension Schemes Act 1993) that has or is reasonably likely to have a Material Adverse Effect or is “connected” with or an “associate” of (as those terms are used in sections 39 or 43 of the Pensions Act 2004) such an employer. (c) Deliver to the Administrative Agent at such times as those reports are prepared in order to comply with the then current statutory or auditing requirements (as applicable either to the trustees of any relevant schemes or to the U.S. Borrower), actuarial reports in relation to all pension schemes mentioned in paragraph (a) above. (d) Promptly notify the Administrative Agent of any material change in the rate of contributions to any pension schemes mentioned in paragraph (a) above, paid or recommended to be paid (whether by the scheme actuary or otherwise) or required by law or otherwise. SECTION 5.18. Transactions. (a) In the case of the U.S. Borrower, consummate the Debt Tender Offer and consummate the Existing Borden Floating Rate Notes Redemption within 90 days after the Amendment Effective Date or such later period that is reasonably satisfactory to the Administrative Agent and the Syndication Agent.   132 -------------------------------------------------------------------------------- (b) Deliver to the Administrative Agent and the Syndication Agent true and correct copies of any amendments or waivers to the terms of the Debt Tender Offer Documents delivered pursuant to Section 7(l) of the Amendment Agreement and any additional Debt Tender Offer Documents. ARTICLE VI Negative Covenants Each Borrower covenants and agrees with each Lender that, so long as this Agreement shall remain in effect (other than in respect of contingent indemnification and expense reimbursement obligations for which no claim has been made) 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, no Borrower will, or will cause or permit any of the Material Subsidiaries to: SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist any Indebtedness, except: (a) The Existing Notes, the New Second Secured Notes, other Indebtedness existing, or incurred pursuant to facilities existing, on the Closing Date and set forth on Schedule 6.01 to the 2005 Credit Agreement and any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness or, without duplication, replacements of such facilities that would constitute Permitted Refinancing Indebtedness with respect to such facilities if all Indebtedness available to be incurred thereunder were outstanding on the date of such replacement (other than Permitted Refinancing Indebtedness in respect of intercompany indebtedness of the U.S. Borrower or any Subsidiary owed to the U.S. Borrower or any Subsidiary Refinanced with Indebtedness owed to a person other than the U.S. Borrower or any Subsidiary); (b) Indebtedness created hereunder and under the other Loan Documents and any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness; (c) Indebtedness of the U.S. Borrower 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 (until a Qualified IPO), the U.S. Borrower or any Subsidiary, pursuant to reimbursement or indemnification obligations to such person; provided that   133 -------------------------------------------------------------------------------- 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 U.S. Borrower to any Subsidiary and of any Subsidiary to the U.S. Borrower or any other Subsidiary; provided that (i) Indebtedness of any Subsidiary that is not a Subsidiary Loan Party to the Loan Parties shall be subject to Section 6.04(b) and (ii) Indebtedness of any Borrower to any Subsidiary and Indebtedness of any other Loan Party to any Subsidiary that is not a Subsidiary Loan Party 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 ten Business Days of notification to any Borrower of its incurrence and (y) such Indebtedness in respect of credit or purchase cards is extinguished within 60 days from its incurrence; (h) (i) (A) Indebtedness of a Subsidiary acquired after the Closing Date or a person merged into or consolidated with the U.S. Borrower or any Subsidiary after the Closing Date and Indebtedness assumed in connection with the acquisition of assets or in connection with a Permitted Business Acquisition, which Indebtedness in each case, exists at the time of such acquisition, merger or consolidation and is not created in contemplation of such event or (B) Indebtedness incurred to finance any such acquisition or Permitted Business Acquisition and where, in each case, such acquisition, merger or consolidation is permitted by this Agreement and where, if such Indebtedness is new Indebtedness incurred to finance such acquisition or Permitted Business Acquisition, such Indebtedness is unsecured or is subordinated to the Obligations on terms reasonably satisfactory to the Administrative Agent and (ii) any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness; provided that, with respect to clause (i), immediately after giving effect to such acquisition, merger or consolidation, and the assumption or incurrence of any such Indebtedness, there shall be no Default or Event of Default and the U.S. Borrower shall be in Pro Forma Compliance;   134 -------------------------------------------------------------------------------- (i) Capital Lease Obligations, mortgage financings and purchase money Indebtedness incurred by the U.S. Borrower 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 this paragraph (i) and the Remaining Present Value of leases permitted under Section 6.03) would not in the aggregate exceed the greater of $150.0 million and 5% 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 the U.S. Borrower or any Subsidiary in respect of any Sale and Lease-Back Transaction that is permitted under Section 6.03, and any Permitted Refinancing Indebtedness in respect thereof; (k) other Indebtedness of the U.S. Borrower or any Subsidiary (pursuant to this paragraph (k)), in an aggregate principal amount that at the time of, and after giving effect to, the incurrence thereof, would not exceed the greater of $150.0 million and 5% 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; (l) Guarantees (i) by the U.S. Borrower or any Subsidiary Loan Party of any Indebtedness of the U.S. Borrower or any Subsidiary Loan Party permitted to be incurred under this Agreement, (ii) by the U.S. Borrower or any Subsidiary Loan Party of Indebtedness otherwise permitted hereunder of any Subsidiary that is not a Subsidiary Loan Party to the extent such Guarantees are permitted by Section 6.04(b) and (iii) by any Foreign Subsidiary that is not a Subsidiary Loan Party of Indebtedness of another Foreign Subsidiary; provided that (A) Guarantees by the U.S. Borrower or any Subsidiary Loan Party under this Section 6.01(1) 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 not less favorable to the Lenders than the subordination terms of such other Indebtedness, (B) no subsidiary of the U.S. Borrower (other than Borden Nova Scotia Finance, ULC) that is not a Domestic Loan Party shall Guarantee the Existing Borden Second Secured Notes, the Debentures or any Permitted Refinancing Indebtedness in respect of any of the foregoing or any Indebtedness that is secured by any Second-Priority Liens and (C) no subsidiary of the U.S. Borrower that is not a Loan Party shall Guarantee any Indebtedness incurred pursuant to Section 6.01(w) or any Permitted Refinancing Indebtedness in respect thereof or any Permitted Refinancing Indebtedness incurred under Section 6.01(b);   135 -------------------------------------------------------------------------------- (m) Indebtedness arising from agreements of Holdings, the U.S. Borrower or any Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with any Permitted Business Acquisition or 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; (n) [reserved]; (o) 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 $15.0 million; (p) Indebtedness supported by a Letter of Credit, in a principal amount not in excess of the stated amount of such Letter of Credit; (q) Indebtedness consisting of (x) the financing of insurance premiums or (y) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business; (r) [reserved]; (s) [reserved]; (t) [reserved]; (u) all premium (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in paragraphs (a) through (q) above and paragraphs (v) through (cc) below; (v) Indebtedness of the U.S. Borrower and the Subsidiaries incurred under lines of credit or overdraft facilities (including, but not limited to, intraday, ACH and purchasing card/T&E services) extended by one or more financial institutions reasonably acceptable to the Administrative Agent or one or more of the Lenders and (in each case) established for the U.S. Borrower’s and the Subsidiaries’ ordinary course of operations (such Indebtedness, the “Overdraft Line”), which Indebtedness may be secured as, but only to the extent, provided in Section 6.02(b) and in the Security Documents (it being understood, however, that for a period of 30 consecutive days during each fiscal year of the U.S. Borrower the outstanding principal amount of Indebtedness under the Overdraft Line shall not exceed $40.0 million); (w) (i) other Indebtedness incurred, issued or assumed by the U.S. Borrower or any Subsidiary Loan Party so long as (A) no Default or Event of Default shall have occurred and be continuing or would result therefrom and   136 -------------------------------------------------------------------------------- (B) immediately after giving effect to the issuance, incurrence or assumption of such Indebtedness, the Consolidated Leverage Ratio on a Pro Forma Basis shall not be greater than 6.00 to 1.00 and (ii) Permitted Refinancing Indebtedness in respect thereof; (x) Indebtedness of Foreign Subsidiaries that are not Loan Parties in an aggregate amount not to exceed at any time outstanding the greater of $150.0 million and 5% 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; (y) Indebtedness in respect of letters of credit, bank guarantees, warehouse receipts or similar instruments issued to support performance obligations and trade letters of credit (other than obligations in respect of other Indebtedness) in the ordinary course of business; (z) unsecured Indebtedness in respect of obligations of the U.S. Borrower or any Subsidiary to pay the deferred purchase price of goods or services or progress payments in connection with such goods and services; provided, that such obligations are incurred in connection with open accounts extended by suppliers on customary trade terms (which require that all such payments be made within 60 days after the incurrence of the related obligations) in the ordinary course of business and not in connection with the borrowing of money or any Swap Agreements; (aa) Indebtedness representing deferred compensation to employees of the U.S. Borrower or any Subsidiary incurred in the ordinary course of business; (bb) Indebtedness consisting of promissory notes issued by the U.S. Borrower or any Subsidiary to current or former officers, directors and employees, their respective estates, spouses or former spouses to finance the purchase or redemption of Equity Interests of Holdings or any direct or indirect parent of the U.S. Borrower permitted by Section 6.06; and (cc) Indebtedness consisting of obligations of the U.S. Borrower or any Subsidiary under deferred compensation or other similar arrangements incurred by such person in connection with Permitted Business Acquisitions or any other Investment permitted hereunder. 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 of the U.S. Borrower) 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 the U.S. Borrower and the Subsidiaries existing on the Closing Date and set forth on Schedule 6.02(a) to the 2005 Credit Agreement or, to the extent not listed in such Schedule,   137 -------------------------------------------------------------------------------- where such property or assets have a fair market value that does not exceed $10 million in the aggregate, and any modifications, replacements, renewals or extensions thereof; provided that (i) such Liens shall secure only those obligations that they secure on the Closing Date (and any Permitted Refinancing Indebtedness in respect thereof permitted by Section 6.01(a)) and shall not subsequently apply to any other property or assets of the U.S. Borrower or any Subsidiary other than (A) after-acquired property that is affixed or incorporated into the property covered by such Lien, and (B) proceeds and products thereof and (ii) 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”; (b) any Lien created under the Loan Documents or permitted in respect of any Mortgaged Property by the terms of the applicable Mortgage; provided, however, in no event shall the holders of the Indebtedness under the Overdraft Line have the right to receive proceeds in respect of a claim in excess of $40.0 million in the aggregate (plus (i) any accrued and unpaid interest in respect of Indebtedness incurred by the U.S. Borrower and the Subsidiaries under the Overdraft Line and (ii) any accrued and unpaid fees and expenses owing by the U.S. Borrower and the Subsidiaries under the Overdraft Line) from the enforcement of any remedies available to the Secured Parties under all of the Loan Documents; (c) any Lien on any property or asset of the U.S. Borrower or any Subsidiary securing Indebtedness permitted by Section 6.01(h)(i)(A) or Permitted Refinancing Indebtedness in respect thereof; provided that such Lien (i) does not apply to any other property or assets of the U.S. Borrower 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 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) Liens imposed by law, such as landlord’s, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, construction or   138 -------------------------------------------------------------------------------- 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, the U.S. Borrower or any Subsidiary shall have set aside on its books reserves in accordance with GAAP; (f) (i) pledges and deposits and other Liens 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 and other Liens 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 (prior to a Qualified IPO), the U.S. Borrower or any Subsidiary; (g) deposits and other Liens 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, agreements with public utilities, and other obligations of a like nature (including letters of credit in lieu of any such bonds or to support the issuance thereof) incurred by the U.S. Borrower or any Subsidiary 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, survey exceptions and such matters as an accurate survey would disclose, easements, trackage rights, leases (other than Capital Lease Obligations), licenses, special assessments, rights-of-way covenants, conditions, restrictions and declarations on or agreements with respect to the use of real property, servicing agreements, development agreements, site plan agreements and other similar encumbrances incurred in the ordinary course of business and title defects or irregularities that are of a minor nature and that, in the aggregate, do not interfere in any material respect with the ordinary conduct of the business of the U.S. Borrower or any Subsidiary; (i) Liens securing Indebtedness permitted by Section 6.01(i); provided that such Liens attach only to property to which such Indebtedness relates (or accessions to such property and proceeds thereof); 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   139 -------------------------------------------------------------------------------- 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); provided that such Liens, to the extent that they secure aggregate amounts of more than $10.0 million, shall be discharged within 60 days of the creation thereof; (l) other Liens with respect to property or assets of the U.S. Borrower 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 $50.0 million at any time; (m) Liens disclosed by the title insurance policies delivered on or subsequent to the Closing Date and pursuant to Section 5.10 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; (n) [reserved]; (o) any interest or title of a lessor or sublessor under any leases or subleases entered into by the U.S. Borrower or any Subsidiary 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 the U.S. Borrower or any Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the U.S. Borrower and the Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the U.S. Borrower or any Subsidiary in the ordinary course of business; (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, trade-related bank guarantees or similar trade-related obligations permitted under Section 6.01(f), (k), (o) or (y) and covering the goods (or the documents of title in respect of such goods) financed by such letters of credit, bank guarantees or similar obligations and the proceeds and products thereof;   140 -------------------------------------------------------------------------------- (s) licenses or sublicenses (including with respect to intellectual property and software) 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 is not a Loan Party that secure Indebtedness of a Foreign Subsidiary that is permitted to be incurred under Section 6.01; (v) other Liens so long as, after giving effect to any such Lien and the incurrence of any Indebtedness incurred at the time such Lien is created, incurred or permitted to exist on a Pro Forma Basis, the Senior Secured Bank Leverage Ratio on the last day of the U.S. Borrower’s then most recently completed fiscal quarter for which financial statements are available shall be less than or equal to 4.00 to 1.00 and at the time of the incurrence of such Lien and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing or would result therefrom; provided that any such Lien on the Collateral (i) shall not be a first priority Lien and (ii) shall be subject to an intercreditor agreement on terms no less favorable to the Lenders than those set forth in the New Second Lien Intercreditor Agreement (it being understood that such Liens may be senior in priority to, or pari passu with, or junior in priority to, the Liens securing the New Second Secured Notes or the Existing Borden Second Secured Notes); (w) Second-Priority Liens on Collateral; (x) Liens solely on any cash earnest money deposits made by the U.S. Borrower or any of the Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder; (y) Liens arising out of consignment or similar arrangements for the sale of goods entered into in the ordinary course of business; (z) Liens securing insurance premium financing arrangements, provided that such Liens are limited to the applicable unearned insurance premiums; (aa) Liens in favor of the U.S. Borrower or any Subsidiary Loan Party; (bb) Liens on not more than $15.0 million of deposits securing Swap Agreements permitted to be incurred under Section 6.13; (cc) deposits or other Liens with respect to property or assets of the U.S. Borrower or any Subsidiary; provided that such property and assets shall have an aggregate fair market value (valued at the time of creation of the Liens) of not more than $50.0 million at any time;   141 -------------------------------------------------------------------------------- (dd) [reserved]; (ee) the reservations, limitations, provisos and conditions, if any, expressed in any original grant from the Crown of any real property or any interest therein in Canada; provided they do not reduce the value of the assets or interfere in any material respect with the ordinary conduct of the business of the U.S. Borrower or any Subsidiary; (ff) Liens on Equity Interests in joint ventures securing obligations of such joint venture; (gg) Liens on securities that are the subject of repurchase agreements constituting Permitted Investments under clause (5) of the definition thereof; and (hh) Liens on the Equity Interests of Hexion Specialty Chemicals Pty. Ltd. to the extent securing Indebtedness of Hexion Specialty Chemicals Pty Ltd. and its Subsidiaries permitted hereunder. Notwithstanding the foregoing, (a) no Liens shall be permitted to exist, directly or indirectly, on (i) Pledged Collateral or any Indebtedness of the U.S. Borrower or any Subsidiary to the U.S. Borrower or a Domestic Subsidiary (unless such Indebtedness shall have become subject to a first-priority Lien securing the Obligations), other than Liens in favor of the Administrative Agent for the benefit of the Secured Parties and Liens permitted by Section 6.02(d), (e), (k), (q) or (w), or (ii) any real estate, fixtures or equipment of the U.S. Borrower or any of its Subsidiaries located within the United States (except in respect of any such assets that the Board of Directors of the U.S. Borrower has determined do not constitute Principal Property that shall have become subject to a first priority Lien securing the Obligations), other than Liens in favor of the Administrative Agent for the benefit of the Secured Parties and Liens permitted by Section 6.02(a), (c), (d), (e), (h), (i), (j), (k), (l) (solely, in the case of clause (l), with respect to Liens of the type referred to in Section 6.02(c) or (i)), (o), (q), (t), (v) (solely, in the case of clause (v), with respect to Liens of the type referred to in Section 6.02(c) or (i)) that do not trigger a requirement to grant equal and ratable Liens securing other outstanding Indebtedness of the U.S. Borrower or any Subsidiary, or (y), unless in each case any such assets shall be secured by a Lien in favor of the Administrative Agent for the benefit of the Secured Parties, in which case the restrictions set forth in this clause (a) shall cease to apply with respect to such assets, and (b) no Liens over any deposit account of the U.S. Borrower or any Subsidiary Loan Party other than Liens permitted by Section 6.02(b), (d), (f), (g), (k), (p)(i), (p)(ii) or (q) shall be perfected. 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   142 -------------------------------------------------------------------------------- purpose or purposes as the property being sold or transferred (a “Sale and Lease-Back Transaction”); provided that (i) a Sale and Lease-Back Transaction shall be permitted with respect to property (a) owned by the U.S. Borrower, any Domestic Subsidiary or any Foreign Subsidiary Loan Party that is acquired after the Closing Date so long as such Sale and Lease-Back Transaction is consummated within 270 days of the acquisition of such property, (b) owned by any Foreign Subsidiary that is not a Loan Party regardless of when such property was acquired, (c) that is included on Schedule 6.03 to the 2005 Credit Agreement or (d) that has a fair market value, together with all property disposed of pursuant to this clause (d) after the Closing Date, not in excess of $25 million and (ii) 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 paragraph (i) of Section 6.01 and the Remaining Present Value of outstanding leases previously entered into under this Section 6.03) would not in the aggregate exceed the greater of $150 million and 5% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date the lease was entered into for which financial statements have been delivered pursuant to Section 5.04. 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 of, evidences of Indebtedness or other securities of, make or permit to exist any loans or advances to or Guarantees of the obligations of, or make or permit to exist any investment or any other interest in (each, an “Investment”), any other person, except: (a) [reserved]; (b) (i) Investments by the U.S. Borrower or any Subsidiary in the Equity Interests of any Subsidiary; (ii) intercompany loans from the U.S. Borrower or any Subsidiary to the U.S. Borrower or any Subsidiary; and (iii) Guarantees by the U.S. Borrower or any Subsidiary of Indebtedness otherwise permitted hereunder of the U.S. 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) made after the Closing Date by the Loan Parties pursuant to clause (i) in Subsidiaries that are not Subsidiary Loan Parties, plus (B) net intercompany loans made by Loan Parties after the Closing Date to Subsidiaries that are not Subsidiary Loan Parties pursuant to clause (ii), plus (C) Guarantees by Loan Parties of Indebtedness after the Closing Date of Subsidiaries that are not Subsidiary Loan Parties pursuant to clause (iii), shall not exceed an aggregate net amount equal to (x) the greater of $150 million and 5% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such Investment for which financial statements have been delivered pursuant to Section 5.04 (plus any return of capital actually received by the respective investors in respect of Investments theretofore made by them pursuant to this paragraph (b)); plus (y) the portion, if any, of the Available Investment Basket Amount on the date of such election that the U.S. Borrower elects to apply to this Section 6.04(b)(y); and provided further   143 -------------------------------------------------------------------------------- that intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations and intercompany sales of Holdings (prior to a Qualified IPO), the U.S. Borrower and the Subsidiaries shall not be included in calculating the limitation in this paragraph at any time; (c) Permitted Investments and Investments that were Permitted Investments when made; (d) Investments arising out of the receipt by the U.S. Borrower or any Subsidiary of noncash consideration for the sale of assets permitted under Section 6.05; (e) loans and advances to officers, directors, employees or consultants of Holdings, the U.S. Borrower or any Subsidiary (i) in the ordinary course of business not to exceed $10 million in the aggregate at any time outstanding (calculated without regard to write-downs or write-offs thereof), (ii) in respect of payroll payments and expenses in the ordinary course of business and (iii) in connection with such person’s purchase of Equity Interests of Holdings (or any direct or indirect parent of the U.S. Borrower) solely to the extent that the amount of such loans and advances are contributed to the U.S. Borrower in cash as common equity; (f) accounts receivable, security deposits and prepayments arising and trade credit granted in the ordinary course of business and any assets or 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; (g) Swap Agreements permitted pursuant to Section 6.13; (h) Investments existing on the Closing Date and set forth on Schedule 6.04 to the 2005 Credit Agreement and any extensions, renewals or reinvestments thereof, so long as the aggregate amount of all Investments pursuant to this clause (h) is not increased at any time above the amount of such Investment existing on the Closing Date; (i) Investments resulting from pledges and deposits referred to in Sections 6.02(f), (g), (k), (t), (x), (bb) and (cc); (j) other Investments by the U.S. Borrower or any Subsidiary; provided that, after giving effect to such Investment, the aggregate amount of all Investments made pursuant to this paragraph (j) (valued at the time of the making thereof, and without giving effect to any write-downs or write-offs thereof) shall not exceed (i) the greater of $150 million and 5% of Consolidated Total Assets as of the end of the fiscal quarter of the U.S. Borrower immediately prior to the date of such Investment for which   144 -------------------------------------------------------------------------------- financial statements have been delivered pursuant to Section 5.04 (plus any returns of capital actually received by the respective investor in respect of Investments theretofore made by it pursuant to this paragraph (j)) plus (ii) the portion, if any, of the Available Investment Basket Amount on the date of such election that the U.S. Borrower elects to apply to this Section 6.04(j)(ii); (k) Investments constituting Permitted Business Acquisitions; (l) Investments consisting of the licensing or contribution of intellectual property pursuant to joint marketing arrangements with other persons; (m) intercompany loans and other Investments between Foreign Subsidiaries that are not Loan Parties and Guarantees by Foreign Subsidiaries permitted by Section 6.01(l); (n) Investments consisting of purchases and acquisitions of inventory, supplies, materials and equipment or purchases of contract rights or licenses or leases of intellectual property in each case in the ordinary course of business; (o) the 2005 Transactions, the May 2006 Transactions and the Transactions; (p) 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 or Investments acquired by the U.S. Borrower as a result of a foreclosure by the U.S. Borrower or any of the Subsidiaries with respect to any secured Investments or other transfer of title with respect to any secured Investment in default; (q) Investments of a Subsidiary acquired after the Closing Date or of a corporation merged into the U.S. Borrower or merged into or consolidated with a Subsidiary in accordance with Section 6.05 after the Closing Date to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger or consolidation and were in existence on the date of such acquisition, merger or consolidation; and (r) Investments received substantially contemporaneously in exchange for Equity Interests of the U.S. Borrower; provided that such Investments are not added in any determination of the Available Investment Basket Amount; (s) any Investment in any person that, as a result of such Investment, becomes a Domestic Subsidiary and an Indenture Restricted Subsidiary if, in the good faith determination of the Board of Directors of the U.S. Borrower,   145 -------------------------------------------------------------------------------- such Domestic Subsidiary could not transfer all Principal Properties held by such Domestic Subsidiary to the U.S. Borrower or take other actions to avoid such Domestic Subsidiary’s being an Indenture Restricted Subsidiary, in each case without subjecting the U.S. Borrower or any of the other Subsidiaries to (a) liabilities that could reasonably be expected to have a Material Adverse Effect or (b) material liability (other than in respect of Indebtedness or trade obligations); provided that no Investments may be made pursuant to this Section 6.04(s) if, immediately after giving effect thereto, the sum of all such Investments made pursuant to this Section 6.04(s) (valued at the time of the making thereof, and without giving effect to any write-downs or write-offs thereof, but after deducting any return of capital actually received by the U.S. Borrower or the respective Subsidiary in respect of investments theretofore made by them pursuant to this Section 6.04(s)) would exceed 2.5% of Consolidated Total Assets as of the end of the fiscal quarter of the U.S. Borrower immediately prior to the date of such Investment for which financial statements have been delivered pursuant to Section 5.04; (t) Investments in joint ventures not in excess of $15.0 million in the aggregate; (u) Guarantees by the U.S. Borrower 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; (v) Investments in connection with the purchase, cancellation, or repayment of the Industrial Revenue Bonds (at par or at a premium); (w) Investments consisting of the redemption, purchase, repurchase or retirement of any Equity Interests permitted under Section 6.06; (x) Investments in the ordinary course of business consisting of Uniform Commercial Code Article 3 endorsements for collection or deposit and Uniform Commercial Code Article 4 customary trade arrangements with customers consistent with past practices; (y) advances in the form of a prepayment of expenses, so long as such expenses are being paid in accordance with customary trade terms of the U.S. Borrower or its Subsidiaries; and (z) Investments by U.S. Borrower and its Subsidiaries, including loans to any direct or indirect parent of the U.S. Borrower, if the U.S. Borrower or any other Subsidiary would otherwise be permitted to make a dividend or distribution in such amount (provided that the amount of any such Investment shall also be deemed to be a distribution under the appropriate clause of Section 6.06 for all purposes of this Agreement).   146 -------------------------------------------------------------------------------- The amount of Investments that may be made at any time pursuant to (a) either Section 6.04(b) or 6.04(j) (such Sections, the “Related Sections”) may, at the election of the U.S. Borrower, be increased by the amount of Investments that could be made at such time under the other Related Section; provided that the amount of each such increase in respect of one Related Section shall be treated as having been used under the other Related Section or (b) Section 6.04(s) may, at the election of the U.S. Borrower, be increased by the amount of Investments that could be made at such time under Section 6.04(j); provided that the amount of each such increase shall be treated as having been used under 6.04(j). 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 any Subsidiary or, except to the extent otherwise permitted by Section 6.01, any Disqualified Stock of the U.S. Borrower, 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 lease, purchase and sale of inventory in the ordinary course of business by the U.S. Borrower or any Subsidiary, (ii) the acquisition or lease (pursuant to an operating lease) of any other asset in the ordinary course of business by the U.S. Borrower or any Subsidiary, (iii) the sale of surplus, obsolete or worn out equipment or other property in the ordinary course of business by the U.S. Borrower or any Subsidiary or (iv) the sale of Permitted Investments in the ordinary course of business; (b) if at the time thereof and immediately thereafter no Event of Default shall have occurred and be continuing or would result therefrom, (i) the merger of any Subsidiary into the U.S. Borrower in a transaction in which the U.S. Borrower is the survivor, (ii) the merger or consolidation of any Domestic Subsidiary into or with any Domestic Subsidiary Loan Party in a transaction in which the surviving or resulting entity is a Domestic Subsidiary Loan Party or the merger or consolidation of any Foreign Subsidiary into or with any Foreign Subsidiary Loan Party in a transaction in which the surviving or resulting entity is a Foreign Subsidiary Loan Party and, in the case of each of clauses (i) and (ii), no person other than the U.S. Borrower or a Subsidiary Loan Party receives any consideration, (iii) the merger or consolidation of any Subsidiary that is not a Subsidiary Loan Party into or with any other Subsidiary that is not a Subsidiary Loan Party, (iv) the liquidation or dissolution or change in form of entity of any Subsidiary (other than any Borrower) if the U.S. Borrower determines in good faith that such liquidation, dissolution or change in form is in the best interests of the U.S. Borrower and is not materially disadvantageous to the Lenders or (v) any Subsidiary may merge with any other person in order to effect an Investment permitted pursuant to Section 6.04 so long as the continuing or surviving person shall be a Subsidiary;   147 -------------------------------------------------------------------------------- (c) sales, transfers, leases, licenses or other dispositions to the U.S. Borrower 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 Subsidiary Loan Party in reliance on this paragraph (c) (other than transactions referenced in Section 6.07(a)(xi)) shall not in the aggregate exceed, in any fiscal year of the U.S. Borrower, 5% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such sale, transfer, lease, license or other disposition for which financial statements have been delivered pursuant to Section 5.04; (d) Sale and Lease-Back Transactions permitted by Section 6.03; (e) Investments permitted by Section 6.04, Liens permitted by Section 6.02, Dividends permitted by Section 6.06 and purchases and leases permitted by Section 6.10; (f) any swap of assets in exchange for services or other assets in the ordinary course of business of comparable or greater value or usefulness to the business of the U.S. Borrower and the Subsidiaries as a whole, as determined in good faith by the management of the U.S. Borrower, which in the event of a swap with a fair market value in excess of (x) $10.0 million shall be evidenced by a certificate from a Responsible Officer of the U.S. Borrower and (y) $25.0 million shall be set forth in a resolution approved in good faith by at least a majority of the Board of Directors of the U.S. Borrower; (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, licenses 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, licensed or otherwise disposed of in reliance upon this paragraph (h) shall not exceed, in any fiscal year of the U.S. Borrower, 8% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such sale, transfer, lease, license or other disposition for which financial statements have been delivered pursuant to Section 5.04; provided, further, that the Net Proceeds thereof are applied in accordance with Section 2.12(b); (i) Permitted Business Acquisitions (including any merger, consolidation or asset acquisition in connection with a Permitted Business Acquisition); provided that following any such merger or consolidation (i) involving any Borrower, such Borrower is the surviving corporation (and, if such merger or consolidation involves the U.S. Borrower, the U.S. Borrower is the surviving corporation), (ii) involving a Domestic Subsidiary, the surviving or resulting entity shall be a Domestic Subsidiary Loan Party that is a Wholly Owned Subsidiary and (iii) involving a Foreign Subsidiary,   148 -------------------------------------------------------------------------------- the surviving or resulting entity shall be a Wholly Owned Subsidiary and, if such Foreign Subsidiary is a Foreign Subsidiary Loan Party, the surviving or resulting entity shall be a Foreign Subsidiary Loan Party; (j) leases, licenses, cross-licensing arrangements, or subleases or sublicenses of any real or personal property (including any technology or other intellectual property) of the U.S. Borrower or any Subsidiary in the ordinary course of business; (k) sales, leases or other dispositions of inventory of the U.S. Borrower and the Subsidiaries determined by the management of the U.S. Borrower to be no longer useful or necessary in the operation of the business of the U.S. Borrower or any of the Subsidiaries; provided that the Net Proceeds thereof are applied in accordance with Section 2.12(b); and (l) acquisitions and purchases made with the proceeds of any asset sale pursuant to the first proviso of paragraph (a) of the definition of “Net Proceeds”. Notwithstanding anything to the contrary contained in Section 6.05 above, (i) [reserved], (ii) no sale, transfer or other disposition of assets shall be permitted by this Section 6.05 (other than sales, transfers, leases, licenses or other dispositions to Loan Parties) unless such disposition is for fair market value and (iii) no sale, transfer or other disposition of assets shall be permitted by paragraph (a), (d), (h) or (k) of this Section 6.05 unless such disposition is for at least 75% cash consideration; provided that the provisions of clause (iii) shall not apply to any individual transaction or series of related transactions involving assets with a fair market value of less than $10.0 million; and provided, further, that for purposes of clause (iii) (a) the amount of any liabilities (as shown on the U.S. Borrower’s or any Subsidiary’s most recent balance sheet or in the notes thereto) of the U.S. Borrower or any Subsidiary of the U.S. Borrower (other than liabilities that are by their terms subordinated to the Obligations) that are assumed by the transferee of any such assets, (b) any notes or other obligations or other securities or assets received by the U.S. Borrower or such Subsidiary of the U.S. Borrower from such transferee that are converted by the U.S. Borrower or such Subsidiary of the U.S. Borrower into cash within 180 days of the receipt thereof (to the extent of the cash received) and (c) any Designated Non-Cash Consideration received by the U.S. Borrower or any of its Subsidiaries in such transaction having an aggregate fair market value, taken together with all other Designated Non-Cash Consideration received pursuant to this clause (c) that is at that time outstanding, not to exceed $35 million at the time of the receipt of such Designated Non-Cash Consideration (with the fair market value of each item of Designated Non-Cash Consideration being measured at the time received and without giving effect to subsequent changes in value) shall, in each case of clause (a), (b) and (c), be deemed to be cash. To the extent any Collateral is disposed of in a transaction permitted by this Section 6.05 to any person other than a Loan Party, such Collateral shall be sold free and clear of the Liens created by the Loan Documents, and the Administrative Agent shall take, and shall be authorized by each Lender to take, any actions reasonably requested by the U.S. Borrower in order to evidence the foregoing.   149 -------------------------------------------------------------------------------- SECTION 6.06. Dividends and Distributions. Declare or pay, directly or indirectly, any dividend or make, directly or indirectly, 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 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 of the U.S. Borrower to purchase or acquire) any of its Equity Interests or set aside any amount for any such purpose (other than through the issuance of additional Equity Interests of the person redeeming, purchasing, retiring or acquiring such shares) (any of the foregoing dividends, distributions, redemptions, repurchases, retirements, other acquisitions or setting aside of amounts, “Dividends”); provided, however, that: (a) any Subsidiary may declare and pay dividends to, repurchase its Equity Interests from or make other distributions to the U.S. Borrower or to any Wholly Owned Subsidiary of the U.S. Borrower (or, in the case of non-Wholly Owned Subsidiaries, to the U.S. Borrower 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 the U.S. Borrower or such Subsidiary) based on their relative ownership interests); (b) prior to a Qualified IPO, the U.S. Borrower may declare and pay dividends or make other distributions to Holdings in respect of (i) overhead, tax liabilities of Holdings, legal, accounting and other professional fees and expenses, (ii) fees and expenses related to any public offering or private placement of debt or equity securities, investment or acquisition permitted hereunder (whether or not successful), (iii) franchise taxes and other fees, taxes and expenses in connection with the maintenance of its existence and its ownership of the U.S. Borrower, and in order to permit Holdings to make payments permitted by Section 6.07(b) and (iv) customary salary, bonus and other benefits payable to, and indemnities provided on behalf of, officers and employees of Holdings or any direct or indirect parent of the U.S. Borrower, in each case in order to permit Holdings or any direct or indirect parent of the U.S. Borrower to make such payments; (c) the U.S. Borrower may purchase or redeem (and the U.S. Borrower may declare and pay dividends or make other distributions to Holdings prior to a Qualified IPO, the proceeds of which are used so to purchase or redeem) Equity Interests of Holdings (prior to a Qualified IPO) or the U.S. Borrower (including related stock appreciation rights or similar securities) held by then present or former directors, consultants, officers or employees of Holdings (prior to a Qualified IPO), the U.S. Borrower or any of the Subsidiaries or by any Plan or any shareholders’ agreement then in effect 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   150 -------------------------------------------------------------------------------- (c) shall not exceed in any fiscal year $25.0 million (plus the amount of net proceeds (x) received by Holdings (to the extent contributed to the U.S. Borrower) or the U.S. Borrower during such calendar year from sales of Equity Interests of Holdings (prior to a Qualified IPO) or the U.S. Borrower, to directors, consultants, officers or employees of Holdings (prior to a Qualified IPO), the U.S. Borrower or any Subsidiary in connection with permitted employee compensation and incentive arrangements and (y) of any key-man life insurance policies received during such calendar year), which, if not used in any year, may be carried forward to any subsequent 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 are permitted hereunder; (e) the U.S. Borrower may declare and pay on the Closing Date cash dividends to Holdings of (i) up to $200.0 million with the proceeds of the Term Loans drawn on the Closing Date and (ii) up to $350.0 million solely with the proceeds of the Equity Financing, and Holdings may declare and pay dividends or make other distributions with such proceeds; provided that the payment by the U.S. Borrower of up to $50.0 million of any such dividends declared on the Closing Date may be deferred and paid on a later date so long as no Default or Event of Default shall have occurred and be continuing on such date or would result therefrom; (f) after a Qualified IPO, the U.S. Borrower may pay dividends and make distributions to, or repurchase or redeem shares from, its equity holders in an aggregate amount equal to (i) $100.0 million in any fiscal year plus (ii) the cash proceeds to the U.S. Borrower of the substantially contemporaneous issuance, sale or exchange of Equity Interests of the U.S. Borrower (so long as such proceeds are not included in any determination of the Available Investment Basket Amount) plus (iii) the portion, if any, of the Available Investment Basket Amount on the date of such election that the U.S. Borrower elects to apply to this Section 6.06(f)(iii); provided that, with respect to clause (iii), at the time of such dividend or distribution and after giving effect thereto and to any borrowing in connection therewith, the Consolidated Leverage Ratio on a Pro Forma Basis does not exceed 5.75:1.00 and no Default or Event of Default shall have occurred and be continuing; (g) [reserved]; (h) the U.S. Borrower may pay additional Dividends or make other distributions to Holdings and to persons other than the Fund or any of its Affiliates in an aggregate amount with all other Dividends and other distributions made pursuant to this clause (h) not to exceed $50.0 million;   151 -------------------------------------------------------------------------------- (i) the U.S. Borrower may make Constructive Distributions; (j) the U.S. Borrower or any Subsidiary may make distributions to minority shareholders of any subsidiary that is acquired pursuant to a Permitted Business Acquisition pursuant to appraisal or dissenters’ rights with respect to shares of such subsidiary held by such shareholders; (k) the U.S. Borrower may consummate the Transactions (and declare and pay the dividends and distributions contemplated thereby); (l) the U.S. Borrower may pay dividends or distributions to allow Holdings or any direct or indirect parent of the U.S. Borrower to make payments in cash, in lieu of the issuance of fractional shares, upon the exercise of warrants or upon the conversion or exchange of Equity Interests of any such person; and (m) the U.S. Borrower may make dividends or distributions to Holdings or any direct or indirect parent of the U.S. Borrower to finance any Investment permitted to be made pursuant to Section 6.04; provided that (A) such dividends or distributions shall be made substantially concurrently with the closing of such Investment and (B) such direct or indirect parent of the U.S. Borrower shall, immediately following the closing thereof, cause (1) all property acquired (whether assets or Equity Interests) to be contributed to the U.S. Borrower or a Subsidiary or (2) the merger (to the extent permitted in Section 6.05) of the person formed or acquired into the U.S. Borrower or a Subsidiary in order to consummate such Permitted Business Acquisition or Investment, in each case, subject to the requirements of Section 5.10. 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 (prior to a Qualified IPO) or the U.S. Borrower in a transaction involving aggregate consideration in excess of $5.0 million, unless such transaction is (i) otherwise expressly permitted (or required) with such Affiliates or holders under this Agreement or (ii) upon terms no less favorable to the U.S. 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 (A) the payment to the Fund of the monitoring and management fees referred to in paragraph (b) below or fees payable on the Closing Date or the Amendment Effective Date, (B) the indemnification of directors of Holdings (prior to a Qualified IPO), the U.S. Borrower or the Subsidiaries in accordance with customary practice or (C) to the extent otherwise permitted under this Agreement (each of which shall not be prohibited by this Section 6.07), the following: (i) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, equity purchase agreements, stock options and stock ownership plans approved by the Board of Directors of Holdings (prior to a Qualified IPO) or the U.S. Borrower;   152 -------------------------------------------------------------------------------- (ii) loans or advances to employees or consultants of Holdings (prior to a Qualified IPO), the U.S. Borrower or any of the Subsidiaries in accordance with Section 6.04(e); (iii) transactions among the U.S. Borrower or any Subsidiary not prohibited by this Agreement; (iv) the payment of fees, reasonable out-of-pocket costs and indemnities to directors, officers, consultants and employees of Holdings (prior to a Qualified IPO), the U.S. Borrower and the Subsidiaries in the ordinary course of business; (v) transactions pursuant to the 2005 Transaction Documents and permitted agreements in existence on the Closing Date and set forth on Schedule 6.07 to the 2005 Credit Agreement or any amendment thereto to the extent such amendment is not adverse to the Lenders in any material respect; (vi) (A) any employment agreements entered into by the U.S. Borrower or any of the Subsidiaries in the ordinary course of business, (B) any subscription agreement or similar agreement pertaining to the repurchase of Equity Interests pursuant to put/call rights or similar rights with employees, officers or directors, and (C) any employee compensation, benefit plan or arrangement, any health, disability or similar insurance plan which covers employees, and any reasonable employment contract and transactions pursuant thereto; (vii) dividends, redemptions and repurchases (including payments to Holdings or any direct or indirect parent of the U.S. Borrower) permitted under Section 6.06; (viii) any purchase by the Fund or any Fund Affiliate of Equity Interests of Holdings (prior to a Qualified IPO) or the U.S. Borrower (after a Qualified IPO) or any contribution prior to a Qualified IPO by Holdings to, or purchase prior to a Qualified IPO by Holdings of, the equity capital of the U.S. Borrower; provided that prior to a Qualified IPO any Equity Interests of the U.S. Borrower purchased by Holdings shall be pledged to the Administrative Agent on behalf of the Lenders pursuant to the Collateral Agreement; (ix) payments by the U.S. Borrower or any of the Subsidiaries to the Fund or any Fund Affiliate made for any customary financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including in connection with acquisitions or divestitures, which payments are approved by the majority of the Board of Directors of Holdings (prior to a Qualified IPO), or the U.S. Borrower, or a majority of disinterested members of such Board, in good faith; (x) payments or loans (or cancellation of loans) to employees or consultants that are (i) approved by a majority of the Board of Directors or the managing member of the U.S. Borrower in good faith, (ii) made in compliance with applicable law and (iii) otherwise permitted under this Agreement;   153 -------------------------------------------------------------------------------- (xi) transactions with Wholly Owned Subsidiaries 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 the U.S. Borrower delivers to the Administrative Agent (for delivery to the Lenders) a letter addressed to the Board of Directors of the U.S. Borrower from an accounting, appraisal or investment banking firm, in each case of nationally recognized standing that is (a) in the good faith determination of the U.S. Borrower 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 the U.S. 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; (xiii) subject to paragraph (b) below, the payment of all fees, expenses, bonuses and awards related to the 2005 Transactions contemplated by the 2005 Transaction Agreement, including fees to the Fund or any Fund Affiliate; (xiv) transactions with customers, clients, suppliers, or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of this Agreement that are fair to the U.S. Borrower or the Subsidiaries; (xv) transactions between the U.S. Borrower or any of the Subsidiaries and any person, a director of which is also a director of the U.S. Borrower or any direct or indirect parent company of the U.S. Borrower, provided, however, that (A) such director abstains from voting as a director of the U.S. Borrower or such direct or indirect parent company, as the case may be, on any matter involving such other person and (B) such person is not an Affiliate of the U.S. Borrower for any reason other than such director’s acting in such capacity; (xvi) transactions with joint ventures for the purchase or sale of goods, equipment and services entered into in the ordinary course of business and in a manner consistent with past practice; (xvii) transactions permitted by, and complying with, the provisions of Section 6.05; (xviii) transactions described in the New Second Secured Notes Offering Memorandum under the heading “Certain Relationships and Related Party Transactions”; (xix) [reserved]; (xx) intercompany transactions for the purpose of improving the consolidated tax efficiency of the U.S. Borrower and the Subsidiaries; and (xxi) payments by Holdings (and any direct or indirect parent of the U.S. Borrower), the U.S. Borrower and the Subsidiaries pursuant to tax sharing agreements among Holdings (and any direct or indirect parent of the U.S. Borrower), the U.S. Borrower and the Subsidiaries on customary terms that require each party to make   154 -------------------------------------------------------------------------------- payments when such taxes are due or refunds received of amounts equal to the income tax liabilities and refunds generated by each such party calculated on a separate return basis and payments to the party generating tax benefits and credits of amounts equal to the value of such tax benefits and credits made available to the group by such party. (b) Make any payment of or on account of monitoring or management or similar fees payable to the Fund or any Fund Affiliate unless no Default or Event of Default has occurred and is continuing and the aggregate amount of such payments in any fiscal year does not exceed the sum of (i) the greater of (x) $3.0 million and (y) 2% of EBITDA of the U.S. Borrower and the Subsidiaries on a consolidated basis for the immediately preceding fiscal year; plus (ii) any deferred fees, plus (iii) 1.5% of the value of transactions with respect to which the Fund or any Fund Affiliate provides any transaction, advisory or other services, plus (iv) in the event of a Qualified IPO, the present value of all future amounts payable pursuant to any agreement governing the payment of any such fees in connection with the termination of such agreement with the Fund and its Fund Affiliates; provided, that if any such payment pursuant to clause (iv) is not permitted to be paid as a result of an Event of Default, such payment shall accrue and may be payable when no Events of Default are continuing to the extent that no further Event of Default would result therefrom. SECTION 6.08. Business of the U.S. Borrower and the Subsidiaries. Notwithstanding any other provisions hereof, engage at any time in any business or business activity other than: (a) in the case of the U.S. Borrower and any Material Subsidiary (other than the Existing Notes Issuers and the New Notes Issuers), any business or business activity conducted by any of them on the Closing Date and any business or business activities incidental or related thereto, or any business or activity that is reasonably similar or complementary thereto or a reasonable extension, development or expansion thereof or ancillary thereto, including the consummation of the Transactions, (b) [reserved]; (c) in the case of any Existing Notes Issuer or New Notes Issuer, (i) ownership of intercompany loans, (ii) performance of its obligations under and in connection with the Existing Notes Documents and the New Second Secured Notes Documents, as applicable (and the documents governing any Permitted Refinancing Indebtedness in respect of the Existing Notes or the New Second Secured Notes) and the Loan Documents and (iii) actions required by law to maintain its existence.   155 -------------------------------------------------------------------------------- SECTION 6.09. Limitation on Modifications and Payments 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 limited liability company operating agreement or other organizational documents of the U.S. Borrower or any Subsidiary Loan Party or any Material Subsidiary the equity of which is pledged pursuant to a Security Document. (b) Amend or modify, or permit the amendment or modification of, (i) any provision of the Existing Notes or the New Second Secured Notes (or any Permitted Refinancing Indebtedness in respect thereof) or any agreement (including any document relating to the Existing Notes or the New Second Secured Notes (or any Permitted Refinancing Indebtedness in respect thereof)) relating thereto, other than amendments or modifications that (1) 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, (2) otherwise comply with the definition of “Permitted Refinancing Indebtedness” or (3) are contemplated by the Debt Tender Offer Documents or (ii) the Debt Tender Offer Documents delivered to the Administrative Agent pursuant to Section 7(l) of the Amendment Agreement in a manner materially adverse to the Lenders. (c) Permit any Material Subsidiary or, in the case of clause (ii) below, the U.S. Borrower, 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 Material Subsidiary to Holdings, the U.S. Borrower or any Subsidiary that is a direct or indirect parent of such Subsidiary or (ii) the granting of Liens by such Material Subsidiary or the U.S. Borrower 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) contractual encumbrances or restrictions (i) in effect on the Amendment Effective Date (including under the Existing Note Documents and the New Second Secured Note Documents), (ii) on the granting of Liens pursuant to documentation governing Indebtedness incurred in compliance with Section 6.01 that is secured by Liens pursuant to Section 6.02(w) or (v), in each case no less favorable to the Lenders than those restrictions set forth in any Existing Notes Documents or the New Second Secured Notes Documents on the Amendment Effective Date, or (iii) pursuant to documentation 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; (C) 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 such Subsidiary pending the closing of such sale or disposition;   156 -------------------------------------------------------------------------------- (D) customary provisions in joint venture agreements and other similar agreements applicable to joint ventures entered into in the ordinary course of business; (E) any restrictions imposed by any agreement relating to secured Indebtedness permitted by this Agreement (other than Indebtedness secured by Second-Priority Liens on the Collateral) to the extent that such restrictions apply only to the property or assets securing such Indebtedness; (F) customary provisions contained in leases or licenses of intellectual property and other similar agreements entered into in the ordinary course of business; (G) customary provisions restricting subletting or assignment of any lease governing a leasehold interest; (H) customary provisions restricting assignment of any agreement entered into in the ordinary course of business; (I) customary restrictions and conditions contained in any agreement relating to the sale, transfer, lease or other disposition of any asset permitted under Section 6.05 pending the consummation of such sale, transfer, lease or other disposition; (J) 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 and such restriction does not apply to the U.S. Borrower or any other Subsidiary; (K) customary net worth provisions contained in real property leases entered into by Subsidiaries of the U.S. Borrower, so long as the U.S. Borrower has determined in good faith that such net worth provisions would not reasonably be expected to impair the ability of the U.S. Borrower and its Subsidiaries to meet their ongoing obligations; (L) restrictions in agreements representing Indebtedness permitted under Section 6.01 of a Subsidiary of the U.S. Borrower that is not a Subsidiary Loan Party; (M) restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business; or (N) any encumbrances or restrictions of the type referred to in Sections 6.09(c)(i) and 6.09(c)(ii) above imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (B) and (J) above; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in   157 -------------------------------------------------------------------------------- the good faith judgment of the U.S. Borrower, no more restrictive with respect to such dividend and other payment restrictions than those contained in the dividend or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing. SECTION 6.10. Capital Expenditures. Permit the U.S. Borrower or the Subsidiaries to make any Capital Expenditure, except that: (a) During any fiscal year the U.S. Borrower and the Subsidiaries may make Capital Expenditures so long as the aggregate amount thereof (excluding expenditures pursuant to subsections 6.10(b) and (c)) does not exceed the sum of (i) $225.0 million, (ii) 10% of Acquired Assets for such fiscal year (the “Acquired Assets Amount”), and (iii) for each fiscal year after any Acquired Assets Amount is initially included in clause (ii) above, 5% of such Acquired Assets Amount, calculated on a cumulative basis. (b) Notwithstanding anything to the contrary contained in paragraph (a) above, to the extent that the aggregate amount of Capital Expenditures made by the U.S. Borrower and the Subsidiaries in any fiscal year of the U.S. Borrower 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 next two succeeding fiscal years. (c) In addition to the Capital Expenditures permitted pursuant to the preceding paragraphs (a) and (b), the U.S. Borrower and the Subsidiaries may make additional Capital Expenditures 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 U.S. Borrower elects to apply to this Section 6.10(c). SECTION 6.11. Senior Secured Bank Leverage Ratio. Permit the Senior Secured Bank Leverage Ratio on the last day of any fiscal quarter to be in excess of 4.25 to 1.00. SECTION 6.12. Indenture Restricted Subsidiaries. Create, acquire or otherwise permit to exist any Indenture Restricted Subsidiary other than pursuant to Section 6.04(s). SECTION 6.13. Swap Agreements. Enter into any Swap Agreement other than (a) Swap Agreements entered into in the ordinary course of business to hedge or mitigate risks to which the U.S. Borrower or any Subsidiary is exposed in the conduct of its business or the management of its liabilities (including raw material, supply costs and currency risks), (b) 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 (prior to a Qualified IPO), the U.S. Borrower or any Subsidiary, and (c) Swap Agreements entered into in order to swap currency in connection with funding the business of Holdings, the U.S. Borrower and the Subsidiaries in the ordinary course of business.   158 -------------------------------------------------------------------------------- ARTICLE VIA Holdings Negative Covenants SECTION 6.01A. Holdings Negative Covenants. Holdings covenants and agrees with each Lender that, so long as this Agreement shall remain in effect (other than in respect of contingent indemnification and expense reimbursement obligations for which no claim has been made), until the earlier of (i) the consummation of a Qualified IPO and (ii) the date on which 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, (a) Holdings will not create, incur, assume or permit to exist any Lien (other than Liens of a type described in Section 6.02(d), (e), (k) or (q)) on any of the Equity Interests issued by the U.S. Borrower to Holdings other than the Liens created under the Loan Documents and (b) Holdings shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence; provided, that so long as no Default exists or would result therefrom, Holdings may merge with any other person. 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 the U.S. 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 (other than the representations and warranties of the Dutch Borrower set forth in Section 3.24 being untrue in any material respect by reason of any representation and warranty of a Lender or Issuing Bank set forth in Section 9.22 or in paragraph 2 of an Assignment and Acceptance being untrue (but without prejudice to the other rights of the Lenders and the Administrative Agent under this Agreement or under applicable law and without prejudice to any other Event of Default that may occur by reason of any representation set out in Section 3.24 being untrue in any material respect)), shall prove to have been false or misleading in any material respect when so made, deemed made or furnished by the U.S. Borrower or any other Loan Party; (b) default shall be made in the payment of any principal of any Loan 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;   159 -------------------------------------------------------------------------------- (c) default shall be made in the payment of any interest on any Loan or on any L/C Disbursement, the reimbursement with respect to any L/C Disbursement or in the payment of any Fee or any other amount (other than an amount referred to in paragraph (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) any default shall be made in the due observance or performance by the U.S. Borrower (or, with respect to Section 5.08, the Dutch Borrower) of any covenant, condition or agreement contained in Section 5.01(a) (with respect to the U.S. Borrower), 5.05(a), 5.08 or in Article VI; (e) default shall be made in the due observance or performance by the U.S. Borrower or any Subsidiary Loan Party 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 to the U.S. 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 (prior to a Qualified IPO) or the U.S. Borrower or any Subsidiary 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 (prior to a Qualified IPO), the U.S. Borrower or any of its subsidiaries, or of a substantial part of the property or assets of Holdings (prior to a Qualified IPO), the U.S. Borrower or any of its subsidiaries, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, moratorium, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings (prior to a Qualified IPO), the U.S. Borrower or any of its subsidiaries or for a substantial part of the property or assets of Holdings (prior to a Qualified IPO), the U.S. Borrower or any of its subsidiaries or (iii) the winding-up or   160 -------------------------------------------------------------------------------- liquidation of Holdings (prior to a Qualified IPO), the U.S. Borrower or any of its subsidiaries (except, in the case of any subsidiary (other than any 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 (prior to a Qualified IPO), the U.S. Borrower or any of its subsidiaries 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, moratorium, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest 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 (prior to a Qualified IPO), the U.S. Borrower or any of its subsidiaries or for a substantial part of the property or assets of Holdings (prior to a Qualified IPO), the U.S. Borrower or any of its subsidiaries, (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 the Holdings (prior to a Qualified IPO), U.S. Borrower or any Subsidiary to pay one or more final judgments aggregating in excess of $25.0 million (to the extent not covered by insurance), which judgments are not discharged or effectively waived or stayed for a period of 45 consecutive days, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of Holdings (prior to a Qualified IPO), the U.S. Borrower or any Subsidiary to enforce any such judgment; (k) (i) an ERISA Event shall have occurred, (ii) a trustee shall be appointed by a United States district court to administer any Plan, (iii) the U.S. Borrower, a Subsidiary or any ERISA Affiliate shall engage in any non-exempt “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan or (iv) any other event or condition shall occur or exist with respect to a Plan or a Multiemployer Plan; and in each case in clauses (i) through (iv) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; (l) (i) any Loan Document shall for any reason be asserted in writing by Holdings (prior to a Qualified IPO), the U.S. Borrower or any Subsidiary Loan Party (or, in the case of any Security Document with respect to the pledge of Equity Interests of the U.S. Borrower, the pledgor thereunder) 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 a material portion of the Collateral of the U.S. Borrower and the   161 -------------------------------------------------------------------------------- Subsidiary Loan Parties on a consolidated basis or (prior to a Qualified IPO) the Equity Interests of the U.S. Borrower (other than options and management shares), shall cease to be, or shall be asserted in writing by the U.S. Borrower or any other Loan Party (or, in the case of any Security Document with respect to the pledge of Equity Interests of the U.S. Borrower, the pledgor thereunder) not to be, a valid and perfected security interest (perfected as or having the priority required by this Agreement or the relevant Security Document and subject to such limitations and restrictions as are set forth herein and therein) in the Collateral covered thereby, except to the extent that any such loss of perfection or priority results from the limitations of foreign laws, rules and regulations as they apply to pledges of Equity Interests in Foreign Subsidiaries (other than as set forth in any Foreign Security Document (other than with respect to Equity Interests in Subsidiaries that are not Loan Parties and are organized under the laws of an Excluded Jurisdiction) or in any Foreign Pledge Agreement) or the application thereof, or from the failure of the Administrative Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Collateral Agreement or any Foreign Security Document or Foreign Pledge Agreement or to file Uniform Commercial Code continuation statements or take the actions described on Schedule 3.04 or in Section 5.14 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 (prior to a Qualified IPO), the U.S. Borrower or any material 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 (prior to a Qualified IPO), the U.S. 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 any 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 U.S. Borrower, take any or all of the following actions, at the same or different times: (i) terminate forthwith the Commitments, (ii) declare the Loans and the Canadian Borrower’s obligations in respect of B/As then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans and the full face amount of the B/As 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 become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by each of the Borrowers, anything contained herein or in any other Loan Document to the contrary notwithstanding and (iii) if the Loans have been declared due and payable pursuant to clause (ii) above, demand cash collateral pursuant to Section 2.05(j); and in any event with respect to any Borrower described in paragraph (h) or (i) above, the Commitments shall automatically terminate, the principal of the Loans and the full face amount of the B/As then outstanding, together with accrued interest thereon and any unpaid accrued Fees   162 -------------------------------------------------------------------------------- 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 each of the Borrowers, anything contained herein or in any other Loan Document to the contrary notwithstanding. SECTION 7.02. Exclusion of Certain Subsidiaries. Solely for the purposes of determining whether an Event of Default has occurred under clause (h), (i), (j) or (l) of Section 7.01, any reference in any such clause to any subsidiary shall be deemed not to include any Immaterial Subsidiary (or any other subsidiary that satisfies clauses (ii) and (iii) of the definition of Immaterial Subsidiary) affected by any event or circumstance referred to in any such clause. SECTION 7.03. Right to Cure. (a) Notwithstanding anything to the contrary contained in Section 7.01, in the event that the U.S. Borrower fails (or, but for the operation of this Section 7.03, would fail) to comply with the requirements of the covenant set forth in Section 6.11, until the expiration of the 10th day subsequent to the date the certificate calculating the covenant set forth in Section 6.11 is required to be delivered pursuant to Section 5.04(c), Holdings (prior to a Qualified IPO) and the U.S. Borrower (after a Qualified IPO) shall have the right to issue Permitted Cure Securities for cash or otherwise receive cash contributions to its capital, and, in each case with respect to Holdings, to contribute any such cash to the capital of the U.S. Borrower (collectively, the “Cure Right”), and upon the receipt by the U.S. Borrower of such cash (the “Cure Amount”) pursuant to the exercise by Holdings or the U.S. Borrower of such Cure Right the covenant set forth in Section 6.11 shall be recalculated giving effect to the following pro forma adjustments: (i) EBITDA shall be increased, solely for the purpose of measuring the covenant set forth in Section 6.11 and not for any other purpose under this Agreement, by an amount equal to the Cure Amount; and (ii) If, after giving effect to the foregoing recalculations, the U.S. Borrower shall then be in compliance with the requirements of the covenant set forth in Section 6.11, the U.S. Borrower shall be deemed to have satisfied the requirements of the covenant set forth in Section 6.11 as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable breach or default of the covenant set forth in Section 6.11 that had occurred shall be deemed cured for the purposes of this Agreement. (b) Notwithstanding anything herein to the contrary, (a) in each four-fiscal-quarter period there shall be at least one fiscal quarter in which the Cure Right is not exercised and (b) for purposes of this Section 7.03, the Cure Amount shall be no greater than the amount required for purposes of complying with the covenant set forth in Section 6.11.   163 -------------------------------------------------------------------------------- ARTICLE VIII The Agents SECTION 8.01. Appointment. Each Lender hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. In addition, to the extent required under the laws of any jurisdiction other than the United States, each of the Lenders and the Issuing Banks hereby grants to the Administrative Agent any required powers of attorney to execute any Security Document governed by the laws of such jurisdiction on such Lender’s or Issuing Bank’s behalf. 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 this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. SECTION 8.02. Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. SECTION 8.03. Exculpatory Provisions. Neither any Agent or its Affiliates nor any of their respective 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 this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from 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 Loan Party or any officer thereof contained in this Agreement or any other Loan Document 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, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party a party thereto to perform its obligations hereunder or 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, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party. SECTION 8.04. Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and   164 -------------------------------------------------------------------------------- to have been signed, sent or made by the proper person or persons and upon advice and statements of legal counsel (including counsel to Holdings (prior to a Qualified IPO) or the Borrowers), 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 this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all or other Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders 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 Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all or other Lenders), 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 Loans. SECTION 8.05. Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Administrative Agent has received notice from a Lender, Holdings (prior to a Qualified IPO) or the U.S. Borrower 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 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 (or, if so specified by this Agreement, all or other 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. SECTION 8.06. Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither the Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by any Agent hereafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by any 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 the Loan Parties and their affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents 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 this Agreement and the other Loan 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 the Loan Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the   165 -------------------------------------------------------------------------------- Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party that may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. SECTION 8.07. Indemnification. The Lenders agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by Holdings or the Borrowers and without limiting the obligation of Holdings or the Borrowers to do so), in the amount of its pro rata share (based on its aggregate Revolving Facility Exposure, outstanding Term Loans and unused Commitments hereunder), 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 Loans) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of the Commitments, this Agreement, any of the other Loan Documents 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 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, 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 such Agent’s gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder. SECTION 8.08. Agent in Its Individual Capacity. Each Agent and its affiliates may make loans to, accept deposits from, purchase and accept B/As from and generally engage in any kind of business with any Loan Party as though such Agent were not an Agent. With respect to its Loans made or renewed by it and with respect to any Letter of Credit issued, or Letter of Credit or Swingline Loan participated in, by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Agent, and the terms “Lender” and “Lenders” shall include each Agent in its individual capacity. SECTION 8.09. Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 10 days’ notice to the Lenders and the U.S. Borrower; provided that such resignation shall not affect the rights of the Administrative Agent pursuant to the Parallel Debt U.S. Obligations and the Parallel Debt Foreign Obligations and the Administrative Agent shall continue to hold such rights until the effective assignment thereof by the Administrative Agent to its successor agent. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall (unless an Event of Default under Sections 7.01(b), (c), (h) or (i) shall have occurred and be continuing) be subject to approval by the U.S. Borrower (which approval shall not be unreasonably withheld or delayed), 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   166 -------------------------------------------------------------------------------- of the parties to this Agreement or any holders of the Loans. If no successor agent has accepted appointment as Administrative Agent by the date that is 10 days following a retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of the 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 as Administrative Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents. The Administrative Agent will reasonably cooperate in assigning its rights under the Parallel Debt U.S. Obligations and the Parallel Debt Foreign Obligations to any such successor agent and will reasonably cooperate in transferring all rights under the Dutch Security Documents to such successor agent. SECTION 8.10. Agents and Arrangers. None of the Agents or the Joint Lead Arrangers shall have any duties or responsibilities hereunder in its capacity as such. SECTION 8.11. Additional Intercreditor Agreements. The Administrative Agent shall be authorized to enter into, from time to time on and after the Amendment Effective Date, without the consent of any Lender, amendments to, and amendments and restatements of, any Intercreditor Agreement and additional and replacement intercreditor agreements, in each case in order to effect the subordination of, and to provide for certain additional rights, obligations and limitations in respect of, any Liens required by the terms of this Agreement to be Second-Priority Liens or other Liens junior to the Obligations that are incurred in accordance with Article VI of this Agreement, and to establish certain relative rights as between the holders of the Obligations (as defined in the Collateral Agreement) and the holders of the Indebtedness secured by such Second-Priority Liens or other Liens junior to the Obligations; provided that the terms of such subordination and such rights, obligations, limitations and relative rights are not materially less favorable to the Lenders than those set forth in the New Second Lien Intercreditor Agreement. SECTION 8.12. Certain German Matters. In relation to the German Security Documents the following additional provisions shall apply: (a) The Administrative Agent shall hold and administer any German Security that is security assigned (Sicherungseigentum/ Sicherungsabtretung) or otherwise transferred under an non-accessory security right (nicht akzessorische Sicherheit) to it as trustee (Treuhänder) for the benefit of the Secured Parties; and administer any German Security that is pledged (Verpfändung) or otherwise transferred to a Secured Party under an accessory security right (akzessorische Sicherheit) as agent, (b) each of the Secured Parties hereby authorizes the Administrative Agent (whether or not by or through employees or agents): (i) to exercise such rights, remedies, powers and discretions as are specifically delegated to or conferred upon the Administrative Agent by the German Security Documents together with such powers and discretions as are reasonably incidental thereto; (ii) to take such action on its behalf as may from time to time be authorized under or in accordance with the German Security Documents; and (iii) to accept as its representative (Stellvertreter) any pledge or other creation of any accessory right made to such Secured Party in relation to the Loan Documents, (c) the Administrative Agent shall be exempted from the restrictions of Section 181 of the German Civil Code, and (d) none of the Secured Parties shall have any independent power to enforce any of the German Security Documents or to exercise any rights, discretions or powers or to grant any consents or releases under or pursuant to any of the German   167 -------------------------------------------------------------------------------- Security Documents or otherwise have direct recourse to the security constituted by any of the German Security Documents except through the Administrative Agent. SECTION 8.13. Certain Canadian Matters. For greater certainty, and without limiting the powers of the Administrative Agent or any other person acting as an agent or mandatary for such agent hereunder or under any of the other Loan Documents, Holdings and each of the Borrowers hereby acknowledge that, for purposes of holding any security granted by any Loan Party on property pursuant to the laws of the Province of Quebec to secure obligations of any Borrower or any other Loan Party under any bond or debenture issued by any Borrower or any other Loan Party, the Administrative Agent is and shall be the holder of an irrevocable power of attorney (fondé de pouvoir within the meaning of Article 2692 of the Civil Code of Quebec) for all present and future Secured Parties, and in particular for all present and future holders of any such bond or debenture. Each Agent, Lender, Issuing Bank and Joint Lead Arranger, on its own behalf and on behalf of its Affiliates that may from time to time be Secured Parties (each, an “Appointer”) hereby: (i) irrevocably constitutes, ratifies and confirms, to the extent necessary, the Administrative Agent as the holder of an irrevocable power of attorney (fondé de pouvoir within the meaning of Article 2692 of the Civil Code of Québec) in order to hold hypothecs and security granted by any Borrower or any other Loan Party on property pursuant to the laws of the Province of Quebec to secure obligations of any Borrower or any other Loan Party under any bond issued by any Borrower or any other Loan Party; and (ii) appoints, ratifies and confirms and agrees that the Administrative Agent may act as the bondholder or debentureholder and mandatary, custodian and depository with respect to any bond or debenture that may be issued by any Borrower or any Loan Party and pledged in their favor from time to time. Each assignee of an Appointer on its own behalf and on behalf of its Affiliates that may from time to time be Secured Parties shall be deemed to have confirmed and ratified the constitution of the Administrative Agent as the holder of such irrevocable power of attorney (fondé de pouvoir) and shall be deemed to have confirmed and ratified the constitution of the Administrative Agent as bondholder or debentureholder and mandatary, custodian and depositary with respect to any bond or debenture that may be issued by any Borrower or any Loan Party and pledged from time to time in favor of the Administrative Agent by the execution of an Assignment and Acceptance or by otherwise becoming a party hereto. Notwithstanding the provisions of Section 32 of the An Act respecting the special powers of legal persons (Quebec), the Administrative Agent may acquire and be the holder of any bond or debenture issued by any Borrower or any other Loan Party (i.e., the fondé de pouvoir may acquire and hold the first bond or debenture issued under any deed of hypothec by any Borrower or any Loan Party). Each Borrower and each Loan Party hereby acknowledge that such bond or debenture constitutes a title of indebtedness, as such term is used in Article 2692 of the Civil Code of Quebec. SECTION 8.14. Foreign Obligations. Notwithstanding anything in this Agreement or any other Loan Document, and for the avoidance of doubt, no Foreign Loan Party shall provide, or be deemed to provide, any Guarantee of or security for any Obligation (as defined in the Collateral Agreement) of any Domestic Loan Party. Notwithstanding anything in this agreement or in any other Loan Document, and for the avoidance of doubt, no Domestic Loan Party shall provide, or be deemed to provide, security for the Dutch Term Loan Obligations.   168 -------------------------------------------------------------------------------- SECTION 8.15. Certain Italian Matters. Each of the Secured Parties (other than the Administrative Agent) hereby appoints the Administrative Agent to act as its agent in connection herewith and each Secured Party (other than the Administrative Agent) appoints the Administrative Agent as mandatario con rappresentanza (common representative) for the purposes of each Security Document governed by Italian law (each, an “Italian Security Document”) and as attorney in fact of each of the Secured Parties for the purposes described below and grants the Administrative Agent the powers to enter into and execute, in the name and on behalf of each of the Secured Parties, each Italian Security Document and each Secured Party authorizes the Administrative Agent in each such capacity to exercise such rights, powers and discretions as are specifically delegated to the Administrative Agent by the terms hereof and each Italian Security Document together with all rights, powers and discretions as are reasonably incidental thereto (including any action in relation to the perfection, maintenance and enforcement of each Italian Security Document) or necessary to give effect to the agency hereby created and each of the Italian Security Documents) or necessary to give effect to the agency hereby created and each of the Secured Parties (other than the Administrative Agent) irrevocably authorizes the Administrative Agent on its behalf to enter into any and each Italian Security Document. 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 Hexion Specialty Chemicals, Inc., 180 East Broad Street, Columbus, Ohio 43215, Attention: Treasurer, with a copy to Apollo Investment Fund IV, L.P., 9 West 57th Street, New York, New York 10019, Attention: Jordan Zaken, with a copy to O’Melveny & Myers LLP, 7 Times Square, New York, New York 10036, Attention: Brad J. Finkelstein; (ii) if to the Administrative Agent, to JPMorgan Chase Bank, N.A., 1111 Fannin, 10th Floor, Houston, Texas 77002, Attention: Sharon Cote (telecopy 713-750-2666) (e-mail: [email protected]) and Marshella Williams (telecopy 713-427-6307) (e-mail: [email protected]), with a copy to JPMorgan Chase Bank, N.A., 270 Park Avenue, 4th Floor, New York, New York 10017, Attention: Peter Dedousis (telecopy 212-270-5100) (e-mail: [email protected]); (iii) if to JPMorgan Europe Limited, 125 London Wall, London, England EC2Y 5AJ, Attention of Loans Agency Division, Stephen Clarke (telecopy 44-207-777-2360) (email: [email protected]), with a copy to the Administrative Agent as provided under clause (ii) above; (iv) if to JPMorgan Chase Bank, N.A., Toronto Branch, 200 Bay Street, Royal Bank Plaza, South Tower, 18th Floor, Toronto, Ontario M5J 2J2 Canada, Attention of   169 -------------------------------------------------------------------------------- Funding Officer (telecopy (416) 981-9128), with a copy to the Administrative Agent as provided under clause (ii) above; and (v) 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 and each 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 Borrowers and the other 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 2.16, 2.18 and 9.05) shall survive the payment in full of the principal and interest hereunder, the return of Tranche C-3 Credit-Linked Deposits, the expiration of the Letters of Credit and the termination of the Commitments or this Agreement. SECTION 9.03. Binding Effect. This Agreement shall become effective when it shall have been executed by Holdings, the Borrowers and the Administrative Agent and when the Administrative Agent shall have received copies hereof that, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to   170 -------------------------------------------------------------------------------- the benefit of Holdings, the Borrowers, each Issuing Bank, the Administrative Agent 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 the Issuing Bank that issues any Letter of Credit), except that (i) the Borrowers may not assign or otherwise transfer any of their rights or obligations hereunder (other than pursuant to a merger permitted by Section 6.05(b) or (i)) without the prior written consent of each Lender (and any attempted assignment or transfer by any 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 or Article X. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), 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, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement or the other Loan Documents. (b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees (each, an “Assignee”) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans or Tranche C-3 Credit-Linked Deposits at the time owing to it) with the prior written consent of: (A) the U.S. Borrower (such consent not to be unreasonably withheld); provided that no consent of the U.S. Borrower shall be required for an assignment to a Lender, an affiliate of a Lender, an Approved Fund (as defined below) or, if an Event of Default under Sections 7.01(b), (c), (h) or (i) has occurred and is continuing, any other person; provided that any liability of any Borrower to an assignee that is an Approved Fund or affiliate of the assigning Lender under Section 2.16 or 2.18 shall be limited to the amount, if any, that would have been payable hereunder by such Borrower in the absence of such assignment; and (B) the Administrative Agent; provided that no consent of the Administrative Agent shall be required for an assignment of all or any portion of a Tranche C-3 Credit-Linked Deposit or a Term Loan to a Lender, an Affiliate of a Lender or an Approved Fund. (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 Commitments or Loans under any Tranche or Tranche C-3 Credit-Linked Deposits, the amount of the Commitments, Loans or Tranche C-3 Credit-Linked Deposits of the assigning Lender subject to each such assignment (determined as of the trade date specified in the Assignment and Acceptance with   171 -------------------------------------------------------------------------------- respect to such assignment or, if no trade date is so specified, as of the date such Assignment and Acceptance is delivered to the Administrative Agent and aggregating Approved Funds that are managed by the same investment advisor for such purpose) shall not be less than (x) $1,000,000 in respect of the Tranche C-3 Credit-Linked Deposits or Term Loans (except and to the extent required to comply with the condition set forth in Section 9.04(b)(ii)(E)) and (y) $2,500,000 in respect of the Revolving Facility Loans, unless each of the U.S. Borrower and the Administrative Agent otherwise consent; (B) 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 (i) assignments pursuant to Section 2.20 shall not require the signature of the assigning Lender to become effective, (ii) any such processing and recordation fee in connection with assignments pursuant to Section 2.20 shall be paid by the U.S. Borrower or the assignee and (iii) only one such processing and recordation fee shall be payable in connection with simultaneous assignments to two or more assignees that are Affiliates of one another, or to two or more Approved Funds that are managed by the same investment advisor; (C) the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; and (D) AT ANY TIME WHEN AND TO THE EXTENT THAT IT IS A REQUIREMENT OF DUTCH LAW THAT EACH LENDER TO THE DUTCH BORROWER BE A PMP, NO ASSIGNMENT OF EUROPEAN TRANCHE COMMITMENTS, EUROPEAN TRANCHE REVOLVING FACILITY LOANS, EUROPEAN TRANCHE L/C EXPOSURE OR CANADIAN TRANCHE L-C EXPOSURE TO THE DUTCH BORROWER OR TRANCHE C-2 TERM LOANS MAY BE MADE TO ANY PERSON THAT IS NOT A PMP AT THE TIME OF SUCH TRANSFER. For the purposes of this Section 9.04, “Approved Fund” means 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) a Lender, (b) an Affiliate of a Lender or (c) 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)(v) below, 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 thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.16, 2.17,   172 -------------------------------------------------------------------------------- 2.18 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. Without the consent of the U.S. Borrower (which consent shall not be unreasonably withheld) and the Administrative Agent, the Tranche C-3 Credit-Linked Deposit of any Tranche C-3 Lender shall not be released in connection with any assignment by such Tranche C-3 Lender, but shall instead be purchased by the relevant assignee and continue to be held for application (to the extent not already applied) in accordance with Section 2.05 to satisfy such assignee’s obligations in respect of Tranche C-3 L/C Disbursements. (iv) The Administrative Agent, acting for this purpose as an agent of the Borrowers, shall maintain at one of its offices outside the United Kingdom 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 Commitments of, and principal amount of the Loans, Tranche C-3 Credit-Linked Deposits and L/C Exposure owing to, and amounts in respect of B/As 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 Borrowers, the Administrative Agent, any 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 Borrowers, 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 any Borrower or the Administrative Agent, 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 Commitments and the Loans and Tranche C-3 Credit-Linked Deposits and participations in Tranche C-3 Letters of Credit 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 Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement 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 (including, for the avoidance of doubt, the sole right to vote   173 -------------------------------------------------------------------------------- on or approve any waiver of any Default or Event of Default); provided that (x) such agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that requires the consent of such Lender providing such participation as a result of Section 9.04(a)(i) or clauses (i), (ii), (iii), (iv), (v) or (vi) of the first proviso to Section 9.08(b) (but not with respect to the waiver of any Default or Event of Default caused by the failure to comply with any provision of the Loan Documents, the amendment, modification or waiver of which is governed by such sections, that has been cured (or will be cured substantially concurrently with the effectiveness of any such amendment, modification or waiver) with respect to the Lender providing such participation) and (y) no other agreement with respect to such Participant may exist between such Lender and such Participant. Subject to paragraph (c)(ii) of this Section, the Borrowers agree that each Participant shall be entitled to the benefits of Sections 2.16, 2.17 and 2.18 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 that such Participant shall be subject to Section 2.19(c) as though it were a Lender. (ii) A Participant shall not be entitled to receive any greater payment under Section 2.16, 2.17 or 2.18 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 U.S. Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.18 to the extent such Participant fails to comply with Section 2.18(f) as though it were a Lender. (d) Any Lender may, without the consent of the Administrative Agent or any Borrower, 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. (e) The Borrowers, at their expense and upon receipt of written notice from the relevant Lender, agree to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in paragraph (d) above. (f) Notwithstanding the foregoing, any Conduit Lender may assign any or all of the Loans it may have funded hereunder to its designating Lender without the consent of any Borrower or the Administrative Agent and without regard to the limitations set forth in Section 9.04(b). Each of Holdings, the Borrowers, each Lender and the Administrative Agent hereby confirms that it will not institute against a Conduit Lender or join any other person in instituting against a Conduit Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Conduit Lender; provided, however, that each Lender designating any Conduit Lender hereby agrees to indemnify, save and hold harmless each other party hereto and each Loan   174 -------------------------------------------------------------------------------- Party for any loss, cost, damage or expense arising out of its inability to institute such a proceeding against such Conduit Lender during such period of forbearance. (g) Notwithstanding the foregoing, no assignment may be made or participation sold to an Ineligible Institution without the prior written consent of the U.S. Borrower. SECTION 9.05. Expenses; Indemnity. (a) Each Borrower agrees to pay all reasonable out-of-pocket expenses (including Other Taxes) incurred by the Administrative Agent or the Syndication Agent in connection with the preparation of this Agreement and the other Loan Documents, or by the Administrative Agent or the Syndication Agent in connection with the syndication of the Commitments or the administration of this Agreement (including expenses incurred in connection with due diligence, reasonable fees, disbursements and the charges for no more than one counsel in each jurisdiction where Collateral is located) or in connection with the administration of this Agreement and any amendments, modifications or waivers of the provisions hereof or thereof or incurred by the Administrative Agent 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 Cravath, Swaine & Moore LLP, counsel for the Administrative Agent and the Syndication Agent, and, in connection with any such enforcement or protection, the reasonable fees, charges and disbursements of any other counsel. (b) The Borrowers agree to indemnify the Administrative Agent, the Joint Lead Arrangers, each Issuing Bank, each Lender their respective Affiliates and each of their respective directors, trustees, officers, employees 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 (except the allocated costs of in-house counsel), 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 are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted primarily from the gross negligence or willful misconduct of such Indemnitee (treating, for this purpose only, the Administrative 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 Borrowers agree 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 (except the allocated costs of in-house counsel), incurred by or asserted against any Indemnitee arising out of, in any way connected with or as a result of   175 -------------------------------------------------------------------------------- (a) any claim or liability related in any way to Environmental Laws and Holdings, the U.S. 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 currently or formerly owned, leased or operated by any predecessor of Holdings, the U.S. 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 are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or 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 the Administrative 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) 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 2.18, 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 (prior to a Qualified IPO), any Borrower or any other Subsidiary against any of and all the obligations of Holdings (prior to a Qualified IPO) or any 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. Notwithstanding the foregoing, no Lender shall exercise setoff rights with respect to the Canadian Borrower’s, the U.K. Borrower’s, or the Dutch Borrower’s assets and apply such proceeds to the Obligations of the U.S. Borrower hereunder. 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 Administrative Agent, 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   176 -------------------------------------------------------------------------------- any other right or power. The rights and remedies of the Administrative Agent, 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 as provided in Section 2.21 or Section 8.11, or (x) in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by Holdings (prior to a Qualified IPO), 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 Administrative 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, or extend the date on which the Tranche C-3 Credit-Linked Deposits are required to be returned in full to the Tranche C-3 Lenders, 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), (iii) extend, waive or reduce the amount of any scheduled installment of principal 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 2.19(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” or “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   177 -------------------------------------------------------------------------------- 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 Closing Date), (vi) release all or substantially all the Collateral or release any of Holdings (prior to a Qualified IPO), any Borrower or any other Subsidiary Loan Party from its Guarantee under the U.S. Guarantee Agreement or the Foreign Guarantee Agreement, as applicable, unless, in the case of (1) Holdings, upon a Qualified IPO or (2) a Subsidiary Loan Party, all or substantially all the Equity Interests of such Subsidiary Loan Party are 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 Tranche differently from those of Lenders participating in another Tranche, without the consent of the Majority Lenders participating in the adversely affected Tranche (it being agreed that the Required Lenders may waive, in whole or in part, any prepayment required by Section 2.12 so long as the application of any prepayment still required to be made is not changed), (viii) effect any waiver, amendment or modification of Section 5.02 of the Collateral Agreement, or any comparable provision of any other Security Document, in a manner that materially adversely affects the rights in respect of payments or collateral of Lenders, without the consent of each Lender so affected; 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 the Syndication Agent or any Joint Lead Arranger or Lender, the Loan Parties and the Administrative 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 (prior to a Qualified IPO) and the Borrowers (a) to add one or more   178 -------------------------------------------------------------------------------- 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 Term Loans and the 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) Notwithstanding the foregoing, technical and conforming modifications to the Loan Documents may be made with the consent of the Borrowers and the Administrative Agent to the extent necessary to integrate any Incremental Term Loan Commitments or Incremental Revolving Facility Commitments on substantially the same basis as the Term Loans or Revolving Facility Loans, as applicable. SECTION 9.09. Interest Rate Limitation. (a) 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 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. (b) Without limiting Section 9.09(a), if any provision of this Agreement or any of the other Loan Documents would obligate the Canadian Borrower to make any payment of interest under the Obligations of the Canadian Borrower or any other amount in an amount or calculated at a rate that would be prohibited by law or would result in the receipt by any Canadian Tranche Lender of interest under the Obligations of the Canadian Borrower at a criminal rate (as such terms are construed under the Criminal Code (Canada)) then, notwithstanding such provision, such amount or rates shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by law or so result in the receipt by such Canadian Tranche Lender of interest under the Obligations of the Canadian Borrower at a criminal rate, such adjustment to be effected, to the extent necessary, as follows: (i) first, by reducing the amount or rate of interest required to be paid to such Canadian Tranche Lender under this Section 9.09(b) and (ii) thereafter, by reducing any fees, commissions, premiums and other amounts required to be paid to such Canadian Tranche Lender that would constitute interest under the Obligations of the Canadian Borrower for purposes of Section 347 of the Criminal Code (Canada). Notwithstanding the foregoing, and after giving effect to all adjustments contemplated hereby, if any Canadian Tranche Lender shall have received an amount in excess of the maximum permitted by Section 347 of the Criminal Code (Canada), then the Canadian Borrower shall be entitled, by notice in writing to the Administrative Agent for the benefit of the Canadian Tranche Lenders, to obtain reimbursement from such Canadian Tranche Lender in an amount equal to such excess, and pending such reimbursement, such amount shall be deemed to be an amount payable by such Canadian Tranche Lender to the Canadian Borrower. Any amount or rate of interest   179 -------------------------------------------------------------------------------- under the Obligations of the Canadian Borrower referred to in this Section 9.09 (b) shall be determined in accordance with generally accepted actuarial practices and principles as an effective annual rate of interest over the term that any Canadian Tranche Revolving Facility Loan to the Canadian Borrower remains outstanding on the assumption that any charges, fees or expenses that fall within the meaning of “interest” (as defined in the Criminal Code (Canada)) shall, if they relate to a specific period of time, be pro-rated over that period of time and otherwise be pro-rated over the period from the Closing Date to the date that all Obligations (other than contingent indemnities and expense reimbursement obligations to the extent no claim therefor has been made) have been indefeasibly paid in full and all the Canadian Tranche Commitments have been terminated and, in the event of a dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Administrative Agent shall be conclusive for the purposes of such determination. SECTION 9.10. Conversion of Currencies. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given. (b) The obligations of each Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the “Applicable Creditor”) shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than the currency in which such sum is stated to be due hereunder (the “Agreement Currency”), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, such Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of the Borrowers contained in this Section 9.10 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder. SECTION 9.11. 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 dated as of October 11, 2006, shall survive the execution and delivery of this Agreement and remain in full force and effect. SECTION 9.12. 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   180 -------------------------------------------------------------------------------- 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 9.12. SECTION 9.13. 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 9.14. 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 9.15. 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. SECTION 9.16. Jurisdiction; Consent to Service of Process. (a) Each of the parties hereto 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 other Loan Party or their properties in the courts of any jurisdiction. (b) Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that 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   181 -------------------------------------------------------------------------------- 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 9.17. 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 Borrowers and the other Loan Parties furnished to it by or on behalf of Holdings, the Borrowers 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 9.17 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 Borrowers 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 9.17), 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 9.17), (d) in order to enforce its rights under any Loan Document in a legal proceeding, (e) to any pledgees referred to in Section 9.04(d) or to any prospective assignee of, or prospective Participant in, any of its rights under this Agreement (so long as each such person shall have been instructed to keep the same confidential in accordance with this Section 9.17) 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 9.18. JPMorgan Chase Bank, N.A. Direct Website Communications. (a) Delivery. (i) Each Loan Party hereby agrees that it will 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 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 acceptable to the Administrative Agent. In addition, each Loan Party agrees to   182 -------------------------------------------------------------------------------- continue to provide the Communications to the Administrative Agent in the manner specified in this Agreement or any other Loan Document but only to the extent requested by the Administrative Agent. Nothing in this Section 9.18 shall prejudice the right of the Agents, the Joint Lead Arrangers 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. (ii) The Administrative Agent agrees that receipt of the Communications by the Administrative Agent at its e-mail address set forth in Section 9.01 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) Platform. 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 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 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 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 9.19. Release of Liens and Guarantees. In the event that (1) 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 Loan Party (other than the Equity Interests of the U.S. Borrower) to a person that is not (and is not required to become) a Loan Party in a transaction not prohibited by this Agreement or (2) upon the satisfaction of the conditions precedent to a Qualified IPO (with respect to the Equity Interests of the U.S. Borrower), then (i) in the case of a disposition of the Equity Interests of any Borrower (other than the U.S. Borrower) in a transaction not prohibited by this Agreement and as a result of which such Borrower would cease   183 -------------------------------------------------------------------------------- to be a Subsidiary, such Borrower shall, immediately prior to the completion of any such disposition, pay the unpaid principal amount of all Loans made to such Borrower hereunder, together with all accrued but unpaid interest thereon and other fees and amounts owed by such Borrower hereunder (and, if applicable, repay all amounts to become due with respect to outstanding B/As of such Borrower hereunder) in accordance with the provisions of Section 2.11 and such Borrower shall thereafter cease for all purposes to have any of the rights or obligations of a Borrower hereunder, (ii) the Administrative Agent shall promptly (and the Lenders hereby authorize the Administrative Agent to) take such action and execute any such documents as may be reasonably requested by Holdings or the U.S. Borrower and at the Borrowers’ expense to release any Liens created by any Loan Document in respect of such assets or Equity Interests, and, in the case of a disposition of the Equity Interests of any Subsidiary Loan Party in a transaction not prohibited by this Agreement and as a result of which such Subsidiary Loan Party would cease to be a Subsidiary Loan Party (or upon a Qualified IPO, with respect to Holdings), terminate such Subsidiary Loan Party’s obligations or Holdings’s obligations, as applicable, under the U.S. Guarantee Agreement or the Foreign Guarantee Agreement, as applicable. In addition, the Administrative Agent agrees to take such actions as are reasonably requested by Holdings or the U.S. Borrower and at the Borrowers’ expense to terminate the Liens and security interests created by the Loan Documents when all the Obligations (other than contingent indemnities and expense reimbursement obligations to the extent no claim therefor has been made) 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 the U.S. Borrower 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 9.20. Dutch Parallel Debt. (a) Parallel Debt U.S. Obligations. (i) The U.S. Borrower hereby irrevocably and unconditionally undertakes to pay to the Administrative Agent amounts equal to the aggregate amount from time to time payable (verschuldigd) to any of the Secured Parties under or pursuant to the U.S. Obligations (such payment undertaking to the Administrative Agent hereinafter referred to as the “Parallel Debt U.S. Obligations”). (ii) The Parallel Debt U.S. Obligations will become due and payable (opeisbaar) immediately upon the Administrative Agent’s first demand, which may be made at any time, as and when one or more of the U.S. Obligations becomes due and payable. (iii) Each of the parties to this Agreement hereby acknowledges that (A) the Parallel Debt U.S. Obligations constitute undertakings, obligations and liabilities of the U.S. Borrower to the Administrative Agent that are transferable and independent from, and without prejudice to, the corresponding U.S. Obligations and (B) the Parallel Debt U.S. Obligations represent the Administrative Agent’s own separate claim to receive payment of the Parallel Debt U.S. Obligations from the U.S. Borrower, it being understood that the amount that is or may become due and payable by the U.S. Borrower under or pursuant to the Parallel Debt U.S. Obligations from time to time shall never exceed the aggregate amount that is payable under the U.S. Obligations from time to time.   184 -------------------------------------------------------------------------------- (iv) For the avoidance of doubt, each of the parties to this Agreement confirms that the claims of the Administrative Agent against the U.S. Borrower in respect of the Parallel Debt U.S. Obligations and the claims of any one or more of the Secured Parties against the U.S. Borrower under or pursuant to the U.S. Obligations payable to such Secured Parties do not constitute common property (een gemeenschap) within the meaning of Article 3:166 of the Netherlands Civil Code (“NCC”) and that the provisions relating to such common property shall not apply. If, however, it would be held that such claims of the Administrative Agent and such claims of any one or more of the Secured Parties do constitute such common property and such provisions do apply, the parties to this Agreement agree that any Intercreditor Agreement shall constitute an administration agreement (beheersregeling) within the meaning of Article 3:168 NCC. (v) For the avoidance of doubt, the parties hereto confirm that this Agreement is not to be construed as an agreement as referred to in Article 6:16 NCC and that Article 6:16 NCC shall not apply, and therefore that the provisions relating to common property (een gemeenschap) within the meaning of Article 3:166 NCC shall not apply by analogy to the relationship between the Secured Parties on the one hand, and the U.S. Borrower as debtor of the Parallel Debt U.S. Obligations, on the other hand. (vi) To the extent the Administrative Agent irrevocably (onaantastbaar) receives any amount in payment of the Parallel Debt U.S. Obligations (the “U.S. Received Amount”), the Administrative Agent shall distribute such amount among the Secured Parties in accordance with the Intercreditor Agreements. Upon irrevocable (onaantastbaar) receipt of any U.S. Received Amount, the U.S. Obligations shall be reduced by an aggregate amount (the “U.S. Deductible Amount”) equal to the U.S. Received Amount in the manner as if the U.S. Deductible Amount were received as a payment of the U.S. Obligations on the date of receipt by the Administrative Agent of the U.S. Received Amount. (b) Parallel Debt Foreign Obligations. (i) Each of the U.S. Borrower and the Foreign Borrowers hereby irrevocably and unconditionally undertakes to pay to the Administrative Agent amounts equal to the aggregate amount payable (verschuldigd) to any of the Secured Parties or the Administrative Agent under or pursuant to the Foreign Obligations (these payment undertakings to the Administrative Agent hereinafter collectively referred to as the “Parallel Debt Foreign Obligations”). (ii) The Parallel Debt Foreign Obligations will become due and payable (opeisbaar) immediately upon the Administrative Agent’s first demand, which may be made at any time, as and when one or more of the Foreign Obligations becomes due and payable. (iii) Each of the parties to this Agreement hereby acknowledges that (A) the Parallel Debt Foreign Obligations constitute undertakings, obligations and liabilities of the U.S. Borrower and the Foreign Borrowers to the Administrative Agent which are transferable and independent from, and without prejudice to, the corresponding Foreign Obligations and (B) the Parallel Debt Foreign Obligations represent the Administrative Agent’s own separate claims to receive payment of the Parallel Debt Foreign Obligations from the U.S. Borrower and each of the Foreign Borrowers, it being understood that the amounts which may become due and payable by the U.S. Borrower and the Foreign Borrowers under or pursuant to the Parallel Debt Foreign   185 -------------------------------------------------------------------------------- Obligations from time to time shall never exceed the aggregate amount which is payable under the Foreign Obligations from time to time. (iv) For the avoidance of doubt, each of the parties to this Agreement confirms that the claims of the Administrative Agent against the U.S. Borrower and each of the Foreign Borrowers in respect of the Parallel Debt Foreign Obligations and the claims of any or more of the Lenders, the Swingline Lender, Issuing Banks and Swap Counterparties against the U.S. Borrower and the Foreign Subsidiary Loan Parties under or pursuant to the Foreign Obligations payable to such Secured Parties and Swap Counterparties do not constitute common property (een gemeenschap) within the meaning of Article 3:166 of the Netherlands Civil Code (“NCC”) and that the provisions relating to such common property shall not apply. If, however, it shall be held that such claims of the Administrative Agent and such claims of any one or more of the Secured Parties do constitute such common property and such provisions do apply, the parties to this Agreement agree that any Intercreditor Agreement shall constitute the administration agreement (beheersregeling) within the meaning of Article 3:168 NCC. (v) For the avoidance of doubt, the parties hereto confirm that this Agreement is not to be construed as an agreement as referred to in Article 6:16 NCC and that Article 6:16 NCC shall not apply, and therefore that the provisions relating to common property (een gemeenschap) within the meaning of Article 3:166 NCC shall not apply by analogy to the relationship between the Secured Parties, on the one hand, and the U.S. Borrower and the Foreign Borrowers as debtors of the Parallel Debt Foreign Obligations on the other hand. (vi) To the extent the Administrative Agent irrevocably (onaantastbaar) receives any amount in payment of the Parallel Debt Foreign Obligations (the “Foreign Received Amount”), the Administrative Agent shall distribute such amount among the Secured Parties in accordance with Intercreditor Agreements. Upon irrevocable (onaantastbaar) receipt of any Foreign Received Amount, the Foreign Obligations shall be reduced by an aggregate amount (the “Foreign Deductible Amount”) equal to the Foreign Received Amount in the manner as if the Foreign Deductible Amount were received as a payment of the Foreign Obligations on the date of receipt by the Administrative Agent of the Foreign Received Amount. SECTION 9.21. German Parallel Debt; Limitation on Enforcement. (a) Each Loan Party hereby agrees and covenants with the Administrative Agent by way of an abstract acknowledgement of debt (abstraktes Schuldanerkenntnis) that each of them shall pay to the Administrative Agent sums equal to, and in the currency of, any sums owing by it to a Secured Party (other than the Administrative Agent) under any Loan Document (the “Principal Obligations”) as and when the same fall due for payment under the relevant Loan Document (the “German Parallel Obligations”). (b) The Administrative Agent shall have its own independent right to demand payment of the German Parallel Obligations by the Loan Parties. The rights of the Secured Parties to receive payment of the Principal Obligations are several from the rights of the Administrative Agent to receive the German Parallel Obligations; provided that the payment by an Obligor of its German Parallel Obligations to the Administrative Agent in accordance with this Section 9.21 shall be a good discharge of the corresponding Principal   186 -------------------------------------------------------------------------------- Obligations and the payment by a Loan Party of its corresponding Principal Obligations in accordance with the provisions of the Loan Documents shall be a good discharge of the relevant German Parallel Obligations. In the event of a good discharge of the Principal Obligations the Administrative Agent shall not be entitled any more to demand payment of the corresponding German Parallel Obligations and such German Parallel Obligations shall cease to exist. This shall apply accordingly in the event of a good discharge of the German Parallel Obligations to the corresponding Principal Obligations. (c) The obligations under this Agreement of any Foreign Subsidiary Loan Party incorporated in Germany as a limited liability company (Gesellschaft mit beschränkter Haftung) shall be limited as set forth in Section 6(d) of the Foreign Guarantee Agreement. SECTION 9.22. Dutch Banking Act. (a) On the date of this Agreement, each Lender (including the Swingline Lender) and each Issuing Bank in respect of the European Tranche or the Canadian Tranche, but in case of the Canadian Tranche only to the extent the Dutch Borrower has requested the issuance of a Revolving Letter of Credit thereunder, hereby represents and warrants for the benefit of the Dutch Borrower, the Administrative Agent and the other Lenders that (i) it is a PMP (the requirements of which are set forth on Schedule 9.22), (ii) it is aware that it does not benefit from the (creditor) protection offered by the Dutch Banking Act when lending monies to persons or entities which are subject to the prohibition of Section 82 of the Dutch Banking Act or, after enactment thereof, Section 3:5 of the AFS, and (iii) in light of the foregoing and other considerations, it has made its own independent appraisal of risks arising under or in connection with the Loan Documents. (b) On each date that an Assignee of any Loan to the Dutch Borrower, any European Tranche Commitment or Canadian Tranche Exposure or, pursuant to Section 2.21, any Incremental Revolving Facility Lender or Incremental Term Lender (if the applicable Incremental Revolving Facility Loans or Incremental Term Loans are to be made available to the Dutch Borrower) becomes a Lender, if such is at the time such person becomes a Lender a requirement under Dutch law (including the Exemption Regulation and, after enactment thereof, the AFS), such Lender hereby represents and warrants for the benefit of the Dutch Borrower, the Administrative Agent and the Lenders that (i) it is a PMP (the current requirements of which are set forth on Schedule 9.22), (ii) it is aware that it does not benefit from the (creditor) protection offered by the Dutch Banking Act when lending monies to persons or entities that are subject to the prohibition of Section 82 of the Dutch Banking Act or, after enactment thereof, Section 3:5 of the AFS, and (iii) in light of the foregoing and other considerations, it has made its own independent appraisal of risks arising under or in connection with the Loan Documents, and each Issuing Bank under the European Tranche represents that it is a PMP (the current requirements of which are set forth on Schedule 9.22). (c) If at any time the U.S. Borrower or the Dutch Borrower has, after due enquiry in the relevant publicly available registers, reasonable grounds to believe that any Lender or Issuing Bank is not a PMP, then at the reasonable request of such Borrower, such Lender or Issuing Bank shall provide to such Borrower information reasonably available to such Lender or Issuing Bank in order to enable such Borrower to verify that such Lender or Issuing Bank is a PMP.   187 -------------------------------------------------------------------------------- SECTION 9.23. Power of Attorney. Each Lender (including the Swingline Lender) and each Issuing Bank hereby (and each Affiliate of a Lender by entering into an Affiliate Authorization thereby) (i) authorizes the Administrative Agent as its agent and attorney to execute and deliver, on behalf of and in the name of such Lender or Issuing Bank (or Affiliate), all and any Loan Documents (including Security Documents) and related documentation, (ii) authorizes the Administrative Agent to appoint any further agents or attorneys to execute and deliver, or otherwise to act, on behalf of and in the name of the Administrative Agent for any such purpose and (iii) authorizes the Administrative Agent to delegate its powers under this power of attorney and to do any and all acts and to make and receive all declarations that are deemed necessary or appropriate to the Administrative Agent. The Lenders and the Issuing Banks hereby (and each Affiliate of a Lender by entering into an Affiliate Authorization thereby) relieve the Administrative Agent from the self-dealing restrictions imposed by Section 181 of the German Civil Code and the Administrative Agent may also relieve agents, delegates and attorneys appointed pursuant to the powers granted under this Section 9.23 from the restrictions imposed by Section 181 of the German Civil Code. SECTION 9.24. Certain Approvals. The Lenders on the Closing Date by execution of this Agreement hereby approve or waive, as applicable, the collateral and intercreditor related matters set forth on Schedule 9.24. SECTION 9.25. U.S.A. Patriot Act. Each Lender hereby notifies the Borrowers that pursuant to the requirements of the U.S.A. Patriot Act, it is required to obtain, verify and record information that identifies the Borrowers, which information includes the name and address of each Borrower and other information that will allow such Lender to identify the Borrowers in accordance with the U.S.A. Patriot Act. SECTION 9.26. Czech Parallel Debt. (a) Notwithstanding any other provision of this Agreement, each Loan Party hereby irrevocably and unconditionally undertakes to pay to the Administrative Agent sums equal to, and in the currency, of each amount payable by such Loan Party to each of the Secured Parties (other than the Administrative Agent) under each of the Loan Documents as and when that amount falls due for payment under the relevant Loan Document. (b) The Administrative Agent shall have its own independent right to demand payment of the amounts payable by each Loan Party under this Section 9.26, irrespective of any discharge of such Loan Party’s obligation to pay those amounts to the other Secured Parties resulting from failure by them to take appropriate steps, in insolvency proceedings affecting that Loan Party, to preserve their entitlement to be paid those amounts. (c) Any amount due and payable by a Loan Party to the Administrative Agent under this Section 9.26 shall be decreased to the extent that the other Secured Parties have received (and are able to retain) payment in full of the corresponding amount under the   188 -------------------------------------------------------------------------------- other provisions of the Loan Documents and any amount due and payable by a Loan Party to the other Secured Parties under those provisions shall be decreased to the extent that the Administrative Agent has received (and is able to retain) payment in full of the corresponding amount under this Section 9.26. (d) The rights of the Secured Parties (other than the Administrative Agent) to receive payment of amounts payable by each Loan Party under the Loan Documents are several and are separate and independent from, and without prejudice to, the rights of the Administrative Agent to receive payment under this Section 9.26. ARTICLE X Collection Allocation Mechanism SECTION 10.01. Implementation of CAM. (a) On the CAM Exchange Date, (i) each European Tranche Lender shall immediately be deemed to have acquired (and shall promptly make payment therefor to the Administrative Agent in accordance with Section 2.04(c)) participations in the Swingline Loans under the European Tranche in an amount equal to such Lender’s European Tranche Percentage of each such Swingline Loan outstanding on such date, (ii) simultaneously with the automatic conversions pursuant to clause (iii) below, the Lenders shall automatically and without further act (and without regard to the provisions of Section 9.04 (but which such provisions shall remain applicable following such exchange)) be deemed to have exchanged interests in the Loans (other than the Swingline Loans) and B/As and participations in Swingline Loans and Letters of Credit, such that in lieu of the interest of each Lender in each Loan, B/A and Letter of Credit in which it shall participate as of such date (including such Lender’s interest in the Obligations of each Loan Party in respect of each such Loan, B/A and Letter of Credit), such Lender shall hold an interest in every one of the Loans (other than the Swingline Loans) and B/As and a participation in every one of the Swingline Loans and Letters of Credit (including the Obligations of each Loan Party in respect of each such Loan, each Tranche C-3 Credit-Linked Deposit and each Reserve Account established pursuant to Section 10.02), whether or not such Lender shall previously have participated therein, equal to such Lender’s CAM Percentage thereof, (iii) simultaneously with the deemed exchange of interests pursuant to clause (ii) above, the interests in the Loans to be received in such deemed exchange shall, automatically and with no further action required, be converted into the U.S. Dollar Equivalent, determined using the Exchange Rate calculated as of such date, of such amount and on and after such date all amounts accruing and owed to the Lenders in respect of such Obligations shall accrue and be payable in U.S. Dollars at the rate otherwise applicable hereunder and (iv) immediately upon the date of expiration of the Contract Period in respect thereof, the interests in each B/A received in the deemed exchange of interests pursuant to clause (ii) above shall, automatically and with no further action required, be converted into the U.S. Dollar Equivalent, determined using the Exchange Rate calculated as of such date, of such amount and on and after such date all amounts accruing and owed to the Lenders in respect of such Obligations shall accrue and be payable in U.S. Dollars at the rate otherwise applicable hereunder. It is understood and agreed that (i) Lenders holding interests in B/As on the CAM Exchange Date shall discharge the obligations to fund such B/As at maturity in exchange for the interests acquired by such Lenders in funded Loans in the CAM Exchange and (ii) the CAM Exchange, in itself, will not affect the aggregate amount of the Obligations (as defined in the   189 -------------------------------------------------------------------------------- Collateral Agreement) owing by each of (1) the Domestic Loan Parties and (2) the Foreign Subsidiary Loan Parties, on the CAM Exchange Date. Each Lender and each Loan Party hereby consents and agrees to the CAM Exchange, and each Lender agrees that the CAM Exchange shall be binding upon its successors and assigns and any person that acquires a participation in its interests in any Loan or B/A or any participation in any Swingline Loan or Letter of Credit. Each Loan Party agrees from time to time to execute and deliver to the Administrative Agent all such promissory notes and other instruments and documents as the Administrative Agent shall reasonably request to evidence and confirm the respective interests of the Lenders after giving effect to the CAM Exchange, and each Lender agrees to surrender any promissory notes originally received by it in connection with its Loans hereunder to the Administrative Agent against delivery of any promissory notes evidencing its interests in the Loans and B/As so executed and delivered; provided, however, that the failure of any Loan Party to execute or deliver or of any Lender to accept any such promissory note, instrument or document shall not affect the validity or effectiveness of the CAM Exchange. (b) As a result of the CAM Exchange, upon and after the CAM Exchange Date, each payment received by the Administrative Agent pursuant to any Loan Document in respect of the Obligations, each release by the Administrative Agent to the Lenders of Tranche C-3 Credit-Linked Deposits from the Tranche C-3 Credit-Linked Deposit Account, and each distribution made by the Administrative Agent pursuant to any Security Document in respect of the Obligations, shall be distributed to the Lenders pro rata in accordance with their respective CAM Percentages. Any direct payment received by a Lender on or after the CAM Exchange Date, including by way of set-off, in respect of an Obligation shall be paid over to the Administrative Agent for distribution to the Lenders in accordance herewith. SECTION 10.02. Letters of Credit. (a) In the event that on the CAM Exchange Date any Letter of Credit under a Tranche shall be outstanding and undrawn in whole or in part, or any L/C Disbursement under a Tranche shall not have been reimbursed by the applicable Borrower or with the proceeds of a Revolving Borrowing or Swingline Borrowing, each Revolving Lender under such Tranche shall promptly pay over to the Administrative Agent, in immediately available funds, an amount in U.S. Dollars equal to such Lender’s Tranche Percentage of such undrawn face amount or (to the extent it has not already done so) such unreimbursed drawing, as applicable, together with interest thereon from the CAM Exchange Date to the date on which such amount shall be paid to the Administrative Agent at the rate that would be applicable at the time to an ABR Revolving Loan in a principal amount equal to such undrawn face amount or unreimbursed drawing, as applicable. The Administrative Agent shall establish a separate account (each, a “Reserve Account”) or accounts for each Lender for the amounts received with respect to each such Letter of Credit pursuant to the preceding sentence. The Administrative Agent shall deposit in each Lender’s Reserve Account such Lender’s CAM Percentage of the amounts received from the Revolving Lenders as provided above. For the purposes of this paragraph, the U.S. Dollar Equivalent of each Lender’s participation in each Letter of Credit denominated in an Alternative Currency shall be the amount in U.S. Dollars determined by the Administrative Agent to be required in order for the Administrative Agent to purchase currency in the applicable Alternative Currency in an amount sufficient to enable it to deposit the actual amount of such participation in such undrawn Letter of Credit in the applicable Alternative Currency in such Lender’s Reserve Account. The Administrative Agent shall have sole dominion and control over each Reserve Account, and the amounts deposited in each   190 -------------------------------------------------------------------------------- Reserve Account shall be held in such Reserve Account until withdrawn as provided in paragraph (b), (c), (d) or (e) below. The Administrative Agent shall maintain records enabling it to determine the amounts paid over to it and deposited in the Reserve Accounts in respect of each Letter of Credit and the amounts on deposit in respect of each Letter of Credit attributable to each Lender’s CAM Percentage. The amounts held in each Lender’s Reserve Account shall be held as a reserve against the Revolving L/C Exposure, shall be the property of such Lender, shall not constitute Loans to or give rise to any claim of or against any Loan Party and shall not give rise to any obligation on the part of any Loan Party to pay interest to such Lender or any other obligation of any Loan Party, it being agreed that the reimbursement obligations in respect of Letters of Credit shall arise only at such times as drawings are made thereunder, as provided in Section 2.05. (b) In the event that after the CAM Exchange Date any drawing shall be made in respect of a Letter of Credit under a Tranche, (i) the Administrative Agent shall, at the request of the applicable Issuing Bank, to the extent such drawing constitutes a Revolving L/C Disbursement, withdraw from the Reserve Account of each Lender under such Tranche any amounts, up to the amount of such Lender’s CAM Percentage of such drawing or payment, deposited in respect of such Letter of Credit and remaining on deposit and deliver such amounts to such Issuing Bank in satisfaction of the reimbursement obligations of the Lenders under such Tranche under Section 2.05(d) (but not of the applicable Borrower under Section 2.05(e)) and (ii) to the extent such drawing constitutes a Tranche C-3 L/C Disbursement, the Administrative Agent shall withdraw from the Tranche C-3 Credit-Linked Deposit of each Lender such Lender’s CAM Percentage of such Tranche C-3 L/C Disbursement and deliver such amounts to the Issuing Bank as contemplated by Section 2.05(e). In the event that any Lender shall default on its obligation to pay over any amount to the Administrative Agent as provided in this Section 10.02, the applicable Issuing Bank shall have a claim against such Lender to the same extent as if such Lender had defaulted on its obligations under Section 2.05(d), but shall have no claim against any other Lender in respect of such defaulted amount, notwithstanding the exchange of interests in the applicable Borrower’s reimbursement obligations pursuant to Section 10.01. Each other Lender shall have a claim against such defaulting Lender for any damages sustained by it as a result of such default, including, in the event that such Letter of Credit shall expire undrawn, its CAM Percentage of the defaulted amount. (c) In the event that after the CAM Exchange Date any Letter of Credit shall expire undrawn, the Administrative Agent shall (i) to the extent such Letter of Credit constitutes a Revolving Letter of Credit, withdraw from the Reserve Account of each Lender the amount remaining on deposit therein in respect of such Letter of Credit and distribute such amount to such Lender and (ii) to the extent such Letter of Credit constitutes a Tranche C-3 Letter of Credit, withdraw from the Tranche C-3 Credit-Linked Deposit of each Lender the portion of such deposit attributable to such Letter of Credit and distribute such amount to such Lender. (d) With the prior written approval of the Administrative Agent (not to be unreasonably withheld), any Lender may withdraw its Tranche C-3 Credit-Linked Deposit or the amount held in its Reserve Account in respect of the undrawn amount of any Letter of Credit. Any Lender making such a withdrawal shall be unconditionally obligated, in the   191 -------------------------------------------------------------------------------- event there shall subsequently be a drawing under such Letter of Credit, to pay over to the Administrative Agent, in the currency in which such drawing is denominated, for the account of the applicable Issuing Bank, on demand, its CAM Percentage of such drawing or payment. (e) Pending the withdrawal by any Lender of any amounts from its Reserve Account as contemplated by the above paragraphs, the Administrative Agent will, at the direction of such Lender and subject to such rules as the Administrative Agent may prescribe for the avoidance of inconvenience, invest such amounts in Permitted Investments. Each Lender that has not withdrawn its amounts in its Reserve Account as provided in paragraph (d) above shall have the right, at intervals reasonably specified by the Administrative Agent, to withdraw the earnings on investments so made by the Administrative Agent with amounts in its Reserve Account and to retain such earnings for its own account. SECTION 10.03. May 2006 Credit Agreement; Effectiveness of Amendment and Restatement. On and after the Amendment Effective Date, all obligations of the Loan Parties under the May 2006 Credit Agreement shall become obligations of the Loan Parties hereunder, secured by the Security Documents, and the provisions of the May 2006 Credit Agreement shall be superseded by the provisions hereof. Each of the parties hereto confirm that the amendment and restatement of the May 2006 Credit Agreement pursuant to this Agreement shall not constitute a novation of the May 2006 Credit Agreement.   192

Exhibit 10.28   SUMMARY OF THE COMPANY’S NON-EMPLOYEE DIRECTOR COMPENSATION   Non-employee directors are paid an annual retainer of $40,000 and fees of $2,500 for each Board meeting attended, $1,000 for each committee meeting attended and $1,000 for certain telephone meetings. In addition, the Chairman of the Audit Committee, the Chairman of the Corporate Governance Committee and the Chairman of the Executive Compensation Committee each are pair $5,000 per annum for their services as such. Other members of the Audit Committee, the Corporate Governance Committee and the Executive Compensation Committee each are paid $2,500 per annum for their services as such. All directors are reimbursed for their expenses related to attendance at meetings.   In accordance with the Company’s 1997 Stock Incentive Plan, as amended, each non-employee director who is a director at the annual meeting of stockholders receives an automatic grant of an option to purchase 5,000 shares of Common Stock at an exercise price equal to the closing price on the date of grant. Upon becoming a director, each non-employee director is granted an option to purchase 10,000 shares of Common Stock at an exercise price equal to the closing price of Common Stock on the date of grant. Each such option expires ten years after the date of grant and becomes exercisable in three equal annual installments beginning on the first day of the month of each of the first three anniversaries of the date of grant. If the director ceases to be a director prior to the date the option becomes fully exercisable, the unvested portion of the option will immediately expire. Any vested options will remain exercisable for a period of one year following cessation of service as a director of the Company. All unexercised options will become exercisable in full beginning 20 days prior to the consummation of a merger or consolidation, acquisition, reorganization or liquidation and, to the extent not exercised, shall terminate immediately after the consummation of such merger, consolidation, acquisition, reorganization or liquidation. Except as the Board may otherwise determine, options granted to non-employee directors are not transferable.

Exhibit 10.1 [date] [Form of Stock Option Grant for members of the Board of Directors] Dear [name]: Pursuant to the terms and conditions of Adolor Corporation’s 2003 Stock-Base Incentive Compensation Plan (the ‘Plan’), I am pleased to advise you of your annual grant of a Non-Qualified Stock Option to purchase [number] shares (the ‘Option’) of common stock as outlined below:   Grant Date:    [date]    Option Price per Share:    $[price]    Total Cost to Exercise: $[total price]                         Expiration Date:    [date]    Vesting Schedule:    100% of the Option shall vest on [date]; provided, however, that if prior [date], you resign from the Board of Directors of the Corporation other than for Cause (as defined in the Plan), the vesting of the Option shall accelerate so that the Option becomes immediately exercisable with respect to one twelfth (1/12) of the shares underlying such Option for each full month that has elapsed between the date of grant and the date of such resignation and provided further, however, that none of the Option shall vest if such resignation from the Board of Directors of the Corporation was for Cause. You may elect at any time while on the Board of Directors of Adolor Corporation to exercise in full all of the shares subject to this Option prior to the vesting of the Option. Any such shares purchased prior to their vesting: (i) shall vest in accordance with the vesting schedule otherwise applicable to the Option; and (ii) shall be subject to a repurchase right in favor of Adolor Corporation in the event of a termination of service as set forth in Section 8 of the Plan (a “Termination Event”). The repurchase right of Adolor Corporation shall be for any unvested shares and shall be at a price equal to the lesser of (x) the exercise price of such shares, or (y) the Fair Market Value of such shares on the date of repurchase, which right must be exercised by Adolor Corporation within 90 days of the Termination Event; provided that if Adolor Corporation does not exercise such repurchase right within such 90-day period, the Option shall become fully and immediately vested. Kindly execute this letter as below and return it to me in the envelope provided. I have also enclosed a summary of the Adolor Corporation’s 2003 Stock-Based Compensation Plan, its Summary Description and the Company’s latest annual report (SEC Form 10-K), and a copy of the grant for your records. We thank you for your many contributions to the Company, and look forward to working with you over the next year. Sincerely, Chief Financial Officer I hereby acknowledge receipt of the Stock Option granted on the date shown above, which has been issued to me under the terms and conditions of the Plan.   Signature:         Date         [Director Name]      

SETTLEMENT AGREEMENT AND RELEASE           This Settlement Agreement and Release (this "Agreement") is dated as of May 30, 2006, by and among (i) Potomac Electric Power Company ("Pepco"); Conectiv Energy Supply, Inc.; Pepco Energy Services, Inc.; Pepco Gas Services, Inc.; Pepco Holdings, Inc.; and Potomac Capital Investment Corporation (Pepco and the other entities identified in this clause (i) are referred to herein collectively as the "Pepco Settling Parties") and (ii) Mirant Corporation ("New Mirant"); Mirant Power Purchase, LLC, f/k/a Mirant Oregon, LLC ("MPP"); MC 2005, LLC, f/k/a Mirant Corporation ("Old Mirant"); Mirant Mid-Atlantic, LLC; Mirant Potomac River, LLC; Mirant Chalk Point, LLC; Mirant Piney Point, LLC; Mirant MD Ash Management, LLC; Mirant Energy Trading, LLC; Mirant Services, LLC; and the MC Plan Trust (as defined in Schedule 1) (New Mirant and the other entities identified in this clause (ii) are referred to herein collectively as the "Mirant Settling Parties").           WHEREAS, on June 7, 2000, Old Mirant, f/k/a Southern Energy, Inc., and Pepco executed and delivered an Asset Purchase and Sale Agreement for Generating Plants and Related Assets (collectively, with its attachments, schedules and exhibits, as amended from time to time, the "APSA");           WHEREAS, under the terms of the APSA, Pepco and Old Mirant entered into a back-to-back arrangement (the "Back-to-Back Arrangement") under which, among other rights and obligations as set out in Section II of Schedule 2.4 to the APSA, Pepco was to sell to Old Mirant and Old Mirant was to purchase, at Pepco's cost, all capacity, energy, ancillary services and other benefits Pepco was entitled to receive under certain existing power purchase agreements that Pepco had entered into with third parties, as identified in a letter dated December 19, 2000, between Pepco and Old Mirant;           WHEREAS, as of the date of this Agreement, the only power purchase agreements subject to the Back-to-Back Arrangement that remain in effect are the Co-Generation and Small Plant Production Services Agreement by and between Pepco and Prince George's County, Maryland, dated June 1, 1990, and the Power Purchase Agreement by and between Pepco and Panda-Brandywine L.P., effective October 24, 1997 (the "Panda PPA");           WHEREAS, under the terms of the APSA, certain of the Mirant Settling Parties entered into Ancillary Agreements or other contracts or leases with Pepco or other Pepco Settling Parties;           WHEREAS, on December 11, 2000, Old Mirant and certain affiliates of Old Mirant (including Mirant Mid-Atlantic, LLC, f/k/a Southern Energy Mid-Atlantic, Inc.; Mirant Potomac River, LLC, f/k/a Southern Energy Potomac River, LLC; Mirant Chalk Point, LLC, f/k/a Southern Energy Chalk Point, LLC, and the successor in interest to Mirant Peaker, LLC, f/k/a Southern Energy Peaker, LLC; Mirant Piney Point, LLC, f/k/a Southern Energy Piney Point, LLC, and f/k/a/ Southern Energy Dickerson, LLC; Mirant MD Ash Management, LLC, f/k/a Southern Energy MD Ash Management, LLC, and the successor in interest to Mirant D.C. O&M, LLC, f/k/a Southern Energy D.C. O&M, LLC, and f/k/a Southern Energy Morgantown, LLC; and Mirant Mid-Atlantic Services, LLC, f/k/a Southern Energy PJM Management, LLC, which affiliates of Old Mirant are collectively referred to herein as the "Other Mirant Entities")) executed and delivered an Assignment and Assumption Agreement under which Old Mirant [image81.gif] assigned its rights to certain Auctioned Assets to specified Other Mirant Entities and the specified Other Mirant Entities assumed Old Mirant's Assumed Obligations pertaining to the assets assigned to them (the "December 11, 2000 Agreement");           WHEREAS, pursuant to the December 11, 2000 Agreement, Old Mirant assigned its rights and obligations under the APSA with respect to a Facility and Capacity Credit Agreement, dated March 21, 1989, by and between Southern Maryland Electric Cooperative, Inc. ("SMECO") and Pepco ("FCC Agreement") to Mirant Chalk Point, LLC, successor in interest to Mirant Peaker, LLC, f/k/a Southern Energy Peaker, LLC, and assigned its rights and obligations under the APSA with respect to a Site Lease Agreement, dated March 21, 1989, by and between SMECO and Pepco ("Site Lease," and together with the FCC Agreement, the "SMECO Agreements"), to Mirant Chalk Point, LLC, f/k/a Southern Energy Chalk Point, LLC.           WHEREAS, on December 18, 2000, Old Mirant and MRAEM, LP, f/k/a Mirant Americas Energy Marketing, LP ("MRAEM") executed and delivered a PPA and TPA Assignment and Assumption Agreement under which, among other things, Old Mirant assigned to MRAEM, and MRAEM assumed, all of Old Mirant's rights and obligations with respect to the Back-to-Back Arrangement;           WHEREAS, on December 19, 2000, SMECO, Pepco, and Old Mirant executed and delivered an Agreement and Consent under which SMECO consented to Pepco's assignment of the SMECO Agreements to Old Mirant or Old Mirant's permitted assigns;           WHEREAS, on December 19, 2000, Pepco, the Other Mirant Entities, and MRAEM (MRAEM and the Other Mirant Entities are referred to herein collectively as the "Mirant Entities") executed and delivered an Assignment and Assumption Agreement under which the Mirant Entities assumed liability for Old Mirant's Assumed Obligations under the APSA on the terms set forth therein, and disputes exist between Pepco and the Mirant Entities regarding the interpretation of those terms, including disputes as to whether those terms create joint and severable liability and as to what obligations fall within the Assumed Obligations;           WHEREAS, on December 19, 2000, Old Mirant executed and delivered to Pepco a Guarantee Agreement under which Old Mirant absolutely guaranteed the payment and performance of the obligations of the Mirant Entities under the APSA, the Ancillary Agreements, and any other agreement or instrument related thereto;           WHEREAS, Old Mirant and certain of its subsidiaries and affiliates (the "Debtors") filed, on July 14-15, 2003, and certain dates thereafter, for protection under chapter 11 of the Bankruptcy Code, which cases are jointly administered as In re Mirant Corporation, et. al. in the United States Bankruptcy Court for the Northern District of Texas, Fort Worth Division (the "Bankruptcy Court"), Case No. 03-46590 (DML) (the "Case");           WHEREAS, Pepco filed claims in the Case seeking, in part, the following: $24,699,336.07 under the Back-to-Back Arrangement for power delivered under a power purchase agreement with Ohio Edison Company for the periods June 2003 and July 1-14, 2003; $2,697,271.00 under the Back-to-Back Arrangement for power delivered under the Panda PPA for periods prior to July 14, 2003; $670,028.84 under the FCC Agreement for the periods of June 2003 and July 1-14, 2003; $68,476.45 under various service level agreements provided pre- 2 [image81.gif] petition; and $37,769.90 under Pepco's General Terms and Conditions for Furnishing Electric Service in Maryland provided pre-petition (collectively, the "Pre-Petition Claim");           WHEREAS, on December 9, 2004, the United States District Court for the Northern District of Texas, Fort Worth Division (the "District Court"), found that the Back-to-Back Arrangement was not severable from the APSA, which decision has been appealed by the Debtors to the United States Court of Appeals for the Fifth Circuit and is not yet a Final Order;           WHEREAS, on December 9, 2005, the Bankruptcy Court entered an order in the Case confirming the Debtors' Amended and Restated Second Amended Joint Chapter 11 Plan of Reorganization for Mirant Corporation and Its Affiliated Debtors (the "Debtors' Plan");           WHEREAS, on December 14, 2004, Mirant Mid Atlantic Services, LLC, was dissolved and Mirant D.C. O&M, LLC, f/k/a Southern Energy D.C. O&M, LLC, and f/k/a Southern Energy Morgantown, LLC, merged into Mirant MD Ash Management, LLC;           WHEREAS, on December 16, 2005, Mirant Peaker, LLC, f/k/a Southern Energy Peaker, LLC, merged into Mirant Chalk Point, LLC;           WHEREAS, the Debtors' Plan became effective on January 3, 2006;           WHEREAS, Section 10.14 of the Debtors' Plan and paragraph 123 of the Bankruptcy Court's order approving the Debtors' Plan provide for the accrual of interest on Pepco's Pre-Petition Claim and on any other Claims (as defined in the Debtors' Plan) of Pepco as set forth therein;           WHEREAS, pursuant to Section 8.3 of the Debtors' Plan, the MC Plan Trust has become the sole member of Old Mirant and, through various wholly-owned subsidiaries, the successor in interest to MRAEM and MRAREM, LP, f/k/a Mirant Americas Retail Energy Marketing, LP ("MRAREM"), both of which were dissolved on March 2, 2006;           WHEREAS, Section 14.5 of the Debtors' Plan provides that, pending a determination by Final Order of the disputes regarding the Debtors' right to reject the Back-to-Back Arrangement and the APSA and the claims of Pepco thereunder, (i) the Debtors' obligations under the Back-to-Back Arrangement, the APSA, and the Assumption/Assignment Agreements shall be interim obligations of MPP and unconditionally guaranteed by New Mirant, and no other subsidiary of New Mirant shall have any liability with respect to such interim performance, and (ii) any Debtor's obligations under any other agreement with Pepco or its subsidiaries (including, without limitation, the Ancillary Agreements) shall be interim obligations of such Debtor and unconditionally guaranteed by New Mirant, and no other subsidiary of New Mirant shall have any liability with respect to such interim performance;           WHEREAS, the Pepco Settling Parties and the Mirant Settling Parties have certain disputes with respect to the foregoing matters, including disputes which are currently the subject of litigation, and the Pepco Settling Parties and the Mirant Settling Parties desire to settle, on the terms and conditions described herein, such disputes. 3 [image81.gif]           NOW THEREFORE, for good and valuable consideration, the sufficiency of which is hereby acknowledged, the Pepco Settling Parties and the Mirant Settling Parties hereby agree as follows:           1.          Definitions. Unless otherwise defined herein, capitalized terms used in this Agreement shall have the meanings set forth for such terms in Schedule 1 attached hereto.           2.          Settlement Obligations Generally.           (a)          Mirant Obligations Regarding Certain Contracts. On (or prior to but effective as of) the Effective Date:           (i)          Assumed APSA. Pursuant to Section 365 of the Bankruptcy Code, Old Mirant hereby assumes the APSA, excepting the Back-to-Back Arrangement, which is not assumed (the "Assumed APSA"), and assigns the Assumed APSA to MPP. The Assumed APSA shall not include any Other Assumed Agreement or SMECO Agreement. MPP hereby accepts the assignment of the Assumed APSA, agrees to cure all defaults under the Assumed APSA (other than defaults that constitute Released Claims Against Mirant) and agrees to discharge and otherwise perform when due, without recourse against Pepco, all obligations and liabilities due to or for the benefit of Pepco thereunder (other than obligations that constitute Released Claims Against Mirant), provided that MPP shall have no liability under any Other Assumed Agreement or SMECO Agreement that is assumed pursuant to Section 2(a)(v) or Section 2(a)(vii) or for any Assumed Obligation that arises under any Other Assumed Agreement or SMECO Agreement that is assumed pursuant to Section 2(a)(v) or Section 2(a)(vii).           (ii)          Panda PPA Consent. Old Mirant and MPP hereby acknowledge and agree that, by execution of this Agreement, each of Old Mirant and MPP are deemed to have provided each of the consents contemplated by paragraphs 3(a)(2), 3(a)(3), 3(a)(4) and 5(a) of the January 8, 2004, letter agreement by and between Panda-Brandywine L.P. and Pepco. Notwithstanding the foregoing, none of the Mirant Settling Parties shall be liable to Pepco for any of the sums paid or payable by Pepco to Panda-Brandywine, L.P. pursuant to paragraphs 1, 4 or 8 of the letter agreement           (iii)          Unwind Agreement. The parties hereto agree and acknowledge that the Unwind Agreement for the Panda PPA, as set out in paragraph 3 of the December 19, 2000, letter agreement by and between Pepco and Old Mirant regarding "Settlement of Outstanding Issues," as subsequently modified, has expired and that no purchase price adjustment is owed           (iv)          Guaranty of Assumed APSA. New Mirant shall unconditionally guarantee MPP's performance of all obligations due to or for the benefit of Pepco under the Assumed APSA pursuant to, and on or prior to the Effective Date shall enter into, a guaranty agreement substantially in the form attached hereto as Exhibit 2(a)(iv).           (v)          Other Assumed Agreements. Pursuant to Section 365 of the Bankruptcy Code, each Mirant Settling Party that is a party to an Ancillary Agreement or other executory contract or unexpired lease identified on Schedule 2(a)(v) attached hereto (collectively, the "Other Assumed Agreements") hereby assumes each Other Assumed Agreement to which it is a party and, unless such Mirant Settling Party is identified next to the name of such agreement on 4 [image81.gif] Schedule 2(a)(v) as the Mirant Settling Party that will remain liable under such Other Assumed Agreement, hereby assigns such Other Assumed Agreement to the Mirant Settling Party that is named on Schedule 2(a)(v) as the assignee thereof. For purposes of this Agreement, each of MRAEM, MRAREM and Mirant Mid-Atlantic Services, LLC, is deemed, pursuant to Section 365 of the Bankruptcy Code, to have assumed each Other Assumed Agreement to which it was a party and to have assigned each such Other Assumed Agreement to the Mirant Settling Party that is named on Schedule 2(a)(v) as the assignee thereof. Each Mirant Settling Party that is identified as an assignee of an Other Assumed Agreement on Schedule 2(a)(v) (1) accepts the assignment of the Other Assumed Agreement to be assigned to it in accordance herewith, (2) agrees to cure all defaults (other than defaults that constitute Released Claims Against Mirant) under such Other Assumed Agreement, (3) agrees to discharge and otherwise perform when due, without recourse against Pepco, all obligations and liabilities due to or for the benefit of the Pepco Settling Parties under such Other Assumed Agreement (other than obligations that constitute Released Claims Against Mirant) and (4) assumes all Assumed Obligations arising under such Other Assumed Agreement (other than obligations that constitute Released Claims Against Mirant). Each Mirant Settling Party that assumes an Other Assumed Agreement and is identified next to the name of such agreement on Schedule 2(a)(v) as the Mirant Settling Party that will remain liable for the obligations under such Other Assumed Agreement (A) agrees to cure all defaults (other than defaults that constitute Released Claims Against Mirant) under such Other Assumed Agreement, (B) agrees to discharge and otherwise perform when due, without recourse against Pepco, all obligations and liabilities due to or for the benefit of the Pepco Settling Parties under such Other Assumed Agreement (other than obligations that constitute Released Claims Against Mirant) and (C) assumes all Assumed Obligations arising under such Other Assumed Agreement (other than obligations that constitute Released Claims Against Mirant).           (vi)          Guaranty of Other Assumed Agreements. New Mirant shall unconditionally guarantee the Mirant Settling Parties' performance of all obligations and liabilities due to or for the benefit of the Pepco Settling Parties under the Other Assumed Agreements pursuant to, and on or prior to the Effective Date shall enter into, a guaranty agreement substantially in the form attached hereto as Exhibit 2(a)(iv).           (vii)          SMECO Agreements. Pursuant to Section 365 of the Bankruptcy Code, Mirant Chalk Point, LLC, hereby assumes and agrees to cure all defaults under the SMECO Agreements (other than defaults that constitute Released Claims Against Mirant, which include defaults arising from the failure to pay amounts accrued under the FCC Agreement prior to July 15, 2003), and agrees to discharge and otherwise perform when due, without recourse against Pepco or SMECO, all obligations and liabilities due to or for the benefit of SMECO thereunder (other than obligations that constitute Released Claims Against Mirant), provided that Mirant Chalk Point, LLC, need not cure any defaults or assume any obligations or liabilities waived by SMECO pursuant to the SMECO Settlement (provided that the SMECO Settlement becomes effective), and provided further that Pepco shall hold harmless and indemnify the Mirant Settling Parties from and against any claim by SMECO for legal fees that SMECO has incurred related to the Case or any proceeding initiated by the Mirant Settling Parties or SMECO in the Bankruptcy Court or the District Court related to the SMECO Agreements.           (viii)          Guaranty of SMECO Agreements. New Mirant shall unconditionally guarantee Mirant Chalk Point, LLC's performance of all obligations and liabilities due to or for the benefit of SMECO under the SMECO Agreements pursuant to, and on or prior to the Effective Date 5 [image81.gif] shall enter into, a guaranty agreement substantially in the form attached hereto as Exhibit 2(a)(iv).           (ix)          Back-to-Back Arrangement. Subject to the provisions of Sections 5(c) and 5(d), pursuant to Section 365 of the Bankruptcy Code, Old Mirant rejects the Back-to-Back Arrangement as of midnight on May 31, 2006 (the "Rejection Time"), and the Back-to-Back Arrangement shall be deemed terminated as of the Rejection Time, provided that the rejection and termination of the Back-to-Back Arrangement shall not be deemed to effect or permit the avoidance, revocation or rescission of any transfers of assets that were made pursuant to the Back-to-Back Arrangement prior to the Rejection Time. Notwithstanding the rejection and termination of the Back-to-Back Arrangement, but subject to the provisions of Sections 3(a) and 4(a) providing for the release of claims with respect to any default or failure to perform that exists as of the date of this Agreement and is within the Knowledge of the Pepco Settling Parties or the Mirant Settling Parties, respectively, (1) Pepco, MPP and New Mirant, as guarantor, shall remain obligated under the Back-to-Back Arrangement with respect to energy, capacity or other services delivered during the period after July 14, 2003, and before the Rejection Time and (2) the Mirant Settling Parties at their own cost and expense may continue to act on behalf of Pepco in seeking recovery from Ohio Edison Company of disputed amounts relating to the dispute regarding whether Ohio Edison Company is required to provide credits against certain reservation charges that Pepco paid from April through December 2005.           (x)          Allocation of Liability Under Assumed Agreements and for Assumed Obligations. Pursuant to Section 365 of the Bankruptcy Code, (1) the Other Mirant Entities (excluding Mirant Mid-Atlantic Services, LLC) reject the Assignment and Assumption Agreement, dated December 19, 2000, by and between Pepco and the Mirant Entities, (2) Old Mirant and the Other Mirant Entities (excluding Mirant Mid-Atlantic Services, LLC) reject the December 11, 2000 Agreement, and (3) Old Mirant rejects the PPA and TPA Assignment and Assumption Agreement, dated December 19, 2000, by and between Old Mirant and MRAEM (collectively the "Assumption/Assignment Agreements"). For purposes of this Agreement, each of MRAEM and Mirant Mid-Atlantic Services, LLC, is deemed to have rejected the Assumption/Assignment Agreements to which it was a party. The parties hereto agree and acknowledge that the Assumption/Assignment Agreements are rejected and terminated as of the Effective Date, provided that neither the rejection nor the termination of the Assumption/Assignment Agreements shall be deemed to effect or permit the avoidance, revocation or rescission of any transfers of assets that were made pursuant to the Assumption/Assignment Agreements. Upon the Effective Date and notwithstanding any provision herein or in the Assumed APSA, the Other Assumed Agreements, or the Assumption/Assignment Agreements to the contrary, (A) only MPP, and New Mirant as guarantor, shall have any obligations under the Assumed APSA, and the other Mirant Settling Parties will have no liability with respect to the Assumed APSA, (B) only a Mirant Settling Party that assumes but does not assign, or to whom is assigned, an Other Assumed Agreement, and New Mirant as guarantor, shall have any obligations under such Other Assumed Agreement or for any Assumed Obligation arising under such Other Assumed Agreement, and the other Mirant Settling Parties will have no liability with respect to such Other Assumed Agreement or for any Assumed Obligation arising under such Other Assumed Agreement, (C) only Mirant Chalk Point, LLC, and New Mirant as guarantor, shall have any obligations under the SMECO Agreements or for any Assumed Obligations arising under the SMECO Agreements, and the other Mirant Settling Parties will have no liability with respect to the SMECO Agreements or for any Assumed Obligations arising under the SMECO 6 [image81.gif] Agreements, and (D) any Assumed Obligation that exists separate from an Other Assumed Agreement or a SMECO Agreement is and will be the sole obligation of MPP and guaranteed by New Mirant.           (b)          Settlement of the Released Claims Against Mirant. Subject to the provisions of Section 5(c):           (i)          Pepco's Class 3 Claim. On the Effective Date, the Mirant Settling Parties shall cause Pepco to receive, on account of (1) the claims released by Pepco on the Effective Date pursuant to Section 3(a), (2) the rejection and termination of the Back-to-Back Arrangement, and (3) the rejection and termination of the Assignment and Assumption Agreement, dated December 19, 2000, by and between Pepco and the Mirant Entities, an allowed Mirant Debtor Class 3 - Unsecured Claim (as defined in the Debtors' Plan) ("Pepco's Class 3 Claim") against Old Mirant in such amount as will result in a total aggregate distribution to Pepco (the "Pepco Distribution"), net of any reasonable actual transaction commissions, fees and expenses incurred by Pepco under the Liquidation Agreement, having a value of Five Hundred Twenty Million Dollars ($520,000,000.00) (subject to adjustment as provided in Sections 5(c) and 5(f), the "Pepco Distribution Amount"). The Pepco Distribution shall be paid in up to Eighteen Million (18,000,000) shares of common stock of New Mirant (the "Pepco Shares") and/or in cash as provided in Sections 2(b)(ii) and 2(b)(iii). Pepco's Class 3 Claim shall not be disallowed, reduced or subordinated for any reason whatsoever, and is accordingly not subject to any offset or reduction for any reason, including, but not limited to, under Section 502(d) of the Bankruptcy Code, and none of the Mirant Settling Parties shall take any action that is inconsistent with the foregoing. Pepco shall not sell, assign, hypothecate or otherwise transfer Pepco's Class 3 Claim without New Mirant's prior written consent.           (ii)          Liquidation of the Pepco Shares. The Pepco Shares will be delivered by New Mirant to Pepco as an initial distribution of 13.5 million shares of common stock of New Mirant (the "First Distribution") followed by a second distribution of shares of common stock of New Mirant (the "Second Distribution") after the liquidation of the First Distribution. New Mirant shall notify Pepco within two (2) business days after the Effective Date of the number of shares to be distributed as part of the Second Distribution, with the number of shares to be determined by New Mirant so as to be reasonably likely to minimize any Shortfall Payment (as hereinafter defined) or Excess Payment (as hereinafter defined) when liquidated and combined with the proceeds from the liquidation of the First Distribution. No later than twenty (20) business days following the Effective Date, Pepco shall negotiate with at least four reputable banks, two of which will be banks identified by New Mirant, to develop a form of agreement for the liquidation of the Pepco Shares (the "Liquidation Agreement") that is acceptable to Pepco and at least two of the banks, at least one of which is a bank identified by New Mirant, and shall provide a copy of the form of Liquidation Agreement to New Mirant, provided that Pepco shall use commercially reasonable efforts to promptly provide New Mirant with drafts of any proposed or suggested Liquidation Agreement as such drafts are exchanged during the course of negotiations between Pepco and a proposed counterparty bank. The Liquidation Agreement shall provide for the Pepco Shares to be sold by Pepco to the counterparty bank or banks as a block trade of the Pepco Shares, with the objective of maximizing the net proceeds received by Pepco from the liquidation of the Pepco Shares. The Liquidation Agreement shall further provide that the 13.5 million shares that comprise the First Distribution shall be transferred from Pepco to the counterparty bank or banks on or before a specified settlement date set forth in the 7 [image81.gif] executed Liquidation Agreement and that the shares comprising the Second Distribution shall be sold from Pepco to a counterparty bank or banks as a forward sale with delivery to occur upon Pepco's receipt of the Second Distribution from New Mirant. Within one business day following New Mirant's receipt of the form of Liquidation Agreement acceptable to Pepco and at least two of the banks, at least one of which is a bank identified by New Mirant, New Mirant shall instruct its transfer agent to cause Pepco to receive the First Distribution as soon as reasonably possible thereafter. As soon as reasonably possible after receiving the First Distribution, Pepco shall obtain competitive bids from the banks that found the form of Liquidation Agreement acceptable, select the bank or banks with whom it will enter into the Liquidation Agreement on the basis of the competitive bids, enter into the Liquidation Agreement and liquidate the First Distribution pursuant to the Liquidation Agreement. Within one business day after Pepco informs New Mirant in writing that Pepco has liquidated the First Distribution and that the bank or banks purchasing the Pepco Shares that comprised the First Distribution have represented to Pepco that it or they can receive the shares comprising the Second Distribution without any such bank holding five percent or more of the common stock of New Mirant, New Mirant shall instruct its transfer agent to cause Pepco to receive the Second Distribution as soon as reasonably possible thereafter, which Second Distribution Pepco shall also liquidate pursuant to the Liquidation Agreement. Prior to Pepco's receipt from Mirant of and after Pepco's liquidation of any Pepco Shares, Pepco shall not directly or indirectly exercise or control the exercise of any voting or other shareholder rights with respect to such Pepco Shares, and, upon Pepco's transfer of the Pepco Shares comprising the First Distribution and the Second Distribution to the bank or banks pursuant to the Liquidation Agreement, Pepco shall not hold or control any shares of common stock of New Mirant.           (iii)          Excess Payment; Shortfall Payment. If the sum of the proceeds that Pepco receives from the bank or banks under the Liquidation Agreement as a result of the liquidation of the Pepco Shares, net of any reasonable actual transaction commissions, fees and expenses incurred by Pepco under the Liquidation Agreement, plus the amount of any cash payments made to Pepco pursuant to Section 5(e) of this Agreement is less than the Pepco Distribution Amount or more than the Pepco Distribution Amount, Pepco shall immediately inform New Mirant of the amount of the difference between such sum and the Pepco Distribution Amount. Within two (2) business days of Pepco's informing New Mirant of the difference between such sum and the Pepco Distribution Amount, (1) if the sum of the net proceeds that Pepco receives from the liquidation of the Pepco Shares plus the amount of any cash payments made to Pepco pursuant to Section 5(e) of this Agreement is greater than the Pepco Distribution Amount, Pepco shall provide New Mirant with an amount of cash equal to the difference between such sum and the Pepco Distribution Amount (the "Excess Payment"), or (2) if the sum of the net proceeds that Pepco receives from the liquidation of the Pepco Shares plus the amount of any cash payments made to Pepco pursuant to Section 5(e) of this Agreement is less than the Pepco Distribution Amount, New Mirant shall provide Pepco with an amount of cash equal to the difference between such sum and the Pepco Distribution Amount (the "Shortfall Payment"), provided that the Shortfall Payment shall be credited with and reduced by such portion of any payment that otherwise would be due to MPP under Section 5(g) as does not exceed the Shortfall Payment. Notwithstanding anything else in this Agreement, in no event shall New Mirant be obligated to distribute in excess of 18 million shares of New Mirant common stock to Pepco on account of Pepco's Class 3 Claim; provided that any shortfall between (A) the sum of the net proceeds received by Pepco from the liquidation of the Pepco Shares actually distributed to Pepco plus the amount of any cash payments made to Pepco pursuant to Section 5(e) of this Agreement and (B) 8 [image81.gif] the Pepco Distribution Amount shall be paid as a Shortfall Payment pursuant this Section 2(b)(iii); and provided further that the total number of Pepco Shares as well as the number of shares of common stock of New Mirant to be distributed as part of the First Distribution and the Second Distribution shall be appropriately adjusted for any stock splits occurring after the date of this Agreement. Pepco and New Mirant may modify the procedures for the liquidation of the Pepco Shares by written agreement. Except for the Pepco Distribution, Pepco shall not be entitled to any distribution under the Debtors' Plan with respect to Pepco's Class 3 Claim.           (iv)          Allocation of the Pepco Distribution Amount. Of the Pepco Distribution Amount, (1) Four Hundred Fifty Million Dollars ($450,000,000.00) shall be allocated to Pepco's damages resulting from Old Mirant's rejection of the Back-to-Back Arrangement, and (2) Seventy Million Dollars ($70,000,000.00) shall be allocated as follows: (A) Fifteen Million Dollars ($15,000,000.00) shall be allocated to claims asserted by Pepco in connection with the Local Area Support Agreement by and between Pepco and Mirant Potomac River, LLC, f/k/a Southern Energy Mirant Potomac River, LLC ("Mirant Potomac"), dated December 19, 2000 (the "LASA"), occasioned by Mirant Potomac's suspension of operations of the Potomac River Plant in 2005, (B) One Hundred Thousand Dollars ($100,000.00) shall be allocated to the Bankruptcy Court's award of that amount to Pepco resulting from Old Mirant's objection to Pepco's receiving a distribution on its allowed claim under the TPA Settlement prior to resolution of claims filed by Old Mirant against Pepco, and (C) the remainder of the $70,000,000.00 shall satisfy the Pre-Petition Claim, claims arising from the rejection of the Assumption/Assignment Agreements, the administrative claim related to execution of certificates in connection with pollution control bonds pursuant to Section 7.12 of the APSA, internal and external legal fees and expenses incurred in connection with the Case, including the legal fees and expenses incurred by SMECO, other additional internal and external expenses incurred in connection with the Case, Pepco's economic costs and losses incurred as a result of and/or in connection with the Case, and all Released Claims Against Mirant not otherwise listed in this Section 2(b)(iv).           (v)          Certain Representations and Warranties by New Mirant. New Mirant represents and warrants to each of the Pepco Settling Parties that:           (1) the Pepco Shares delivered by New Mirant to Pepco pursuant to Section 2(b)(ii) will be duly authorized, validly issued, fully paid and nonassessable and will be free and clear of any liens or encumbrances of any kind except as may be created by the Pepco Settling Parties;           (2) the issuance of the Pepco Shares will not result in the violation of any federal or state law except for such violations as would not, individually or in the aggregate, have a material adverse affect on the business or results of operations of New Mirant and that would not materially hinder or impair the ability of New Mirant to issue the Pepco Shares pursuant hereto; and           (3) the reports filed with or furnished to the Securities and Exchange Commission by New Mirant pursuant to the Securities Exchange Act of 1934, as amended, (A) since January 1, 2006, through the date of this Agreement, did not, as of their respective dates, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (B) subsequent to the date of this Agreement through the date on which the sales of the Pepco Shares by the Pepco Settling Parties pursuant to the Liquidation 9 [image81.gif] Agreement are completed, will not, as of their respective dates, contain any untrue statement of a material fact nor 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 that New Mirant makes the representations and warranties in Sections 2(b)(v)(2) and 2(b)(v)(3) solely for purposes of facilitating Pepco's liquidation of the Pepco Shares pursuant to the Liquidation Agreement, and none of the Pepco Settling Parties may rely upon such representations or warranties for any other purpose or assert any claims arising out of the inaccuracy of such representations and warranties in any other context.           (c)          Dismissal of Actions. As soon as practicable following the Effective Date, each of the Pepco Settling Parties and the Mirant Settling Parties shall cause all pending appeals, adversary actions or other contested matters between or among the parties hereto relating to any claim, demand, action or cause of action released pursuant to Section 3(a) or Section 4(a), including without limitation those listed on Schedule 2(c), to be dismissed with prejudice. The form of each of the dismissals shall be acceptable to the Pepco Settling Parties and the Mirant Settling Parties.           (d)          Stay of Actions. Immediately upon execution of this Settlement Agreement by each of the Pepco Settling Parties and the Mirant Settling Parties, each of the Pepco Settling Parties and the Mirant Settling Parties shall jointly request, pursuant to a Request for Stay substantially in the form attached hereto as Exhibit 2(d), that the United States Court of Appeals for the Fifth Circuit ("Fifth Circuit") stay consideration of the cases captioned Mirant Corp., et al. v. Potomac Electric Power Co., et al., No. 05-10038 (5th Cir.), and Potomac Electric Power Co. v. Mirant Corp., et al., No. 05-10419 (5th Cir.), pending the entry of a Final Order approving this Settlement Agreement, which Final Order will result in the dismissal of those cases pursuant to Section 2(c) herein. If the Fifth Circuit does not enter the requested stay and rules on one or both of the cases identified in this Section 2(d), the Pepco Settling Parties and the Mirant Settling Parties further agree, regardless of the ruling or rulings of the Fifth Circuit, that they shall each be bound by the terms of this Settlement Agreement.           (e)          Future Treatment of this Agreement, the Assumed APSA, and the Other Assumed Agreements. The Mirant Settling Parties and the Pepco Settling Parties agree and acknowledge that:           (i)          the standard of review for any termination of or changes to any portion of the Assumed APSA, the Back-to-Back Arrangement (if assumed pursuant to Section 5(c)), the Other Assumed Agreements or the SMECO Agreements over which the Federal Energy Regulatory Commission ("FERC") has jurisdiction, whether such changes are proposed by Pepco, MPP, any of the other Mirant Settling Parties, a non-party, or FERC acting sua sponte, shall be the "public interest" standard of review set forth in United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956), and Federal Power Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956);           (ii)          the standard of review for any proposed rejection of the Assumed APSA, the Back-to-Back Arrangement (if assumed pursuant to Section 5(c)), the Other Assumed Agreements, or the SMECO Agreements, or any portion of those agreements, by any of the 10 [image81.gif] Pepco Settling Parties or any of the Mirant Settling Parties in bankruptcy proceedings shall be the "balancing of the equities" test suggested in In re Mirant Corp., 378 F.3d 511 (5th Cir. 2004);           (iii)          As a result of the releases provided by the Pepco Settling Parties herein, Mirant Potomac shall have no obligation under the LASA to fund the transmission facilities upgrades being implemented by Pepco as a result of the suspension of operations at the Potomac River Plant that began in August 2005, including the transmission facilities upgrades approved by the DC Public Service Commission in March 2006. Pepco and Mirant Potomac further agree that Pepco shall (1) give Mirant Potomac 30 days' prior written notice of any planned outage of transmission facilities that would cause an Abnormal Condition (as defined in the LASA) to occur, and (2) give Mirant Potomac prompt written notice upon the occurrence of any unplanned outages of such transmission facilities. Pepco shall comply with the notification requirements under the Department of Energy Order EO-05-01; and           (iv)   Notwithstanding anything to the contrary herein (1) if Old Mirant rejects the Back-to-Back Arrangement pursuant to this Agreement, a breach of any of the Assumed APSA, the Back-to-Back Arrangement, the Other Assumed Agreements or the SMECO Agreements, respectively, shall not entitle the non-defaulting party to terminate, suspend performance under, or exercise any other right or remedy under or with respect to any of the other such agreements, and (2) if, however, New Mirant elects to have the Back-to-Back Arrangement assumed and assigned by Old Mirant pursuant to Section 5(c), nothing in this Agreement shall prejudice any claim or argument by the Pepco Settling Parties that the Assumed APSA, the Back-to-Back Arrangement, and the Other Assumed Agreements constitute a single non-severable agreement, the material breach of which would entitle the Pepco Settling Parties to suspend or terminate all performance by the Pepco Settling Parties thereunder, or any defense of the Mirant Settling Parties to any such claim or argument.           3.          Release in Favor of the Mirant Settling Parties. The Pepco Settling Parties execute the following release in favor of the Mirant Settling Parties and their subsidiaries, affiliates, shareholders, officers, directors and employees (collectively, the "Mirant Releasees"):           (a)          Except as otherwise provided in Section 3(b), effective as of the Effective Date and for and in consideration of the terms of this Agreement, the Pepco Settling Parties, acting for themselves and each of their predecessors, assigns, and successors, do hereby compromise, settle and fully release and forever discharge the Mirant Releasees of and from any and all claims, demands, actions, or causes of action which the Pepco Settling Parties had, or may now have, own, or hold for relief, compensation, damages, losses, or remedy of any kind or character, arising from the following: (i) the Pre-Petition Claim (other than claims for contingent liabilities based on the Debtors' potential failure to perform under executory contracts or unexpired leases after the date of this Agreement), (ii) the administrative claim related to execution of certificates in connection with pollution control bonds pursuant to Section 7.12 of the APSA, (iii) the claims asserted by Pepco in connection with the LASA occasioned by the suspension of operations of the Potomac River Plant in 2005, (iv) internal and external legal fees and expenses incurred in connection with the Case, including the legal fees and expenses incurred by SMECO, and other additional internal and external expenses incurred in connection with the Case, (v) the Bankruptcy Court's award of One Hundred Thousand Dollars ($100,000.00) to Pepco resulting from Old Mirant's objection to Pepco's receiving a distribution on its allowed claim under the 11 [image81.gif] TPA Settlement prior to resolution of claims filed by Old Mirant against Pepco, (vi) any other claims filed by the Pepco Settling Parties in the Case and/or in any litigation related to, resulting from or arising out of the Case (other than claims for contingent liabilities based on the Debtors' potential failure to perform under executory contracts or unexpired leases in the future), (vii) claims arising from the rejection of the Assumption/Assignment Agreements, (viii) if the Back-to-Back Arrangement is rejected, claims arising from the rejection of the Back-to-Back Arrangement (other than claims with respect to energy, capacity or other services delivered during periods after July 14, 2003, and before the Rejection Time, which claims shall survive the termination and rejection of the Back-to-Back Arrangement as provided in Section 2(a)(ix)), and (ix) claims arising under the Assumed APSA, the Back-to-Back Arrangement, the Other Assumed Agreements or the SMECO Agreements with respect to any default or failure to perform by any of the Mirant Settling Parties that (1) exists as of the date of this Agreement and (2) is within the Knowledge of the Pepco Settling Parties (such claims, demands, actions or causes of action collectively, and except as otherwise provided in Section 3(b), the "Released Claims Against Mirant").           (b)          Section 3(a) only releases the specific claims, demands, actions, and causes of action described therein, and does not release any other claim, demand, action or cause of action against the Mirant Releasees or any other person or entity. For further clarity, Section 3(a) does not release (i) any Mirant Settling Party that assumes but does not assign, or to whom is assigned, the Assumed APSA, the Back-to-Back Arrangement (if assumed pursuant to Section 5(c)), an Other Assumed Agreement, or a SMECO Agreement from breaches of such agreement occurring after the date of this Agreement, (ii) existing claims under the Assumed APSA, the Back-to-Back Arrangement, an Other Assumed Agreement, or a SMECO Agreement that are not within the Knowledge of the Pepco Settling Parties, (iii) existing obligations under the Assumed APSA, the Back-to-Back Arrangement (if assumed pursuant to Section 5(c)), an Other Assumed Agreement, or a SMECO Agreement for which the Mirant Settling Parties are not in default (or which the Mirant Settling Parties have not failed to perform when due) as of the date of this Agreement or (iv) if the Back-to-Back Arrangement is rejected, obligations arising under the Back-to-Back Arrangement prior to the Rejection Time or with respect to energy, capacity or other services delivered during periods after July 14, 2003, and before the Rejection Time, for which the Mirant Settling Parties are not in default (or which the Mirant Settling Parties have not failed to perform when due) as of the date of this Agreement. The Released Claims Against Mirant shall not include any claim for breach of this Agreement or the New Mirant Guaranty.           (c)          The Pepco Settling Parties represent and warrant that, to their Knowledge and as of the date of this Agreement, one or more of the Pepco Settling Parties is the only owner of the Released Claims Against Mirant, that such Released Claims Against Mirant have not been assigned, encumbered or transferred, and that such Pepco Settling Parties have unqualified authority, by the signatories immediately below, to release the same.           (d)          Each of the Pepco Settling Parties represents and warrants that, to its Knowledge and as of the date of this Agreement, no Affiliate of any Pepco Settling Party, other than another Pepco Settling Party, holds any claims, demands, actions, or causes of action against any Mirant Settling Party or any of their respective Affiliates. 12 [image81.gif]           (e)          The Pepco Settling Parties represent and warrant that, upon the Effective Date, this Agreement effects a full, complete and final settlement, satisfaction and extinguishment of the Released Claims Against Mirant.           (f)          In entering into and executing this Agreement, the Pepco Settling Parties have not relied upon any statement or representation pertaining to this matter made by any representative, agent or employee of the Mirant Releasees, or any person, firm, organization or corporation hereby released, or by any person or persons representing them that is not set forth herein; but the Pepco Settling Parties have consulted with attorneys of their own independent choosing and have determined this settlement is in their best interest.           (g)          The Pepco Settling Parties represent and warrant that, except for the approvals described in Section 5(a): they have full power to execute, deliver and perform this Agreement; this Agreement has been duly authorized, executed and delivered by the Pepco Settling Parties and constitutes the valid and binding obligation of the Pepco Settling Parties; and the execution, delivery and performance of this Agreement by the Pepco Settling Parties requires no consent, approval or authorization by or filing with any third party or governmental authority (other than any of the foregoing which has been obtained or made) and does not and will not (with notice, the passage of time or both) contravene or violate any agreement or commitment binding upon the Pepco Settling Parties or any provision of applicable law.           (h)          Except for such defaults or failures to perform that are Released Claims Against Mirant or postpetition amounts incurred and payable in the ordinary course of business that are not past due, the Pepco Settling Parties represent and warrant that, to their Knowledge and as of the date of this Agreement, the Mirant Settling Parties are not in default of and have not failed to perform (i) any obligation owed to any Pepco Settling Party under the Assumed APSA, (ii) any obligation owed to any Pepco Settling Party under the Back-to-Back Arrangement, (iii) any obligation owed to any Pepco Settling Party under any Other Assumed Agreement or any obligation arising under such Other Assumed Agreement, or (iv) any obligation owed to SMECO under the SMECO Agreements or any obligation arising under the SMECO Agreements. The Pepco Settling Parties further represent and warrant that, to their Knowledge and as of the date of this Agreement, the Pepco Settling Parties are not aware of any claim, defense or other matter that could have been asserted by the Pepco Settling Parties in the Case and/or in any litigation related to, resulting from, or arising out of the Case that was not so asserted.           (i)          Except for such defaults or failures to perform that are Released Claims Against Pepco or postpetition amounts incurred and payable in the ordinary course of business that are not past due, the Pepco Settling Parties represent and warrant that, to their Knowledge and as of the date of this Agreement, the Pepco Settling Parties are not in default of and have not failed to perform (i) any material obligation owed to any Mirant Settling Party under the Assumed APSA, (ii) any material obligation owed to any Mirant Settling Party under the Back-to-Back Arrangement, (iii) any material obligation owed to any Mirant Settling Party under any Other Assumed Agreement or any material obligation arising under such Other Assumed Agreement, or (iv) any material obligation owed to any Mirant Settling Party under the SMECO Agreements or any material obligation arising under the SMECO Agreements. The Pepco Settling Parties further represent and warrant that, to their Knowledge and as of the date of this Agreement, the Pepco Settling Parties are not aware of any claim, defense or other matter that could have been 13 [image81.gif] asserted by the Mirant Settling Parties in the Case and/or in any litigation related to, resulting from, or arising out of the Case that was not so asserted.           (j)          Based on the Mirant Settling Parties' representation that Old Mirant, MRAEM, MRAREM, Mirant Mid-Atlantic Services, LLC, the Plan Trustees, the MC Plan Trust, and the estate of the MC Plan Trust (i) will not be party to or performing the Assumed APSA, the Back-to-Back Arrangement (if assumed pursuant to Section 5(c)), any of the SMECO Agreements, or any of the Other Assumed Agreements, (ii) are not affiliated with New Mirant and (iii) have been or at some point in the future will be dissolved (or, in the case of the Plan Trustees, have their trusteeships terminated), effective as of the Effective Date and for and in consideration of the terms of this Agreement, the Pepco Settling Parties, acting for themselves and each of their predecessors, assigns, and successors, do hereby compromise, settle and fully release and forever discharge Old Mirant, MRAEM, MRAREM, Mirant Mid-Atlantic Services, LLC, the Plan Trustees, the MC Plan Trust, and the estate of the MC Plan Trust of and from any and all claims, demands, actions, or causes of action which the Pepco Settling Parties had, or may now have, own, or hold for relief, compensation, damages, losses, or remedy of any kind or character against those parties. This release shall not affect in any way the treatment of Pepco's Class 3 Claim in accordance with the other provisions of this Agreement or the obligations of the Mirant Settling Parties under the other provisions of this Agreement.           4.          Release in Favor of Pepco. The Mirant Settling Parties execute the following release in favor of Pepco and its subsidiaries, affiliates, shareholders, officers, directors and employees (collectively, the "Pepco Releasees"):           (a)          Except as otherwise provided in Section 4(b), effective as of the Effective Date and for and in consideration of the terms of this Agreement, the Mirant Settling Parties, acting for themselves and each of their predecessors, assigns, and successors, do hereby compromise, settle and fully release and forever discharge the Pepco Releasees of and from any and all claims, demands, actions, or causes of action which the Mirant Settling Parties had, or may now have, own, or hold for relief, compensation, damages, losses, or remedy of any kind or character, arising from or related to any of the following: (i) any claim, defense or other matter that was asserted in the Case and/or in any litigation related to, resulting from, or arising out of the Case (other than claims for contingent liabilities based on any of the Pepco Settling Parties' potential failure to perform under executory contracts or unexpired leases after the date of this Agreement), including without limitation the cases styled Mirant Corporation, et al. v. Potomac Electric Power Company, Civil Action No. 4:03-CV-00944 (N.D. Tex.); Mirant Corporation, Mirant Peaker, LLC, and Mirant Chalk Point, LLC v. Southern Maryland Electric Cooperative, Inc., and Potomac Electric Power Company, Adv. Case No. 04-4073 (Bankr. N.D. Tex.); Mirant Corporation, et al. v. Potomac Electric Power Company, Civil Action No. 4:05-CV-00095 (N.D. Tex.); Mirant Corporation v. Potomac Electric Power Company, et al., Civil Action No. 4:05-CV-00606 (N.D. Tex.); Mirant Corporation et al. v. Southern Maryland Electric Cooperative, Inc., and Potomac Electric Power Company, Adv. Case No. 05-04258 (Bankr. N.D. Tex.); Mirant Corporation et al. v. Potomac Electric Power Company, Adv. Case No. 05-04259 (Bankr. N.D. Tex.); and Mirant Corporation, et al. v. Potomac Electric Power Company, Civil Action No. 4:05-CV-00810 (N.D. Tex.), (ii) any right to avoid or recover under Sections 544, 545, 547, 548, 549, 550, 551 and/or 553 of the Bankruptcy Code, or under any similar state statutes, any payments received by or on behalf of Pepco or SMECO, respectively, prior to the Effective Date, and (iii) claims arising under the Assumed APSA, the Back-to-Back 14 [image81.gif] Arrangement, the Other Assumed Agreements or the SMECO Agreements with respect to any default or failure to perform by any of the Pepco Settling Parties that (1) exists as of the date of this Agreement and (2) is within the Knowledge of the Mirant Settling Parties (such claims, demands, actions or causes of action collectively, and except as otherwise provided in Section 4(b), the "Released Claims Against Pepco").           (b)          Section 4(a) only releases the specific claims, demands, actions, and causes of action described therein, and does not release any other claim, demand, action or cause of action against the Pepco Releasees or any other person or entity. For further clarity, Section 4(a) does not release (i) any Pepco Settling Party from breaches of the Assumed APSA, the Back-to-Back Arrangement (if assumed pursuant to Section 5(c)), or an Other Assumed Agreement occurring after the date of this Agreement, (ii) existing claims under the Assumed APSA, the Back-to-Back Arrangement, or an Other Assumed Agreement that are not within the Knowledge of the Mirant Settling Parties, (iii) existing obligations under the Assumed APSA, the Back-to-Back Arrangement (if assumed pursuant to Section 5(c)), or an Other Assumed Agreement for which the Pepco Settling Parties are not in default (or which the Pepco Settling Parties have not failed to perform when due) as of the date of this Agreement or (iv) if the Back-to-Back Arrangement is rejected, obligations arising under the Back-to-Back Arrangement prior to the Rejection Time or with respect to energy, capacity or other services delivered during periods after July 14, 2003, and before the Rejection Time for which the Pepco Settling Parties are not in default (or which the Pepco Settling Parties have not failed to perform when due) as of the date of this Agreement, which obligations shall survive the rejection and termination of the Back-to-Back Arrangement as provided in Section 2(a)(ix), including Pepco's obligation to remit to MPP any payments that Pepco may recover from Ohio Edison Company upon resolution of the dispute regarding whether Ohio Edison Company is required to provide credits against certain reservation charges that Pepco paid from April through December 2005. The Released Claims Against Pepco shall not include any claim for breach of this Agreement.           (c)          The Mirant Settling Parties represent and warrant that, to their Knowledge and as of the date of this Agreement, one or more of the Mirant Settling Parties is the only owner of the Released Claims Against Pepco, that such Released Claims Against Pepco have not been assigned, encumbered or transferred, and that the Mirant Settling Parties have unqualified authority, by the signatories immediately below, to release the same.           (d)          Each of the Mirant Settling Parties represents and warrants that, to its Knowledge and as of the date of this Agreement, no Affiliate of any Mirant Settling Party, other than another Mirant Settling Party, holds any claims, demands, actions, or causes of action against any Pepco Settling Party or any of their respective Affiliates.           (e)          The Mirant Settling Parties represent and warrant that, upon the Effective Date, this Agreement effects a full, complete and final settlement, satisfaction and extinguishment of the Released Claims Against Pepco.           (f)          In entering into and executing this Agreement, the Mirant Settling Parties have not relied upon any statement or representation pertaining to this matter made by any representative, agent or employee of the Pepco Releasees, or any person, firm, organization or corporation hereby released, or by any person or persons representing them that is not set forth 15 [image81.gif] herein; but the Mirant Settling Parties have consulted with attorneys of their own independent choosing and have determined this settlement is in their best interest.           (g)          The Mirant Settling Parties represent and warrant that, except for the approvals described in Section 5(a): they have full power to execute, deliver and perform this Agreement; this Agreement has been duly authorized, executed and delivered by or on behalf of the Mirant Settling Parties and constitutes the valid and binding obligation of the Mirant Settling Parties; and the execution, delivery and performance of this Agreement by or on behalf of the Mirant Settling Parties requires no consent, approval or authorization by or filing with any third party or governmental authority (other than any of the foregoing which has been obtained or made) and does not and will not (with notice, the passage of time or both) contravene or violate any agreement or commitment binding upon the Mirant Settling Parties or any provision of applicable law.           (h)          Except for such defaults or failures to perform that are Released Claims Against Pepco or postpetition amounts incurred and payable in the ordinary course of business that are not past due, the Mirant Settling Parties represent and warrant that, to their Knowledge and as of the date of this Agreement, the Pepco Settling Parties are not in default of and have not failed to perform (i) any obligation owed to any Mirant Settling Party under the Assumed APSA, (ii) any obligation owed to any Mirant Settling Party under the Back-to-Back Arrangement, (iii) any obligation owed to any Mirant Settling Party under any Other Assumed Agreement or any obligation arising under such Other Assumed Agreement, or (iv) any obligation owed to any Mirant Settling Party under the SMECO Agreements or any obligation arising under the SMECO Agreements. The Mirant Settling Parties further represent and warrant that, to their Knowledge and as of the date of this Agreement, the Mirant Settling Parties are not aware of any claim, defense or other matter that could have been asserted by the Mirant Settling Parties in the Case and/or in any litigation related to, resulting from, or arising out of the Case that was not so asserted.           (i)          Except for such defaults or failures to perform that are Released Claims Against Mirant or postpetition amounts incurred and payable in the ordinary course of business that are not past due, the Mirant Settling Parties represent and warrant that, to their Knowledge and as of the date of this Agreement, the Mirant Settling Parties are not in default of and have not failed to perform (i) any material obligation owed to any Pepco Settling Party under the APSA, (ii) any material obligation owed to any Pepco Settling Party under the Back-to-Back Arrangement, (iii) any material obligation owed to any Pepco Settling Party under any Other Assumed Agreement or any material obligation arising under such Other Assumed Agreement, or (iv) any material obligation owed to SMECO under the SMECO Agreements or any material obligation arising under the SMECO Agreements. The Mirant Settling Parties further represent and warrant that, to their Knowledge and as of the date of this Agreement, the Mirant Settling Parties are not aware of any claim, defense or other matter that could have been asserted by the Pepco Settling Parties in the Case and/or in any litigation related to, resulting from, or arising out of the Case that was not so asserted.           (j)          Effective as of the Effective Date and for and in consideration of the terms of this Agreement, Old Mirant, the Plan Trustees, the MC Plan Trust, and the estate of the MC Plan Trust do hereby compromise, settle and fully release and forever discharge the Pepco Settling Parties of and from any and all claims, demands, actions, or causes of action which Old Mirant, 16 [image81.gif] the Plan Trustees, the MC Plan Trust, and the estate of the MC Plan Trust may now have, own, or hold for relief, compensation, damages, losses, or remedy of any kind or character against the Pepco Settling Parties. This release shall not affect in any way the treatment of Pepco's Class 3 Claim in accordance with the other provisions of this Agreement or the obligations of the Pepco Settling Parties under the other provisions of this Agreement.           5.          Conditions Precedent to the Effective Date; Efforts To Cause the Effective Date to Occur; Share Price Trigger; Performance Pending Appeal.           (a)          The "Effective Date" means and shall be the date as of which, and shall be conditioned upon, each of the following having occurred: the Applicable Court shall have entered an order or orders pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure approving this Agreement, all Exhibits and Schedules attached hereto, the SMECO Settlement, and all transactions contemplated hereby and thereby, and such order or orders shall not materially modify or amend the transactions contemplated by this Agreement and the Exhibits and Schedules hereto or the SMECO Settlement (such orders, collectively, the "Approval Order"), each of which Approval Order, as proposed to the Applicable Court and entered by the Applicable Court, shall be satisfactory to Pepco and New Mirant and entered pursuant to a motion acceptable to Pepco and New Mirant and shall have become a Final Order.           (b)          Each of the Mirant Settling Parties and the Pepco Settling Parties shall use commercially reasonable efforts to cause the Effective Date to occur promptly, including using commercially reasonable efforts to obtain, on an expedited basis, approval of this Agreement pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure by the Applicable Court. In addition, each of the Pepco Settling Parties and the Mirant Settling Parties shall support this Agreement in any communications, whether oral or written, as to the matters that are the subject of this Agreement with any court of competent jurisdiction, FERC, the Public Service Commission of Maryland, the Public Service Commission of the District of Columbia, the People's Counsel for the State of Maryland, the People's Counsel for the District of Columbia, and all other applicable regulatory agencies.           (c)         Notwithstanding anything herein to the contrary, prior to the Election Termination Date, if a Share Price Trigger occurs, New Mirant may elect, by giving Pepco written notice by the tenth business day after the first occurrence of a Share Price Trigger, that the Back-to-Back Arrangement not be rejected and terminated. If New Mirant so elects, then (i) Section 2(a)(ix) will be void and of no effect, (ii) pursuant to Section 365 of the Bankruptcy Code and Section 14.5 of the Debtors' Plan, Old Mirant will assume the Back-to-Back Arrangement and assign the Back-to-Back Arrangement to MPP effective as of the Effective Date, (iii) MPP will accept the assignment of the Back-to-Back Arrangement, cure all defaults under the Back-to-Back Arrangement (other than defaults that constitute Released Claims Against Mirant) and agree to discharge and otherwise perform when due, without recourse against Pepco, all obligations and liabilities due to or for the benefit of Pepco thereunder (other than obligations that constitute Released Claims Against Mirant), (iv) New Mirant shall unconditionally guaranty MPP's performance of all obligations due to or for the benefit of Pepco under the Back-to-Back Arrangement pursuant to, and on or prior to the Effective Date shall enter into, a guaranty agreement substantially in the form attached hereto as Exhibit 2(a)(iv), (v) only MPP, and New Mirant as guarantor, shall have any obligations under the Back-to-Back Arrangement, and the other Mirant Settling Parties will have no liability with respect to the Back-to-Back 17 [image81.gif] Arrangement, (vi) the Pepco Distribution Amount shall be reduced to Seventy Million Dollars ($70,000,000), (vii) only the portion of the Pepco Distribution Amount allocable to the Pre-Petition Claim and any interest payable pursuant to Section 5(f) shall be paid in Pepco Shares and the balance of the Pepco Distribution Amount shall be paid in cash, (viii) the provisions of Sections 2(b)(ii) and 2(b)(iii) shall apply to the liquidation of the Pepco Shares distributed on account of Pepco's Class 3 Claim, provided that there shall be only a single distribution of Pepco Shares, in an amount reasonably anticipated to produce aggregate proceeds equal to the Pepco Distribution Amount when liquidated and combined with the cash payment, unless the Pepco Shares to be distributed on account of the Pepco Distribution would equal or exceed a five percent (5%) voting interest in New Mirant, in which case there shall be two distributions of Pepco Shares as provided in Section 2(b)(ii), (ix) the Pepco Distribution Amount shall be allocated to claims asserted by Pepco in accordance with Section 2(b)(iv)(2), (x) except for the Pepco Distribution, as modified pursuant to this Section 5(c), Pepco shall not be entitled to any distribution under the Debtors' Plan with respect to Pepco's Class 3 Claim and (xi) in all other respects, this Agreement shall remain in full force and effect. If New Mirant does not timely elect that the Back-to-Back Arrangement not be rejected and terminated as provided in the first sentence of this Section 5(c) following the first occurrence of a Share Price Trigger, then Mirant shall be deemed to have waived any right to make such election and this Section 5(c) will be void and of no effect.           (d)          If the Approval Order is appealed, the Mirant Settling Parties shall continue to perform all of their obligations under the APSA, the Back-to-Back Arrangement, the Other Assumed Agreements, the SMECO Agreements, and the Assumption/Assignment Agreements in accordance with the provisions of Sections 14.5 and 14.8 of the Debtors' Plan until the Approval Order becomes a Final Order or there is a Final Order allowing the Mirant Settling Parties to cease performance of those obligations.           (e)          If the Approval Order is appealed, New Mirant shall pay to Pepco the sum of Seventy Million Dollars ($70,000,000) on account of the Pepco Distribution, which payment (i) shall be made on the third business day after the ninth day after the entry of the Approval Order if the Approval Order is not stayed pending appeal, or within five (5) business days after the expiration of the stay if the Approval Order is stayed pending appeal, and (ii) shall be allocated to claims asserted by Pepco in accordance with Section 2(b)(iv)(2) (the "Advance Payment"). If the Approval Order becomes a Final Order, (1) New Mirant shall distribute Pepco Shares to Pepco in accordance with the provisions of Section 2(b)(ii) as if the Advance Payment had not been made, (2) Pepco shall liquidate the Pepco Shares in accordance with the provisions of Section 2(b)(ii), and (iii) the Advance Payment shall be included as a cash payment made to Pepco on account of the Pepco Distribution in the calculation of any Shortfall Payment or Excess Payment.           (f)          If (i) the Approval Order is appealed and is stayed pending appeal and (ii) the Advance Payment is not made by the third business day after the ninth day after entry of the Approval Order, the Pepco Distribution Amount shall be increased by an amount equal to four percent (4%) per annum simple interest on $70,000,000.00, calculated from the date of entry of the Approval Order to the date of Pepco's receipt of $70,000,000 pursuant to Section 5(e).           (g)          Further, if (i) the Approval Order becomes a Final Order, either after an appeal or otherwise and (ii) the Back-to-Back Arrangement is not assumed pursuant to Section 5(c), 18 [image81.gif] Pepco, within two (2) business days after receiving the full consideration due to Pepco under this Agreement on account of the Pepco Distribution, shall pay MPP an amount equal to the aggregate amount of any payments made by the Mirant Settling Parties on account of the Back-to-Back Arrangement for energy, capacity or other services delivered after May 31, 2006, less any portion of such amount credited against the Shortfall Payment pursuant to Section 2(b)(iii)(2).           6.          Previously Settled Claims and Other Agreements. Nothing in this Agreement affects previously settled claims between the Pepco Settling Parties and their subsidiaries and affiliates and the Mirant Settling Parties and their respective subsidiaries and affiliates, including, but not limited to, (a) the Amended Settlement Agreement and Release among Pepco, MRAEM, and Old Mirant, dated as of October 24, 2003, and approved by the Bankruptcy Court on November 19, 2003, or any agreement entered into in connection therewith or contemplated thereby (the "TPA Settlement"), (b) the Settlement Agreement and Release among Pepco and Old Mirant, dated as of October 14, 2005, and approved by the Bankruptcy Court on November 23, 2005, or any agreement entered into in connection therewith or contemplated thereby, (c) the Stipulation for Allowance of General Unsecured Claim of Substation Test Company, dated June 15, 2005, or any agreement entered into in connection therewith or contemplated thereby, and (d) the Stipulation for Allowance of General Unsecured Claim of W.A. Chester, LLC, dated July 15, 2005, or any agreement entered into in connection therewith or contemplated thereby. Further, nothing in this Agreement modifies other executory contracts or unexpired leases that were not executed in connection with or as a result of the APSA, including, but not limited to, any agreements between Potomac Energy Services, Inc. and a Mirant Settling Party or an Affiliate of a Mirant Settling Party, provided that each such other executory contract or unexpired lease shall be assumed, or assumed and assigned, and performed by the Mirant Settling Party identified next to the name of such agreement in Schedule 2(a)(v) as the Mirant Settling Party that will remain liable for the obligations under the agreement, as specified in Section 2(a)(v)           7.          Termination.           (a)          Notwithstanding anything in this Agreement to the contrary, this Agreement may be terminated (or shall terminate, in the case of clause (iii) below) as follows:   (i)          at any time prior to entry of the Approval Order, by the mutual written consent of each of Pepco and New Mirant;   (ii)          by Pepco, if on or before the fourteenth day after the Pepco Settling Parties' execution of this Agreement, Pepco gives New Mirant written notice that it believes, in its sole discretion, that any applicable regulatory agency opposes Pepco's consummating the transactions contemplated by this Agreement and/or the agreements to be entered into pursuant hereto;   (iii)          prior to the Effective Date, automatically if any material term or provision of this Agreement is found by a final, non-appealable judicial order in any proceeding in any jurisdiction to be invalid or unenforceable; 19 [image81.gif]   (iv)          prior to the Effective Date, by Pepco, in the event of any material breach by any of the Mirant Settling Parties of any of their covenants, representations or warranties contained herein and the failure of such Mirant Settling Party to cure such breach within five days after receipt of written notice from Pepco requesting such breach to be cured; or   (v)          prior to the Effective Date, by New Mirant, in the event of any material breach by any of the Pepco Settling Parties of any of their covenants, representations or warranties contained herein and the failure of such Pepco Settling Party to cure such breach within five days after receipt of written notice from New Mirant requesting such breach to be cured.           (b)    If either Pepco or New Mirant desires to terminate this Agreement under Section 7(a), the party so desiring such termination shall give written notice of such termination to each of the other parties to this Agreement.           (c) In the event that this Agreement shall be terminated pursuant to this Section 7, Pepco shall repay any Advance Payment made to Pepco, with simple interest at four percent (4%) per annum from the date the Advance Payment was paid to the date of repayment, within five (5) business days of the termination, and all other obligations under this Agreement shall be terminated and of no further force or effect without further action by any party hereto and without liability of any party hereto to the others, provided that (i) the foregoing shall not relieve any party in breach of this Agreement at the time of such termination from liability in respect of such breach, and (ii) the following Sections shall survive termination of this Agreement: Section 6 (excluding the the proviso in the last sentence thereof), this Section 7(c), Section 8, Section 10(b), Section 10(c) and Section 10(g) through 10(i). In addition, upon termination of this Agreement, no rights or obligations, nor any claims or defenses, of the Pepco Settling Parties or the Mirant Settling Parties existing prior to the date of this Agreement, including, without limitation, the obligations of any of the Mirant Settling Parties or the Pepco Settling Parties under the APSA, the Back-to-Back Arrangement, the Other Assumed Agreements, or the SMECO Agreements, will be prejudiced, compromised, discharged or otherwise affected in any way, and all shall exist as if this Agreement had never been executed, and, in such event, neither this Agreement nor any negotiations or writings in connection with this Agreement shall in any way be construed as or deemed to be evidence of or an admission on behalf of any party hereto regarding any claim or right that such party may have against another party hereto.           8.          Indemnification.           (a)          In addition to any other rights and remedies the Mirant Releasees may have at law or by agreement, Pepco shall hold harmless and indemnify the Mirant Releasees from and against, and shall compensate and reimburse the Mirant Releasees on demand for, any and all loss, damage, injury, claim, demand, settlement, judgment, award, fine, penalty, fee (including any reasonable legal fee, reasonable expert fee, reasonable accounting fee or reasonable advisory fee), charge, cost (including any reasonable cost of investigation) and/or expense, which is suffered or incurred by any of the Mirant Releasees or to which any of the Mirant Releasees may otherwise become subject at any time and which arises directly from or directly as a result of: (i) the breach of any representation or warranty made by the Pepco Settling Parties in this Agreement, or (ii) the breach of any covenant or agreement of the Pepco Settling Parties contained in this Agreement; provided that nothing in this Section 8(a) shall be construed as imposing upon Pepco any obligation to hold harmless or indemnify the Mirant Releasees with 20 [image81.gif] respect to rights or obligations arising under the APSA, the Back-to-Back Arrangement, an Other Assumed Agreement or a SMECO Agreement.           (b)          In addition to any other rights and remedies the Pepco Releasees may have at law or by agreement, New Mirant shall hold harmless and indemnify the Pepco Releasees from and against, and shall compensate and reimburse the Pepco Releasees on demand for, any and all loss, damage, injury, claim, demand, settlement, judgment, award, fine, penalty, fee (including any reasonable legal fee, reasonable expert fee, reasonable accounting fee or reasonable advisory fee), charge, cost (including any reasonable cost of investigation), and/or expense, which is suffered or incurred by any of the Pepco Releasees or to which any of the Pepco Releasees may otherwise become subject at any time and which arises directly from or directly as a result of: (i) the breach of any representation or warranty made by any of the Mirant Settling Parties in this Agreement or the New Mirant Guaranty, or (ii) the breach of any covenant or agreement of the Mirant Settling Parties contained in this Agreement or the New Mirant Guaranty; provided that nothing in this Section 8(b) shall be construed as imposing upon New Mirant any obligation to hold harmless or indemnify the Pepco Releasees with respect to rights or obligations arising under the APSA, the Back-to-Back Arrangement, an Other Assumed Agreement or a SMECO Agreement.           9.          Relationship to Debtors' Plan. This Agreement is intended to resolve disputes existing between the parties regarding the assumption or rejection of the APSA, the Back-to-Back Arrangement, and certain other agreements. These disputes resulted in the inclusion of Sections 14.5 and 14.8 in the Debtors' Plan. The parties intend this Agreement to resolve fully those disputes, and, therefore, as of the Effective Date, all portions of the Debtors' Plan and the Bankruptcy Court's December 9, 2005, order confirming the Debtors' Plan relating to or concerning the matters addressed by this Agreement, including Sections 14.5 and 14.8 of the Debtors' Plan, are moot and no longer have any application. To the extent that there are any inconsistencies or discrepancies between this Agreement and the Debtors' Plan, or the Bankruptcy Court order approving the Debtors' Plan, the terms of this Agreement shall control.           10.          Miscellaneous.           (a)          This Agreement may be amended, assigned, modified or supplemented only by written agreement executed by the Mirant Settling Parties and the Pepco Settling Parties.           (b)          All disputes relating to or arising out of this Agreement shall be governed by the laws of the District of Columbia, excluding its choice-of-law rules. The United States District Court for the District of Columbia shall have jurisdiction over any suit, action, or other proceeding pertaining to or arising out of the terms and application of this Agreement or, if any such suit, action or proceeding may not be brought in the United States District Court for the District of Columbia for jurisdictional reasons, the Superior Court for the District of Columbia shall have jurisdiction over any such suit, action or proceeding.           (c)          Except as expressly provided herein, this Agreement shall not create any third party beneficiary rights in any person and shall not confer any rights or remedies upon any person other than the parties and their respective successors and permitted assigns. 21 [image81.gif]            (d)          Except as expressly set forth herein, none of the provisions of the Assumed APSA, the Back-to-Back Arrangement (if assumed pursuant to Section 5(c)), any Other Assumed Agreement or any SMECO Agreement, including, without limitation, the Assumed Obligations of New Mirant, MPP, or each Mirant Settling Party that is a party to the Assumed APSA, an Other Assumed Agreement or a SMECO Agreement and the Retained Liabilities of Pepco as set forth in the Assumed APSA, shall be deemed to be amended, modified or otherwise changed by this Agreement or the transactions contemplated hereby.           (e)          This Agreement (including the Schedules and Exhibits hereto) constitutes the entire agreement and understanding of the parties with respect to the settlement and releases contemplated herein and supersedes all prior agreements and understandings, written or oral, between the parties with respect to such settlement and releases.           (f)          The recitals in this Agreement constitute an integral part of the agreement of the parties and are legally binding to the same extent as if the same were set forth in a section of this Agreement.           (g)          This Agreement uses the words "herein," "hereof," and "hereunder" and words of similar import to refer to this Agreement as a whole and not to any provision of this Agreement, and the words "Section," "Schedule," and "Exhibit" refer to Sections of, and Schedules and Exhibits to, this Agreement unless otherwise specified.           (h)          Whenever the context so requires, the singular number includes the plural and vice versa, and a reference to one gender includes the other gender and the neuter.           (i)          Except where the context otherwise requires, the word "including" (and, with correlative meaning, the word "include") means including without limiting the generality of any description preceding that word, and the words "shall" and "will" are used interchangeably and have the same meaning.           (j)          All references to "$" or "dollars" are to U.S. dollars.           (k)          All notices required or permitted under this Agreement must be in writing and will be deemed to be delivered and received (i) when actually received by the party to whom notice is sent if personally delivered, (ii) when sent by facsimile (with electronic confirmation of successful transmission) before 5:00 p.m. Eastern Prevailing Time on a business day with a copy of such facsimile sent to the recipient by reputable overnight courier service (charges prepaid) on the same day, or (iii) one business day after being sent to the recipient by reputable overnight courier service (charges prepaid), in each case addressed to the appropriate party or parties, at the address of such party or parties set forth below (or at such other address as such party may designate by written notice to all other parties in accordance with this Section 10(k)):           If to Pepco or any of the other Pepco Settling Parties:   Pepco Holdings, Inc. 701 Ninth Street NW Suite 1100 Washington, DC 20068 Attn: General Counsel 22 [image81.gif]   With a copy, which shall not constitute notice, to:   Jonathan P. Guy Orrick, Herrington & Sutcliffe LLP 3050 K Street, NW Washington, DC 20007   If to New Mirant or any of the other Mirant Settling Parties:   Mirant Corporation 1155 Perimeter Center West Suite 100 Atlanta, GA 30338-5416 Attn: General Counsel   With a copy, which shall not constitute notice, to   Craig Averch White & Case LLP 633 W. 5th Street, Suite 1900 Los Angeles, CA 90071-2007           (l)          The claims and distribution rights provided for in this Agreement shall not be subject to reconsideration under Section 502(j) of the Bankruptcy Code, Rule 3008 of the Federal Rules of Bankruptcy Procedure or any other applicable law. Except as provided in the Agreement, any and all Released Claims Against Mirant are expunged and disallowed in their entirety and shall not be asserted in any forum, and such disallowed claims shall not be subject to reconsideration under Section 502(j) of the Bankruptcy Code, Rule 3008 of the Federal Rules of Bankruptcy Procedure or any other applicable law.           (m)          This Agreement may be executed in any number of counterparts, each of which, when executed, will be deemed an original and all of which together will be deemed to be one and the same instrument. This Agreement may be executed by a signature delivered electronically by facsimile or by the use of Adobe portable document format, which shall be deemed the same as an original signature.           (n)          From time to time after the date of this Agreement until the completion of the transactions contemplated by this Agreement, each of the parties hereto (other than Old Mirant and the MC Plan Trust) shall execute and deliver such documents and provide such assurances and take such actions, as any other party may reasonably request in order to consummate or more effectively to consummate the transactions contemplated hereby, including without limitation the entry by Pepco into the Liquidation Agreement and the consummation of the transactions contemplated thereby.           (o)          Each of the Pepco Settling Parties and the Mirant Settling Parties acknowledges that (i) this Agreement is the result of negotiations among the parties, and has been reviewed by 23 [image81.gif] each party and its counsel, and (ii) all parties contributed to the drafting of this Agreement. Accordingly, this Agreement shall be deemed the product of each party, and no ambiguity shall be construed in favor of or against any party on the basis that it was the drafter of the Agreement.           (p)          This Agreement is a settlement of disputed claims and other matters. In executing this Agreement, no party is admitting any liability with respect to any of the claims against it released in this Agreement or any other matter addressed herein. Neither this Agreement, nor any act performed or document executed pursuant to this Agreement is or may be deemed to be, or may be used by a Mirant Settling Party or a Pepco Settling Party as, an admission of, or evidence of, the validity of any released claim.           (q)          This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any Mirant Settling Party without the prior written consent of Pepco or by any Pepco Settling Party without the prior written consent of New Mirant.                                     24 [image81.gif]           IN WITNESS WHEREOF, the Mirant Settling Parties and the Pepco Settling Parties have caused this Settlement Agreement and Release to be signed by their respective duly authorized officers or representatives as of the date set forth above.   POTOMAC ELECTRIC POWER COMPANY   By /s/ KIRK J. EMGE                  Name:  Kirk J. Emge     Title:  General Counsel   CONECTIV ENERGY SUPPLY, INC.   By /s/ W. H. SPENCE                 Name:  W. H. Spence     Title:  President   PEPCO ENERGY SERVICES, INC.   By /s/ JOHN HUFFMAN            Name:  John Huffman     Title:  COO   PEPCO GAS SERVICES, INC.   By /s/ JOHN HUFFMAN            Name:  John Huffman     Title:  COO   PEPCO HOLDINGS, INC.   By /s/ KIRK J. EMGE                  Name:  Kirk J. Emge     Title:  Vice President         25 [image81.gif]   POTOMAC CAPITAL INVESTMENT CORPORATION   By /s/ KEVIN McGOWAN               Name:  Kevin McGowan     Title:  President & CEO   MIRANT CORPORATION   By /s/ HUGH DAVENPORT              Name:  Hugh Davenport     Title:  Senior Vice President   MIRANT POWER PURCHASE, LLC   By /s/ ROBERT DRISCOLL               Name:  Robert Driscoll     Title:  Chief Operating Officer   MC 2005, LLC   By MC PLAN TRUST, SOLE MEMBER /s/ JOSEPH A. PARDO, CO-TRUSTEE   Name:  Joseph A. Pardo     Title:  Co-Trustee   MIRANT MID-ATLANTIC, LLC   By /s/ ROBERT DRISCOLL              Name:  Robert Driscoll     Title:  President and Chief Executive Officer   MIRANT POTOMAC RIVER, LLC   By /s/ ROBERT DRISCOLL              Name:  Robert Driscoll     Title:  President and Chief Executive Officer       26 [image81.gif]   MIRANT CHALK POINT, LLC   By /s/ ROBERT DRISCOLL              Name:  Robert Driscoll     Title:  President and Chief Executive Officer   MIRANT PINEY POINT, LLC   By /s/ ROBERT DRISCOLL              Name:  Robert Driscoll     Title:  President and Chief Executive Officer   MIRANT MD ASH MANAGEMENT, LLC   By /s/ ROBERT DRISCOLL              Name:  Robert Driscoll     Title:  President and Chief Executive Officer   MIRANT ENERGY TRADING, LLC   By /s/ ROBERT DRISCOLL              Name:  Robert Driscoll     Title:  Chief Operating Officer   MIRANT SERVICES, LLC   By /s/ HUGH DAVENPORT              Name:  Hugh Davenport     Title:  Vice President   " MC PLAN TRUST"   By /s/ JOSEPH A. PARDO                Name:  Joseph A. Pardo     Title:  Co-Trustee       27 [image81.gif]   LIST OF SCHEDULES AND EXHIBITS Schedules   Schedule 1 Definitions Schedule 2(a)(v) Other Assumed Agreements Schedule 2(c) Adversary Proceedings and Contested Matters Exhibits Exhibit 2(a)(iv) Form of New Mirant Guaranty Exhibit 2(d) Form of Request for Stay                                 [image81.gif] Schedule 1           When used in the Agreement, the following terms shall have the following meanings.           1.          "Advance Payment" has the meaning set forth in Section 5(e).           2.          "Affiliate" means, with respect to any Person, all Persons that would fall within the definition assigned to such term in Section 101(2) of the Bankruptcy Code, if such Person was a debtor in a case under the Bankruptcy Code.           3.          "Agreement" has the meaning set forth in the first paragraph.           4.          "Ancillary Agreements" has the meaning set forth for such term in the APSA.           5.          "Applicable Court" means such court of competent jurisdiction, as determined, designated or agreed to by the United States District Court for the Northern District of Texas.           6.          "Approval Order" has the meaning set forth in Section 5(a).           7.          "APSA" has the meaning set forth in the first Whereas provision.           8.          "Assumed APSA" has the meaning set forth in Section 2(a)(i).           9.          "Assumed Obligations" has the meaning set forth for such term in the APSA.           10.          "Auctioned Assets" has the meaning set forth for such term in the APSA.           11.          "Assumption/Assignment Agreements" has the meaning set forth for such term in Section 2(a)(x).           12.          "Back-to-Back Arrangement" has the meaning set forth in the second Whereas provision.           13.          "Bankruptcy Code" means title 11 of the United States Code.           14.          "Bankruptcy Court" has the meaning set forth in the eleventh Whereas provision.           15.          "Case" has the meaning set forth in the eleventh Whereas provision.           16.          "Debtors" has the meaning set forth in the eleventh Whereas provision.           17.          "Debtors' Plan" has the meaning set forth in the fourteenth Whereas provision.           18.          "December 11, 2000 Agreement" has the meaning set forth in the fifth Whereas provision. [image81.gif]           19.          "District Court" has the meaning set forth in the thirteenth Whereas provision.           20.          "Effective Date" has the meaning set forth in Section 5(a).           21.          "Election Termination Date" means the date that New Mirant instructs its transfer agent, pursuant to Section 2(b)(ii), to cause Pepco to receive the First Distribution.           22.          "Excess Payment" has the meaning set forth in Section 2(b)(iii).           23.          "FCC Agreement" has the meaning set forth in the sixth Whereas provision.           24.          "FERC" has the meaning set forth in Section 2(e)(i).           25.          "Fifth Circuit" has the meaning set forth in Section 2(d).           26.          "Final Order" means (a) an order or judgment of the Bankruptcy Court or any other court or adjudicative body as to which the time to appeal, petition for certiorari, or move for reargument or rehearing has expired and as to which no appeal, petition for certiorari, or other proceedings for reargument or rehearing shall then be pending, or (b) in the event that an appeal, writ of certiorari, reargument, or rehearing thereof has been sought, such order of the Bankruptcy Court or any other court or adjudicative body shall have been affirmed by the highest court to which such order was appealed, or certiorari has been denied, or from which reargument or rehearing was sought, and the time to take any further appeal, petition for certiorari or move for reargument or rehearing shall have expired; provided, that no order shall fail to be a Final Order solely because of the possibility that a motion pursuant to Section 502(j) of the Bankruptcy Code, Rule 59 or Rule 60 of the Federal Rules of Civil Procedure or Bankruptcy Rule 9024 may be filed with respect to such order.           27.          "First Distribution" has the meaning set forth in Section 2(b)(ii).           28.          "Knowledge," when used with respect to any party hereto, means the actual knowledge, as of or before the date of the Agreement, of a member of senior management of such party, including any officer at the Vice President or higher level.           29.          "LASA" has the meaning set forth in Section 2(b)(iv).           30.          "Liquidation Agreement" has the meaning set forth in Section 2(b)(ii).           31.          "MC Plan Trust" means the trust established pursuant to the terms of that certain Plan Trust Declaration dated as of January 3, 2006, by and among the Debtors and the Plan Trustees.           32.          "Mirant Entities" has the meaning set forth in the ninth Whereas provision.           33.          "Mirant Potomac" has the meaning set forth in Section 2(b)(iv)           34.          "Mirant Releasees" has the meaning set forth in Section 3. [image81.gif]           35.          "Mirant Settling Parties" has the meaning set forth in the first paragraph.           36.          "MPP" has the meaning set forth in the first paragraph.           37.          "MRAEM" has the meaning set forth in the seventh Whereas provision.           38.          "MRAREM" has the meaning set forth in the nineteenth Whereas provision.           39.          "New Mirant" has the meaning set forth in the first paragraph.           40.          "New Mirant Guaranty" means the guaranty executed by New Mirant pursuant to Sections 2(a)(iv), 2(a)(vi) and 2(a)(viii).           41.          "Other Assumed Agreements" has the meaning set forth in Section 2(a)(v).           42.          "Old Mirant" has the meaning set forth in the first paragraph.           43.          "Other Mirant Entities" has the meaning set forth in the fifth Whereas provision.           44.          "Panda PPA" has the meaning set forth in the third Whereas provision.           45.          "Pepco" has the meaning set forth in the first paragraph.           46.          "Pepco Distribution" has the meaning set forth in Section 2(b)(i).           47.          "Pepco Distribution Amount" has the meaning set forth in Section 2(b)(i).           48.          "Pepco Releasees" has the meaning set forth in Section 4.           49.          "Pepco's Class 3 Claim" has the meaning set forth in Section 2(b)(i).           50.          "Pepco Settling Parties" has the meaning set forth in the first paragraph.           51.          "Pepco Shares" has the meaning set forth in Section 2(b)(i).           52.          "Person" means an individual, corporation, partnership, limited liability company, joint venture, trust, estate, unincorporated association, unincorporated organization, governmental entity, or political subdivision thereof, or any other entity.           53.          "Plan Trustees" means Mr. Auren Primack, Phoenix Advisors, LLC, and Kurtzman Carson Consultants LLC in their capacity as trustees of the MC Plan Trust.           54.          "Pre-Petition Claim" has the meaning set forth in the twelfth Whereas provision.           55.          "Rejection Time" has the meaning set forth in Section 2(a)(ix). [image81.gif]           56.          "Released Claims Against Mirant" has the meaning set forth in Section 3(a).           57.          "Released Claims Against Pepco" has the meaning set forth in Section 4(a).           58.          "Retained Liabilities" has the meaning set forth for such term in the APSA.           59.          "Second Distribution" has the meaning set forth in Section 2(b)(ii).           60.          "Share Price Trigger" means that, for four business days in a twenty consecutive business day period, the closing price of shares of New Mirant common stock (adjusted for any stock splits occurring after the date of the Agreement), as reported by the New York Stock Exchange, is less than Sixteen Dollars ($16.00) per share.           61.          "Shortfall Payment" has the meaning set forth in Section 2(b)(iii).           62.          "Site Lease" has the meaning set forth in the sixth Whereas provision.           63.          "SMECO" has the meaning set forth in the sixth Whereas provision.           64.          "SMECO Agreements" has the meaning set forth in the sixth Whereas provision.           65.          "SMECO Settlement" shall mean a settlement agreement and release between (a) SMECO and (b) New Mirant, Old Mirant, Mirant Mid-Atlantic, LLC, Mirant Potomac, Mirant Chalk Point, LLC, Mirant Piney Point, LLC, Mirant MD Ash Management, LLC, and the MC Plan Trust with respect to the SMECO Agreements.           66.          "TPA Settlement" has the meaning set forth in Section 6.                     [image81.gif]   Schedule 2(a)(v) Schedule of Assumed, or Assumed and Assigned, Executory Contracts and Unexpired Leases Original Mirant Party Counterparty Contract Name/Description Mirant Settling Party to Remain or Become Liable for Obligations of Original Mirant Party Mirant Potomac River, LLC The Bank of New York, as trustee Non-Disturbance and Attornment Agreement by and between The Bank of New York, as trustee, and Southern Energy Potomac River, LLC dated 12/19/2000 Mirant Potomac River, LLC MRAEM, LP Conectiv Energy Supply, Inc. Incoming Parent Guaranty by and between Mirant Americas Energy Marketing, LP, Conectiv Energy Supply, Inc. (Counterparty), and Pepco Holdings, Inc. (Guarantor) in the amount of $15,000,000 effective 5/16/2003 Mirant Energy Trading, LLC MRAEM, LP Pepco Energy Services, Inc. Incoming Parent Guaranty by and between Mirant Americas Energy Marketing, LP, Pepco Energy Services, Inc. (Counterparty), and Pepco Holdings, Inc. (Guarantor) in the amount of $5,000,000 effective 12/20/2004 Mirant Energy Trading, LLC MRAREM, LP Pepco Electronic Data Interchange Trading Partner Agreement by and between Pepco and Mirant Americas Retail Energy Marketing, LP, dated 1/22/03 Mirant Energy Trading, LLC Old Mirant Pepco Entitlements/Benefits Agreement by and between Pepco and Southern Energy, Inc. dated 12/19/2000 Mirant Power Purchase, LLC Mirant Potomac River, LLC Pepco Interconnection Agreement (Potomac River) by and between Pepco and Southern Energy Potomac River, LLC dated 12/19/2000 Mirant Potomac River, LLC Mirant Chalk Point, LLC (as successor to Mirant Peaker, LLC) Pepco Interconnection Agreement (Chalk Point) by and among Pepco, Southern Energy Chalk Point, LLC, and Southern Energy Peaker, LLC dated 12/19/2000 Mirant Chalk Point, LLC Mirant Mid-Atlantic, LLC Pepco Interconnection Agreement (Dickerson) by and between Pepco and Southern Energy Mid-Atlantic, LLC dated 12/19/2000 Mirant Mid-Atlantic, LLC [image81.gif] Mirant Mid-Atlantic, LLC Pepco Interconnection Agreement (Morgantown) by and between Pepco and Southern Energy Mid-Atlantic, LLC dated 12/19/2000 Mirant Mid-Atlantic, LLC Mirant Potomac River, LLC Pepco Local Area Support Agreement by and between Pepco and Southern Energy Potomac River, LLC dated 12/19/2000 Mirant Potomac River, LLC Mirant Potomac River, LLC Pepco Site Lease Agreement by and between Pepco and Southern Energy Potomac River, LLC dated 12/19/2000 Mirant Potomac River, LLC MRAREM, LP Pepco Supplier Coordination Agreement by and between Pepco and Mirant Americas Retail Energy Marketing, LP, dated 1/22/2003 Mirant Energy Trading, LLC Mirant Chalk Point, LLC; Mirant Piney Point, LLC Pepco Easement, License and Attachment Agreement (Chalk Point Station) by and between Southern Energy Chalk Point, LLC, Southern Energy Piney Point, LLC and Pepco dated 12/19/2000 Mirant Chalk Point, LLC; Mirant Piney Point, LLC Mirant MD Ash Management; Mirant Mid-Atlantic, LLC Pepco Easement, License and Attachment Agreement (Dickerson Station) by and between Southern Energy Mid-Atlantic, LLC, Southern Energy MD Ash Management, LLC, and Pepco dated 12/19/2000 Mirant MD Ash Management, LLC; Mirant Mid-Atlantic, LLC Mirant Mid-Atlantic, LLC; Mirant Piney Point, LLC Pepco Easement, License and Attachment Agreement (Morgantown Station) by and between Southern Energy Mid-Atlantic, LLC, Southern Energy Piney Point, LLC, and Pepco dated 12/19/2000 Mirant Mid-Atlantic, LLC; Mirant Piney Point, LLC Mirant Potomac River, LLC Pepco Easement, License and Attachment Agreement (Potomac River) by and between Southern Energy Potomac River, LLC and Pepco dated 12/19/2000 Mirant Potomac River, LLC Mirant Mid-Atlantic, LLC Pepco License Agreement by and between Southern Energy Mid-Atlantic, LLC and Pepco dated 12/19/2000 Mirant Mid-Atlantic, LLC Old Mirant Pepco Stormwater Discharge Agreement by and between Pepco and Southern Energy, Inc. dated 12/19/2000 Mirant Power Purchase, LLC Mirant MD Ash Management, LLC (as successor to Mirant D.C. O&M, LLC) Pepco Operation and Maintenance Agreement for Buzzard Point and Benning Facilities Located in Washington D.C. by and between Pepco and Southern Energy D.C. O&M, LLC dated 12/19/2000 Mirant MD Ash Management, LLC [image81.gif] Mirant Mid-Atlantic, LLC Pepco Assignment and Assumption Agreement (SEMA; Bowling; Calvert; FBI; Charles County at Morgantown) by and between Pepco and Southern Energy Mid-Atlantic, LLC dated 12/19/2000 Mirant Mid-Atlantic, LLC Mirant Mid-Atlantic, LLC Pepco Assignment and Assumption Agreement (SEMA: Samuel and Julia Gough (2 leases)) by and between Pepco and Southern Energy Mid-Atlantic, LLC dated 12/19/2000 Mirant Mid-Atlantic, LLC Mirant MD Ash Management, LLC Pepco Assignment and Assumption Agreement (SEAM: Jamison at Westland) by and between Pepco and Southern Energy MD Ash Management, LLC dated 12/19/2000 Mirant MD Ash Management, LLC Mirant Chalk Point, LLC Pepco Assignment and Assumption Agreement (SECP: State of Maryland Dept. of Natural Resources and Maryland Bd. of Public Works) by and between Pepco and Southern Energy Chalk Point, LLC dated 12/19/2000 Mirant Chalk Point, LLC Mirant Potomac River, LLC Pepco Assignment and Assumption Agreement (SEPR: Metricom at Potomac River) by and between Pepco and Southern Energy Potomac River, LLC dated 12/19/2000 Mirant Potomac River, LLC Mirant Mid-Atlantic, LLC Pepco Assignment and Assumption Agreement (SEMA: CNG at Dickerson) by and between Pepco and Southern Energy Mid-Atlantic, LLC dated 12/19/2000 Mirant Mid-Atlantic, LLC Mirant Piney Point, LLC Pepco; The Bank of New York Assignment and Assumption of License Agreement and Easement Agreements (SEPP: Oil Pipeline) by and among Pepco, The Bank of New York and Southern Energy Piney Point, LLC dated 12/19/2000 Mirant Piney Point, LLC Mirant Piney Point, LLC Pepco Assignment and Assumption Agreement (SEPP: Pipeline Permits) by and between Pepco and Southern Energy Piney Point, LLC dated 12/19/2000 Mirant Piney Point, LLC Mirant Mid-Atlantic, LLC Pepco Assignment and Assumption Agreement (SEMA: Railroad Permits) by and between Pepco and Southern Energy Mid-Atlantic, LLC dated 12/19/2000 Mirant Mid-Atlantic, LLC Mirant Chalk Point, LLC Pepco Assignment and Assumption Agreement (SECP: SMECO and Washington Gas Light at Chalk Point) by and between Pepco and Southern Energy Chalk Point, LLC dated 12/19/2000 Mirant Chalk Point, LLC Old Mirant Pepco Three Letter Agreements between Pepco and Southern Energy, Inc. dated 10/23/2000 and 11/21/2000 (relating to the Ryceville-Piney Point Pipeline) Mirant Power Purchase, LLC [image81.gif] Mirant Services, LLC (as successor to Southern Energy Resources, Inc.) and affiliates of Southern Energy Resources, Inc. as of 12/8/2000 Pepco Transfer of Assets and Indemnification Agreement by and between Pepco and its affiliates and Southern Energy Resources, Inc. and its affiliates dated 12/8/2000 Mirant Services, LLC Mirant Mid-Atlantic, LLC Pepco Agreement for Continued Availability of Coverage Under Pepco Health Benefits by and between Pepco and Southern Energy Mid-Atlantic, LLC dated 11/2/2000 Mirant Power Purchase, LLC Old Mirant Pepco Letter Agreement between Pepco and Southern Energy, Inc., dated 12/19/2000 (relating to SO2 and NO2 allowances) Mirant Power Purchase, LLC Various Mirant Settling Parties, MRAEM or Mirant Mid-Atlantic Services, LLC Pepco and/or its subsidiaries Any other executory contract or unexpired lease entered into by a Mirant Settling Party, MRAEM or Mirant Mid-Atlantic Services, LLC with Pepco and/or its subsidiaries, but not including the Assumed APSA, the Back-to-Back Arrangement, the FCC Agreement, the Site Lease, the Assumption/Assignment Agreements, the Guarantee Agreement dated December 19, 2000, or the letter agreement dated December 19, 2000, relating to the unwind agreement for the Panda PPA Postpetition executory contracts or unexpired leases will be performed by the Mirant Settling Parties party thereto or their successors in interest in accordance with the terms of the contracts or leases.  Prepetition executory contracts or unexpired leases will be performed by the Mirant Settling Party that, after the effective date of the Debtors' Plan, owns or leases the assets or facilities to which the executory contract or unexpired lease relates, or, if such contract or lease does not relate to any specific assets or facilities, Mirant Power Purchase, LLC.             [image81.gif]   Schedule 2(c)           Upon the occurrence of the Effective Date, the Pepco Settling Parties and the Mirant Settling Parties shall cause all pending appeals, adversary actions or other contested matters between or among the parties hereto relating to any claim, demand, action or cause of action released pursuant to Sections 3(a) or 4(a) to be dismissed with prejudice, including, without limitation, the following causes of action: 1. Mirant Corporation, et al. v. Potomac Electric Power Company , Civil Action No. 4:03-CV-00944 (N.D. Tex.) 2. Mirant Corporation, Mirant Peaker, LLC, and Mirant Chalk Point, LLC v. Southern Maryland Electric Cooperative, Inc., and Potomac Electric Power Company , Adv. Case No. 04-04073 (Bankr. N.D. Tex.) 3. Potomac Electric Power Company v. Mirant Corporation, et al. , Civil Action No. 4:05-CV-00095 (N.D. Tex.) 4. Mirant Corporation v. Potomac Electric Power Company, et al. , Civil Action No. 4:05-CV-00606 (N.D. Tex.) 5. Mirant Corporation, et al. v. Southern Maryland Electric Cooperative, Inc., and Potomac Electric Power Company , Adv. Case No. 05-04258 (Bankr. N.D. Tex.) 6. Mirant Corporation, et al. v. Potomac Electric Power Company , Adv. Case No. 05-04259 (Bankr. N.D. Tex.) 7. Debtor's Motion (I) Pursuant to 11 U.S.C. § 365 to Assume, Assume and Assign, or Reject Certain Agreements with Potomac Electric Power Company; and (II) For Disgorgement of Funds Paid Postpetition Under the Back-to-Back Agreement Pursuant to 11 U.S.C. §§ 105, 503, and 549, Bankr. N.D. Tex., Doc. No. 12405 8. Motion of Debtors (I) to Reject the Facility and Capacity Credit Agreement and the Site Lease with Southern Maryland Electric Cooperative, Inc.; and (II) for Disgorgement of Funds Paid Postpetition Pursuant to 11 U.S.C. §§ 105, 503, and 549, Bankr. N.D. Tex., Doc. No. 12406 9. Mirant Corporation, et al. v. Potomac Electric Power Company , Civil Action No. 4:05-CV-00810 (N.D. Tex.) 10. Southern Maryland Electric Cooperative, Inc., and Potomac Electric Power Company v. Mirant Peaker, LLC, Mirant Chalk Point, LLC, and Mirant Corporation , No. 4:06-CV-00041 (N.D. Tex.) [image81.gif] 11. Mirant Corp., et al. v. Potomac Electric Power Co., et al. , No. 05-10038 (5th Cir.) 12. Potomac Electric Power Co. v. Mirant Corp., et al. , No. 05-10419 (5th Cir.)                                                   [image81.gif] Exhibit 2(a)(iv) - Form of New Mirant Guaranty GUARANTEE AGREEMENT           THIS GUARANTEE AGREEMENT (this "Agreement"), dated as of __________, 2006, by and between Mirant Corporation, a Delaware corporation ("Guarantor"), and Potomac Electric Power Company, a District of Columbia and Virginia corporation (together with its successors and permitted endorsees, transferees and assigns, "Pepco"). Guarantor and Pepco are referred to herein individually as a "Party" and collectively as the "Parties." Capitalized terms used herein and defined in the Settlement Agreement (as defined below) have the meanings set forth for such terms in the Settlement Agreement.           WHEREAS, Mirant and Pepco, among others, are parties to that certain Settlement Agreement and Release dated as of May 30, 2006 (the "Settlement Agreement") pursuant to which the parties thereto agreed to settle, on the terms and conditions contained therein, certain disputes, including disputes with respect to the APSA, the Back-to-Back Arrangement, the Other Assumed Agreements, the SMECO Agreements and the Assumed Obligations.           WHEREAS, pursuant to and subject to the terms and provisions of the Settlement Agreement, MPP has assumed the Assumed APSA [and the Back-to-Back Arrangement]1 certain Mirant Settling Parties have assumed or accepted the assignment of the Other Assumed Agreements and have assumed the Assumed Obligations arising under the Other Assumed Agreements, Mirant Chalk Point, LLC has assumed the SMECO Agreements and assumed the Assumed Obligations arising under the SMECO Agreements, and MPP has assumed the Assumed Obligations not arising under the Other Assumed Agreements or the SMECO Agreements.           WHEREAS, pursuant to the Settlement Agreement, Mirant has agreed to guarantee the payment and performance of the obligations of the other Mirant Settling Parties under the Assumed APSA, [the Back to Back Arrangement],2 the Other Assumed Agreements, the SMECO Agreements and the Assumed Obligations (collectively, the "Underlying Agreements") pursuant to this Agreement.           NOW, THEREFORE, the Parties agree, effective as of the Effective Date, as follows:           SECTION 1. Purpose and Intent. IT IS THE PURPOSE AND INTENT OF THIS AGREEMENT THAT THE OBLIGATIONS OF GUARANTOR UNDER THIS AGREEMENT ARE IRREVOCABLE, ABSOLUTE AND UNCONDITIONAL, PRESENT AND CONTINUING UNDER ANY AND ALL CIRCUMSTANCES UNTIL TERMINATED IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT.           SECTION 2. Guarantee. Guarantor absolutely, irrevocably and unconditionally guarantees, as a primary obligor and not merely as a surety, (a) the due and punctual payment to Pepco of (i) each payment required to be made by the other Mirant Settling Parties under the ______________________ 1   If applicable. 2   Id. [image81.gif] Underlying Agreements when and as due, whether at maturity or by reason of acceleration or otherwise and at all times thereafter, including payments in respect of reimbursement of disbursements and interest thereon and (ii) all other monetary obligations, including indemnities, fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the other Mirant Settling Parties under the Underlying Agreements (all such obligations referred to in this clause (a) being collectively referred to as the "Monetary Obligations") and (b) the due and punctual performance and observance of, and compliance with, all covenants, agreements, obligations and liabilities of the other Mirant Settling Parties under the Underlying Agreements or the Settlement Agreement (all such obligations referred to in the preceding clauses (a) and (b) and any extensions, renewals or replacements thereof being collectively referred to as the "Obligations").           SECTION 3. Payment of Costs. Guarantor agrees to pay and reimburse Pepco for all reasonable costs, legal expenses and attorneys' and paralegals' fees of every kind (excluding those costs, expenses and fees of attorneys and paralegals who may be employees of Pepco), paid by, or incurred by or on behalf of, Pepco in enforcing its rights under this Agreement, provided that the Guarantor shall not be liable for any expenses of Pepco if no payment or performance is determined to be due from Guarantor under this Agreement.           SECTION 4. Waiver of Notice and Defenses. To the fullest extent permitted by applicable law, Guarantor hereby expressly, absolutely, unconditionally and irrevocably waives all notices whatsoever with respect to this Agreement, with respect to the Underlying Agreements, with respect to the Settlement Agreement or with respect to the Obligations, including, without limitation, presentment to, demand of payment from and protest, dishonor, default or nonpayment to the other Mirant Settling Parties or any other person of any of the Obligations, and notice of acceptance of its guarantee. To the fullest extent permitted by applicable law, the obligations of Guarantor hereunder shall not be affected by (a) the failure of Pepco to assert any claim or demand or to enforce or exercise any right or remedy against the other Mirant Settling Parties in respect of the Obligations or any delay in connection therewith, or (b) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, this Agreement not made in accordance with Section 13 of this Agreement.           SECTION 5. Continuing Guarantee of Payment and Performance. Guarantor further agrees that its guarantee contained herein constitutes a continuing guarantee of payment and performance when due, and not of collection, and therefore Pepco shall not be required (although it is entitled, at its option) to prosecute collection, enforcement or other remedies against the other Mirant Settling Parties, any other guarantor or any other person, before calling on Guarantor for payment and performance of the Obligations. Guarantor further waives any right to require that any resort be had by Pepco (although it is entitled, at its option) to any security.     [image81.gif]           SECTION 6. Discharge or Diminishment of Guarantee.                     (a)         The obligations of Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination, or be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever, or otherwise be affected, for any reason (other than the performance in full of all Obligations, including the indefeasible payment in full in cash of all Monetary Obligations, and the termination of all the Obligations), including, without limitation:                                 (i)        any claim of waiver, release, surrender, alteration or compromise of any of the Obligations;                                 (ii)        any claim or defense of statute of limitations, statute of frauds, fraud, incapacity, minority or usury;                                 (iii)        the invalidity, illegality or unenforceability of the Obligations or the genuineness, validity or regularity of the Underlying Agreements or the Settlement Agreement;                                 (iv)        the occurrence or continuance of any event of bankruptcy, reorganization, insolvency, receivership or other similar proceeding with respect to the other Mirant Settling Parties or any other person (for purposes hereof, "person" means any individual, partnership, limited liability company, joint venture, corporation, trust, unincorporated organization or Governmental Authority), or the dissolution, liquidation or winding up of the other Mirant Settling Parties or any other person;                                 (v)        any permitted assignment or other permitted transfer of this Agreement or any rights hereunder by Pepco;                                 (vi)        any sale, transfer or other disposition by Guarantor of any direct or indirect interest it may have in the other Mirant Settling Parties or any other change in ownership or control of the other Mirant Settling Parties;                                 (vii)        the absence of any notice to, or knowledge on behalf of, Guarantor of the existence or occurrence of any of the matters or events set forth in the foregoing clauses; or                                 (viii)        any other action or circumstance that might otherwise constitute a legal or equitable discharge or defense of Guarantor from performance of the obligations set forth herein (other than the performance in full of all Obligations, including the indefeasible payment in full in cash of all Monetary Obligations, and the termination of all the Obligations).                     (b)         Without limiting the generality of the foregoing, the obligations of Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of Pepco to assert any claim or demand or to enforce its rights under this Agreement, the Underlying Agreements or the Settlement Agreement, by any waiver or modification of any   [image81.gif] provision thereof (except a waiver or modification made in accordance with Section 13 hereof), by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of Guarantor or that would otherwise operate as a discharge of Guarantor as a matter of law or equity (other than the performance in full of all Obligations, including the indefeasible payment in full in cash of all Monetary Obligations, and the termination of all the Obligations).                     (c)         In furtherance and not in limitation of the foregoing, Guarantor authorizes Pepco, without notice, demand or additional reservation of rights against Guarantor and without affecting Guarantor's obligations hereunder, from time to time: (1) to renew, refinance, modify, subordinate, extend, increase, accelerate, or otherwise change the time for payment of, the terms of or the interest on the Obligations or any part thereof; (2) to accept collateral from any person or entity and hold collateral for the payment of the Obligations or any part thereof, and to exchange, enforce, refrain from enforcing or release such collateral or any part thereof; (3) to accept and hold any indorsement or guarantee of payment of the Obligations or any part thereof or any negotiable instrument or other writing intended by any party to create an accord and satisfaction with respect to the Obligations or any part thereof, and to discharge, terminate, release, substitute, replace or modify any such obligation of any such indorser or guarantor, or any person or entity who has given any security interest in any collateral as security for the payment of the Obligations or any part thereof, or any other person or entity in any way obligated to pay the Obligations or any part thereof, and to enforce, or refrain from enforcing, compromise or modify, the terms of any obligation of such indorser, guarantor, person or entity; (4) to dispose of any and all collateral securing the Obligations in any commercially reasonable manner as Pepco, in its sole discretion, may deem appropriate, and to direct the order or manner of such disposition and the enforcement of any and all indorsements and guarantees relating to the Obligations or any part thereof as Pepco, in its sole discretion, may determine; (5) subject to the terms and provisions of the Underlying Agreements and the Settlement Agreement, to determine the manner, amount and time of application of payments and credits, if any, to be made on all or any part of any component or components of the Obligations (whether principal, interest, costs and expenses, or otherwise); (6) to take advantage or refrain from taking advantage of any security or accept or make or refrain from accepting or making any compositions or arrangements when and in such manner as Pepco, in its sole discretion, may deem appropriate; and (7) to generally do or refrain from doing any act or thing which might otherwise, at law or in equity, release the liability of Guarantor as a guarantor or surety in whole or in part, and in no case shall Pepco be responsible, or shall the Guarantor be released in whole or in part, for any act or omission in connection with Pepco having sold any collateral at less than its value, providing that the collateral is sold in a commercially reasonable manner.           SECTION 7. Defenses Waived. To the fullest extent permitted by applicable law, Guarantor waives any defense based on or arising out of the unenforceability of the Obligations or any part thereof from any cause. Pepco may compromise or adjust any part of the Obligations, make any other accommodation with the other Mirant Settling Parties or exercise any other right or remedy available to it against the other Mirant Settling Parties, without affecting or impairing in any way the liability of Guarantor hereunder except to the extent that all the Obligations have been fully and finally performed, including the indefeasible payment in full of all Monetary Obligations, and terminated. To the fullest extent permitted by applicable law, [image81.gif] Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of Guarantor against the other Mirant Settling Parties or any security. Guarantor waives each right and all defenses to which it may be entitled under applicable law as in effect or construed from time to time.           SECTION 8. Representations and Warranties of Guarantor. Guarantor represents and warrants to Pepco as follows:                     (a)         Organization. Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as is now being conducted.                     (b)         Authority Relative to this Agreement. Guarantor has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by Guarantor of this Agreement and performance by Guarantor of its obligations hereunder have been duly and validly authorized and no other corporate proceedings on the part of Guarantor are necessary to authorize this Agreement and the performance by Guarantor of its obligations hereunder. This Agreement has been duly and validly executed and delivered by Guarantor and this Agreement constitutes a valid and binding agreement of Guarantor, enforceable against Guarantor in accordance with its terms.                     (c)         Consents and Approvals; No Violation.                                   (i)        Neither the execution and delivery of this Agreement by Guarantor nor performance by Guarantor of its obligations hereunder will (i) conflict with or result in any breach of any provision of the organizational or governing documents or instruments of Guarantor, (ii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement, lease or other instrument or obligation to which Guarantor or any of its subsidiaries is a party or by which any of their respective assets may be bound, or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Guarantor, or any of its assets, except in the case of clauses (ii) and (iii) for such failures to obtain a necessary consent, defaults and violations which would not, individually or in the aggregate, have a material adverse effect on the ability of Guarantor to discharge its obligations under this Agreement (a "Guarantor Material Adverse Effect").                                   (ii)       No declaration, filing or registration with, or notice to, or authorization, consent or approval of any governmental authority is necessary for performance by Guarantor of its obligations hereunder, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made would not, individually or in the aggregate, have a Guarantor Material Adverse Effect.   [image81.gif]           SECTION 9. Agreement to Perform and Pay; Subordination. In furtherance of the foregoing and not in limitation of any other right that Pepco has at law or in equity against Guarantor by virtue hereof, upon the failure of any of the other Mirant Settling Parties to perform or pay any Obligation when and as the same shall become due, Guarantor hereby promises to and will forthwith, as the case may be, (a) perform, or cause to be performed, such unperformed Obligations and (b) pay, or cause to be paid, to Pepco in cash the amount of such unpaid Monetary Obligations. Upon payment by Guarantor of any sums to Pepco as provided above, all rights of Guarantor against the other Mirant Settling Parties arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Monetary Obligations. If any amount shall erroneously be paid to Guarantor on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of the other Mirant Settling Parties, such amount shall be held in trust for the benefit of Pepco and shall forthwith be paid to Pepco to be credited against the payment of the Monetary Obligations.           SECTION 10. Information. Guarantor assumes all responsibility for being and keeping itself informed of the other Mirant Settling Parties' financial condition and assets, and of all other circumstances bearing upon the risk of nonperformance of the Obligations (including the nonpayment of Monetary Obligations) and the nature, scope and extent of the risks that Guarantor assumes and incurs hereunder, and agrees that Pepco does not have any duty to advise Guarantor of information known to it regarding such circumstances or risks.           SECTION 11. Termination and Reinstatement.                     (a)         Notwithstanding any provision to the contrary herein, this Agreement and the guarantee made hereunder shall terminate for all purposes upon the termination of the Settlement Agreement pursuant to Section 7 of the Settlement Agreement.                     (b)         Subject to Section 11(a) above and Section 11(c) below, the guarantee made hereunder shall remain in full force and effect until, and shall terminate when, all the Obligations have been (i) finally and irrevocably performed in full, including the indefeasible payment in full in cash of the Monetary Obligations, and (ii) terminated.                     (c)         Notwithstanding Section 11(b), if at any time any payment, or any part thereof, of any Obligation is subsequently recovered from, rescinded or is restored by Pepco, whether upon the bankruptcy, dissolution, reorganization, arrangement, or liquidation proceedings (or proceedings similar thereto) of the other Mirant Settling Parties or Guarantor or for any other reason, this Agreement and all of Guarantor's obligations under this Agreement shall continue to be effective or shall be reinstated, as the case may be, as though such payment had not been made. Except in the case of a termination pursuant to Section 11(a) above, the provisions of this Section 11(c) shall survive termination of the guarantee made hereunder or this Agreement.           SECTION 12. Assignment; No Third Party Beneficiaries. This Agreement and all of the provisions hereunder shall be binding upon and inure to the benefit of the Parties and their [image81.gif] respective successors (including, without limitation, any entity to which all or a substantial part of the business or assets of such Party shall have been transferred, including a debtor in possession under the Bankruptcy Code, and any entity into or with which such Party shall have been merged, consolidated, reorganized, or absorbed) and permitted assigns. Nothing herein express or implied will give or be construed to give any person other than the Parties any legal or equitable rights hereunder. Neither this Agreement nor any of the rights, interests and obligations hereunder shall be assigned by Guarantor, including by operation of law, without the prior written consent of Pepco; provided, however, that no assignment or transfer of rights or obligations by Guarantor shall relieve it from the full liabilities and the full financial responsibility set forth in this Agreement, unless and until the transferee or assignee shall agree in writing to assume such obligations and duties and Pepco has consented in writing to such assumption. Pepco may assign any of (including a portion of) its rights hereunder to any assignee or transferee of the Underlying Agreements without the consent of Guarantor; provided that such assignment or transfer of the Underlying Agreements is not effected in violation of the terms of the Underlying Agreements.           SECTION 13. Amendment and Modification; Extension; Waiver. Except with respect to assignments effected in accordance with Section 12, this Agreement may be amended, modified or supplemented only by an instrument in writing signed on behalf of each of the Parties. Any agreement on the part of a Party to any extension or waiver in respect of this Agreement shall be valid only if set forth in an instrument in writing signed on behalf of such Party. The failure of a Party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights.           SECTION 14. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the District of Columbia (regardless of the laws that might otherwise govern under applicable principles of conflicts of law).           SECTION 15. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given (as of the time of delivery or, in the case of a telecopied communication, of the times of confirmation) if delivered personally, telecopied (which is confirmed) or sent by overnight courier (providing proof of delivery) to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):           if to Pepco, to:   Potomac Electric Power Company 701 Ninth Street NW Suite 1100 Washington, DC 20068 Telecopy No.: 202-872-6484 Attention: General Counsel     [image81.gif]           with a copy to:   Jonathan P. Guy Orrick, Herrington & Sutcliffe LLP 3050 K Street, NW Washington, DC 20007           if to Guarantor, to:   Mirant Corporation 1155 Perimeter Center West Atlanta, Georgia 30338-5416 Telecopy No.: 678-579-6767 Attn: General Counsel           with a copy to:   Craig Averch White & Case LLP 633 W. 5th Street, Suite 1900 Los Angeles, CA 90071-2007           SECTION 16. Jurisdiction and Enforcement.                     (a)         Each of the Parties irrevocably submits to the exclusive jurisdiction of (i) the Superior Court of the District of Columbia and (ii) the United States District Court for the District of Columbia for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the Parties agrees to commence any action, suit or proceeding relating hereto either in the United States District Court for the District of Columbia or, if such suit, action or proceeding may not be brought in such court for jurisdictional reasons, in the Superior Court of the District of Columbia. Each of the Parties further agrees that service of process, summons, notice or document by hand delivery or U.S. registered mail at the address specified for such Party in Section 15 (or such other address specified by such Party from time to time pursuant to Section 15) shall be effective service of process for any action, suit or proceeding brought against such Party in any such court. Each of the Parties irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the Superior Court of the District of Columbia and (ii) the United States District Court for the District of Columbia and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.                     (b)         The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to equitable relief, including without limitation, an injunction or injunctions to prevent breaches of this Agreement and to specifically enforce the terms and provisions of this Agreement, this being in addition to any other remedy to which they are justly entitled to, whether at law or in equity. [image81.gif]           SECTION 17. Effectiveness; Counterparts. This Agreement shall become effective as of the Effective Date. This Agreement may be executed in two counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument.           SECTION 18. Rules of Interpretation. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation" or equivalent words. 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. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto or thereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument, statute, regulation, rule or order defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument, statute, regulation, rule or order as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes, regulations, rules or orders) by succession of comparable successor statutes, regulations, rules or orders and references to all attachments thereto and instruments incorporated therein. References to a person are also to its permitted successors and assigns. Each Party acknowledges that it has been represented by counsel in connection with the review and execution of this Agreement and, accordingly, there shall be no presumption that this Agreement or any provision hereof be construed against the Party that drafted this Agreement.           SECTION 19. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.           SECTION 20. Entire Agreement. This Agreement is intended by the Parties to be the final, complete and exclusive expression of the agreement between Guarantor and Pepco with respect to the guarantee of the Obligations. Guarantor expressly disclaims any reliance on any course of dealing or usage of trade or oral representations of Pepco, including, without limitation, representations to enter into any other agreement with the other Mirant Settling Parties or Guarantor.         [image81.gif]           IN WITNESS WHEREOF, this Guarantee Agreement has been duly executed and delivered by the Parties as of the date first above written and is effective as of the Effective Date.   POTOMAC ELECTRIC POWER COMPANY   By _________________________________________     Name: Title:   MIRANT CORPORATION   By _________________________________________     Name: Title:                                       [image81.gif] Exhibit 2(d) - Form of Request for Stay IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT NO. 05-10038 IN THE MATTER OF: MIRANT CORPORATION, Debtor MIRANT CORPORATION; MLW DEVELOPMENT LLC; MIRANT AMERICAS ENERGY MARKETING LP; MIRANT AMERICAS GENERAL LLC; MIRANT MID-ATLANTIC LLC; ET AL., Appellants vs. POTOMAC ELECTRIC POWER COMPANY, FEDERAL ENERGY REGULATORY COMMISSION, Appellees NO. 05-10419 IN THE MATTER OF: MIRANT CORPORATION, Debtor POTOMAC ELECTRIC POWER COMPANY, Appellee vs. MIRANT CORPORATION; MLW DEVELOPMENT LLC; MIRANT AMERICAS ENERGY MARKETING LP; MIRANT AMERICAS GENERAL LLC; MIRANT MID-ATLANTIC LLC; ET AL., Appellants On Appeal from the United States District Court for the Northern District of Texas, Fort Worth Division, Civil Action Nos. 4-05-CV-095-A and 4-03-CV-1242-A JOINT MOTION FOR STAY OF PENDING APPEALS   ATTORNEYS FOR APPELLANTS MIRANT CORPORATION, ET AL.: ATTORNEYS FOR APPELLEE POTOMAC ELECTRIC POWER COMPANY: Thomas E Lauria J. Christopher Shore WHITE & CASE LLP Wachovia Financial Center 200 South Biscayne Blvd. Miami, Florida 33131 305-371-2700 (Telephone) 305-358-5744 (Facsimile) Robin Phelan W. Alan Wright Benjamin L. Mesches HAYNES AND BOONE, LLP 901 Main Street, Suite 3100 Dallas, Texas 75202-3789 214-651-5000 (Telephone) 214-651-5940 (Facsimile) Roger Frankel Jonathan Guy ORRICK, HERRINGTON &SUTCLIFFE LLP 3050 K Street, NW Washington, D.C. 20007 202-339-8400 (Telephone) 202-339-8500 (Facsimile) [image81.gif] TO THE HONORABLE COURT OF APPEALS:           Appellants Mirant Corporation, et al. ("Mirant"), and Appellee Potomac Electric Power Company ("PEPCO") file this joint motion to stay the above-styled and numbered appeals (the "Appeals") pending anticipated court approval of a settlement of all outstanding disputes between them, and respectfully state as follows:           1.       The Appeals are currently pending before the Court.           2.       The Court heard oral argument in the Appeals on February 9, 2006.           3.       In addition to the Appeals, the parties are involved in the following litigation pending in the United States District Court for the Northern District of Texas and the United States Bankruptcy Court for the Northern District of Texas: a. Mirant Corporation, et al. v. Potomac Electric Power Company , Civil Action No. 4:03-CV-00944 (N.D. Tex.);   b. Mirant Corporation, Mirant Peaker, LLC, and Mirant Chalk Point, LLC v. Southern Maryland Electric Cooperative, Inc., and Potomac Electric Power Company , Adv. Case No. 04-04073 (Bankr. N.D. Tex.);   c. Potomac Electric Power Company v. Mirant Corporation, et al. , Civil Action No. 4:05-CV-00095 (N.D. Tex.);   d. Mirant Corporation v. Potomac Electric Power Company, et al. , Civil Action No. 4:05-CV-00606 (N.D. Tex.);   e. Mirant Corporation, et al. v. Southern Maryland Electric Cooperative, Inc., and Potomac Electric Power Company , Adv. Case No. 05-04258 (Bankr. N.D. Tex.);   [image81.gif] f. Mirant Corporation, et al. v. Potomac Electric Power Company , Adv. Case No. 05-04259 (Bankr. N.D. Tex.);   g. Debtor's Motion (I) Pursuant to 11 U.S.C. § 365 to Assume, Assume and Assign, or Reject Certain Agreements with Potomac Electric Power Company; and (II) For Disgorgement of Funds Paid Postpetition Under the Back-to-Back Agreement Pursuant to 11 U.S.C. §§ 105, 503, and 549, In re Mirant Corporation, et al., Case No. 03-46590 (Bankr. N.D. Tex.);   h. Motion of Debtors (I) to Reject the Facility and Capacity Credit Agreement and the Site Lease with Southern Maryland Electric Cooperative, Inc.; and (II) for Disgorgement of Funds Paid Postpetition Pursuant to 11 U.S.C. §§ 105, 503, and 549, In re Mirant Corporation, et al., Case No. 03-46590 (Bankr. N.D. Tex.);   i. Mirant Corporation, et al. v. Potomac Electric Power Company , Civil Action No. 4:05-CV-00810 (N.D. Tex.); and   j. Southern Maryland Electric Cooperative, Inc., and Potomac Electric Power Company v. Mirant Peaker, LLC, Mirant Chalk Point, LLC, and Mirant Corporation , No. 4:06-CV-00041 (N.D. Tex.).             4.       Mirant and PEPCO have entered into a settlement agreement resolving all outstanding disputes between them (the "Settlement Agreement"). The Settlement Agreement must be approved by the Bankruptcy Court and/or the District Court in Mirant's bankruptcy proceedings by final order or orders to become effective.3 On May 30, 2006, the parties filed motions in the Bankruptcy Court and District Court, pursuant to Federal Rule of Bankruptcy Procedure 9019, ______________________ 3   The district court has withdrawn the reference to the bankruptcy court for a number of the pending disputes between the parties. [image81.gif] seeking such approval. The parties are hopeful that the lower courts will approve the Settlement Agreement.           5.       As part of the Settlement Agreement, the parties agreed to request that the Court stay further action in the Appeals pending the required judicial approval of their Settlement Agreement.           6.       Accordingly, Mirant and PEPCO file this Joint Motion for Stay of Pending Appeals and request that the Court stay further action on the Appeals pending approval of the Settlement Agreement by the Bankruptcy Court and/or the District Court by final order or orders. In the interim, the parties will keep the Court apprised regarding the status of the Rule 9019 motions. Once the order or orders approving the Settlement Agreement become final, the parties will file a joint motion to dismiss the Appeals.           7.       Counsel for Mirant and PEPCO have conferred with counsel for FERC regarding the relief requested in this joint motion. Counsel for FERC has indicated that FERC does/does not oppose such relief. CONCLUSION AND REQUEST FOR RELIEF           Mirant and PEPCO jointly request that the Court stay further action in the Appeals pending approval of the Settlement Agreement by final order or orders and award them any other relief to which they are justly entitled.   [image81.gif]   Respectfully submitted,   ________________________________ Robin Phelan W. Alan Wright Benjamin L. Mesches Haynes and Boone, LLP 901 Main Street, Suite 3100 Dallas, Texas 75202-3789 214-651-5000 (Telephone) 214-651-5940 (Facsimile)             and   Thomas E Lauria J. Christopher Shore White & Case LLP Wachovia Financial Center 200 South Biscayne Blvd. Miami, Florida 33131 305-371-2700 (Telephone) 305-358-5744 (Facsimile)   ATTORNEYS FOR APPELLANTS MIRANT CORPORATION, ET AL.                     [image81.gif]   ___________________________________ Roger Frankel Jonathan Guy Orrick, Herrington & Sutcliffe LLP 3050 K Street, NW Washington, D.C. 20007 202-339-8400 (Telephone) 202-339-8500 (Facsimile)   ATTORNEYS FOR APPELLEE POTOMAC ELECTRIC POWER COMPANY                                       [image81.gif] CERTIFICATE OF CONFERENCE            On May _, 2006, the undersigned counsel for Appellants Mirant Corporation et al. conferred with counsel for FERC, Carol J. Banta, regarding the relief requested in the foregoing motion. Ms. Banta stated that FERC does/does not oppose the relief requested.   __________________________ W. Alan Wright CERTIFICATE OF SERVICE            The undersigned hereby certifies that a true and correct copy of the foregoing Joint Motion for Stay of Pending Appeals has been served on the following counsel of record by Federal Express and in accordance with the Federal Rules of Appellate Procedure on this ___ day of May, 2006. Sander L. Esserman Jo E. Hartwick Stutzman Bromberg Esserman & Plifka 2323 Bryan Street, Suite 2200 Dallas, Texas 75201 Roger Frankel Jonathan Guy Orrick, Herrington & Sutcliffe LLP 3050 K Street, NW Washington, D.C. 20007 Jason Brookner Andrews & Kurth L.L.P. 1717 Main Street Suite 3700 Dallas, Texas 75201 Donald E. Herrmann Lars L. Berg Kelly, Hart & Hallman 201 Main Street, Suite 2500 Fort Worth, Texas 76102-3194 Carol J. Banta Federal Energy Regulatory Commission 888 First Street, N.E. Washington, DC 20426 Stephen L. Tatum Cantey & Hanger 801 Cherry Street, Suite 2100 Fort Worth, Texas 76102 James Bradford Ramsay Grace D. Soderberg National Association of Regulatory Utility Commissioners 1101 Vermont Avenue NW Washington, DC 20005 Peter J. Kadzik Dickstein, Shapiro, Morin & Oshinsky 2101 L Street NW, 10th Floor Washington, DC 20037-1526 [image81.gif] Daniel M. Lewis Arnold & Porter 555 12th Street NW Washington, DC 20004 Frederick Sosnick Shearman & Sterling 599 Lexington Avenue New York, NY 10022-6069   ___________________________________ W. Alan Wright                                             [image81.gif]

NOVADEL PHARMA INC. 1998 STOCK OPTION PLAN NONQUALIFIED STOCK OPTION AGREEMENT AGREEMENT, made as of this 17th day of January, 2006, by and between NOVADEL PHARMA INC., a Delaware corporation having offices at 25 Minneakoning Road, Flemington, NJ 08822 (the “Company”) and CHARLES NEMEROFF, c/o Emory School of Medicine, 101 Woodruff Circle, Suite 4000, Atlanta, GA 30322 (the “Optionee”). WHEREAS, on June 15, 1998, the Board of Directors of the Company (the “Board”) adopted the NovaDel Pharma Inc. 1998 Stock Option Plan (the “Plan”), subject to approval by the stockholders of the Company by December 31, 1998; and WHEREAS, on November 23, 1998, the stockholders of the Company, at the Company’s Annual Meeting of Stockholders, approved the Board’s adoption of the Plan; and WHEREAS, on April 19, 2004, the stockholders of the Company, at the Company’s Annual Meeting of Stockholders, approved an amendment to the Plan that allowed the Company to grant additional shares under the Plan; and WHEREAS, on January 17, 2006, the Optionee was re-elected to the Board of Directors of the Company; and, WHEREAS, the grant of the within Options, which are to vest according to a schedule contained in this Agreement, have been authorized by the Board of Directors of the Company (the “Board”); NOW, THEREFORE, it is agreed:   1. Date of Grant. The date of grant of this Option is January 17, 2006.   2. Nature of the Option. This Option is a nonqualified Option issued pursuant to the terms of the Plan, pursuant to which Optionee is hereby granted the right, subject to the terms and conditions hereof, to purchase up to FIFTY THOUSAND (50,000) shares of the authorized but unissued common stock, par value $.001 per share, of the Company.   3. Exercise Price. The exercise price is $1.36 for each share of Common Stock.   4. Exercisability of Option. This Option shall be exercisable during its term as follows:   4.1 This Option shall vest and become exercisable in whole or in part to the extent of:   4.1.1 16,666 Option Shares on or after January 17, 2007; and   4.1.2 16,667 Option Shares on or after January 17, 2008; and,   4.1.3 16,667 Option Shares on or after January 17, 2009.   4.2 This Option may not be exercised for a fraction of a share.   4.3 After a portion of the Option becomes exercisable it shall remain exercisable except as otherwise provided herein, until the close of business on January 16, 2011.   5. Method of Exercise.   5.1 Notice to the Company. The Option shall be exercised in whole or in part by written notice in substantially the form attached hereto as Exhibit A directed to the Company at its principal place of business accompanied by full payment as hereinafter provided of the exercise price for the number of Option Shares specified in the notice.   5.2 Delivery of Option Shares. The Company shall deliver a certificate for the Option Shares to the Optionee as soon as practicable after payment therefore.   5.3 Payment of Purchase Price.   1   ~Doc# 429491.03~         5.3.1 Cash Payment. The Optionee shall make all payments by wire transfer, certified or bank check, in each case payable to the order of the Company; the Company shall not be required to deliver certificates for Option Shares until the Company has confirmed the receipt of good and available funds in payment of the purchase price thereof.   5.3.2 Payment of Withholding Tax. Any required withholding tax shall be paid in cash or certified or bank check.   5.3.3 Restrictions on Exercise. This Option may not be exercised if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any applicable federal or state securities or other law or regulation, including any rule under Part 207 of Title 12 of the Code of Federal Regulations (“Regulation C”) as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Company may require the Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation.   6. Optionee’s Representations. The Optionee hereby represents and warrants to the Company that:   6.1 Investment Intent. The Optionee is acquiring the Option and shall acquire the Option Shares for his own account and not with a view towards the distribution thereof.   6.2 Option Shares Restricted. The Optionee understands that the Optionee must, for an indefinite period of time, bear the economic risk of the investment in the Option Shares, which cannot be sold by him unless they are registered under the Securities Act of 1933, as amended (the “1933 Act”) or an exemption therefrom is available thereunder and that the Company is under no obligation to register the Option Shares for sale under the 1933 Act.   6.3 Access to Information. In his position with the Company, the Optionee has had both the opportunity to ask questions and receive answers from the officers and directors of the Company and all persons acting on its behalf concerning the terms and conditions of the offer made hereunder and to obtain any additional information to the extent the Company possesses or may possess such information or can acquire it without unreasonable effort or expense necessary to verify the accuracy of the information contained in the Company’s offering documents.   6.4 Transfer Restrictions. The Optionee is aware that the Company shall place stop transfer orders with its transfer agent against the transfer of the Option Shares in the absence of registration under the 1933 Act or an exemption therefrom as provided herein.   6.5 Legends. Unless the Option Shares delivered upon exercise are registered under the 1933 Act, the certificates evidencing the Option Shares shall bear the following legends: “The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under the 1933 Act.” “The shares represented by this certificate have been acquired pursuant to a Stock Option Agreement, dated as of January 17, 2006, a copy of which is on file with the Company, and may not be transferred, pledged or disposed of except in accordance with the terms and conditions thereof.”   7. Withholding Tax. Not later than the date as of which an amount first becomes includable in the gross income of the Optionee for Federal income tax purposes with respect to the Option, the Optionee shall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any Federal, state and local taxes of any kind required by law to be withheld or paid with respect to such amount. The obligations of the Company under the Plan and   2   ~Doc# 429491.03~     pursuant to this Agreement shall be conditional upon such payment or arrangements with the Company and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Optionee from the Company.   8. Death or Disability of Optionee. This Option shall survive the death or Disability of the Optionee, and shall bind and inure to the benefit of the Optionee’s heirs, executors, administrators of personal representatives. The one-year exercise period restriction contained in the Plan shall not apply. For purposes of this Agreement, “Disability” means (1) the inability by the Optionee to engage in a substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (2) the Optionee 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 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company.   9. Termination of Directorship. If the Optionee ceases to serve as a Director of the Company, Optionee may exercise this Option, to the extent Optionee was entitled to exercise it at the date of Termination. The three-month exercise period restriction contained in the Plan shall not apply. If, however, Optionee’s directorship is terminated by the Company For Cause, this Option shall become void effective upon the act of Termination For Cause. For purposes of this Agreement, Termination For Cause includes:   (1) the willful failure, neglect or refusal by the Optionee to perform his duties hereunder;   (2) any willful, intentional or grossly negligent act by the Optionee having the effect of injuring, in a material way (whether financial or otherwise and as determined in good-faith by the President of the Company), the business or reputation of the Company or any of its affiliates, including but not limited to, any officer, director, executive or shareholder of the Company or any of its affiliates;   (3) willful misconduct by the Optionee, including insubordination, in respect of the duties or obligations of the Optionee under this Agreement;   (4) the Optionee’s indictment of any felony or a misdemeanor involving moral turpitude (including entry of a nolo contendere plea);   (5) the determination by the Company, after a reasonable and good-faith investigation by the Company following a written allegation by another employee of the Company, that the Optionee engaged in some form of harassment protected by law (including, without limitation age, sex or race discrimination); or   (6) any misrepresentation or embezzlement of the property of the Company or its affiliates (whether or not a misdemeanor or a felony).   10. Non-Transferability of Option. This Option may not be transferred in any manner without the Optionee obtaining the express written consent of the Company prior to the proposed transfer.   11. Term of Option. This Option may not be exercised more than five (5) years from January 17, 2006, and may be exercised during such term only in accordance with the terms of this Option Agreement.   12. Restriction on Transfer of Option Shares. Anything in this Agreement to the contrary notwithstanding, the Optionee hereby agrees that it shall not sell, transfer by any means or otherwise dispose of the Option Shares acquired by it without registration under the 1933 Act, or in the event that they are not so registered, unless (i) an exemption from the 1933 Act registration requirements is available thereunder, and (ii) the Optionee has furnished the Company with notice of such proposed transfer and the Company’s legal counsel, in its reasonable opinion, shall deem such proposed transfer to be so exempt.   3   ~Doc# 429491.03~         13. Miscellaneous.   13.1 Notices. All notices, requests, deliveries, payments, demands and other communications which are required or permitted to be given under this Agreement shall be in writing and shall be either delivered personally or sent by registered or certified mail, or by private courier, return receipt requested, postage prepaid to the Company at its principal executive office and to the Optionee at his address set forth above, or to such other address as either party shall have specified by notice in writing to the other. Notice shall be deemed duly given hereunder when delivered or mailed as provided herein.   13.2 Plan Paramount; Conflicts with Law. This Agreement and the Option shall, in all respects, be subject to the terms and conditions of the Plan, whether or not stated herein. In the event of a conflict between the provisions the Plan and the provisions of this Agreement, the provisions of the Plan shall in all respects be controlling. All capitalized terms not defined herein shall have the meanings ascribed to them in the Plan.   13.3 Stockholder Rights. The Optionee shall not have any of the rights of a stockholder with respect to the Option Shares until such shares have been issued after the due exercise of the Option.   13.4 Waiver. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other or subsequent breach.   13.5 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof. This Agreement may not be amended except by writing executed by the Optionee and the Company.   13.6 Binding Effect; Successors. This Agreement shall inure to the benefit of and be binding upon the parties hereto and, to the extent not prohibited herein, their respective heirs, successors, assigns and representatives. Nothing in this Agreement expressed or implied, is intended to confer on any person other than the parties hereto and as provided above, their respective heirs, successors, assigns and representatives any rights, remedies, obligations or liabilities.   13.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (without regard to choice of law provisions).   13.8 Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement.   4   ~Doc# 429491.03~                      IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the day and year first above written. NOVADEL PHARMA INC. (a Delaware corporation)   By: /s/Jean W. Frydman   Vice President, General Counsel & Corporate Secretary   Optionee acknowledges receipt of a copy of the Plan, a copy of which is attached hereto, and represents that the Optionee is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under the Plan. /s/Charles Nemeroff Charles Nemeroff, Optionee   5   ~Doc# 429491.03~       EXHIBIT A FORM OF NOTICE OF EXERCISE OF OPTION Date NovaDel Pharma Inc. Attention: Board of Directors   Re: NovaDel Pharma Inc. Purchase of Option Shares Gentlemen: In accordance with the Stock Option Agreement dated as of January 17, 2006 (“Agreement”) between CHARLES NEMEROFF (“Optionee”) and NovaDel Pharma Inc. (the “Company”), the Optionee hereby irrevocably elects to exercise the right to purchase shares of the Company’s common stock, par value $.001 per share (“Common Stock”), which are being purchased for investment and not for resale. All capitalized terms not defined herein shall have the meanings ascribed to them in the Plan. As payment for my shares, enclosed is (check and complete applicable boxes):     a (certified check) (bank check) payable to the order of “NovaDel Pharma Inc.” in the sum of $          ;     confirmation of wire transfer in the amount of $      and/or The Optionee hereby represents, warrants to, and agrees with, the Company that (i)            The Optionee is acquiring the Option Shares for his 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 (the “1933 Act”); (ii)           The Optionee 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 Optionee has received a copy of all reports and documents required to be filed by the Company with the Commission pursuant to the Securities Exchange Act of 1934 (“Exchange Act”) within the last 24 months and all reports issued by the Company to its stockholders; (iii)          The Optionee understands that he must bear for an indefinite period of time the economic risk of an investment in the Option Shares, which cannot be sold by him unless they are registered under the 1933 Act or an exemption therefrom is available thereunder and that the Company is under no obligation to register the Option Shares for sale under the 1933 Act; (iv)          In his position with the Company, the Optionee has had both the opportunity to ask questions and receive answers from the officers and directors of the Company and all persons acting on its behalf concerning the terms and conditions of the offer made hereunder and to obtain any additional information to the extent the Company possess or may possess such information or can acquire it without unreasonable effort or expense necessary to verify the accuracy of the information obtained pursuant to clause (ii) above; (v)           The Optionee is aware that the Company shall place stop transfer orders with its transfer agent against the transfer of the Option Shares in the absence of registration under the 1933 Act or an exemption therefrom as provided herein; (vi)          The Optionee’s rights with respect to the Option Shares shall, in all respects, be subject to the terms and conditions of the Plan and this Agreement; and (vii)         Unless the shares delivered upon exercise are registered under the 1933 Act, the certificates evidencing the Option Shares shall bear the following legends: “The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act.”   6   ~Doc# 429491.03~       “The shares represented by this certificate have been acquired pursuant to a Stock Option Agreement, dated as of January 17, 2006, a copy of which is on file with the Company, and may not be transferred, pledged or disposed of except in accordance with the terms and conditions thereof.” (viii)        The Optionee is familiar with the provisions of Rule 144, promulgated under the 1933 Act, which, in substance, permits limited public resale of “restricted securities” acquired, directly or indirectly, from the issuer thereof (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions, including, among other things: (1) the availability of certain public information about the Company; (2) the resale occurring not less than one year after the party has purchased, and made full payment within the meaning of Rule 144, for the securities to be sold; and, in the case of an affiliate, or of a non-affiliate who has held the securities less than three years, (3) 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 Exchange Act) and the amount of securities being sold during any three-month period not exceeding the specified limitations stated in Rule 144, if applicable. (ix)          The Optionee further understands that at the time he decides 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 Optionee would be precluded from selling the securities under Rule 144 even if the two-year minimum holding period is satisfied. (x)           The Optionee further understands that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the 1933 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. Kindly forward to me my certificate at your earliest convenience. Very truly yours,         (Signature)   (Address)       (Print Name)               (Social Security Number)       7   ~Doc# 429491.03~      

Exhibit 10.33   SECOND AMENDMENT TO THE CAREMARK RX, INC. 1997 STOCK INCENTIVE PLAN (FORMERLY THE AMENDED & RESTATED MEDPARTNERS, INC. 1997 LONG TERM INCENTIVE COMPENSATION PLAN)   This Second Amendment to the Caremark Rx, Inc. 1997 Stock Incentive Plan (formerly the Amended & Restated Medpartners, Inc. 1997 Long Term Incentive Compensation Plan) (the “Plan”) to be effective as of January 12, 2001.   WITNESSETH:   WHEREAS, Caremark Rx, Inc. (the “Company”) currently sponsors and maintains the Caremark Rx, Inc. 1997 Stock Incentive Plan (formerly the Amended & Restated Medpartners, Inc. 1997 Long Term Incentive Compensation Plan) (the “Plan”); and   WHEREAS, Section 13.1 of the Plan grants the Compensation Committee of the Board the power at any time to amend the Plan, and the Compensation Committee now wishes to amend the Plan to modify the vesting provisions for options granted under the Plan on and after January 12, 2001;   NOW, THEREFORE, the Plan is hereby amended as indicated below:   1.   Section 6.4 of the Plan is amended effective as of January 12, 2001, to read as follows:   6.4 VESTING OF OPTIONS. Except as provided by the Committee in the applicable Award Agreement, Options shall vest and become exercisable as follows:   (a) 34% of the Options shall vest on the date such options are granted;   (b) 33% of the Options granted shall vest on each of the   Second Amendment to the Caremark Rx, Inc. 1997 Stock Incentive Plan Page 1 -------------------------------------------------------------------------------- first anniversary and second anniversary of the date such Options are granted; provided, however, that for Options granted prior to January 12, 2001, if during the first year after the date such Options are granted, the stock price of the Shares closes at or above $12.00 (or such other price as determined by the Committee and set forth in the applicable Award Agreement) for any twenty (20) out of thirty (30) consecutive trading days, the 33% of the Options due to vest on the first anniversary of the date such Options are granted shall vest immediately at the end of such 20th day, and provided, however, that for Stock Options granted prior to January 12, 2001, if during the second year after the date such Options are granted, the stock price of the Shares closes at or above $18.00 (or such other price as determined by the Committee and set forth in the applicable Award Agreement) for any twenty (20) out of thirty (30) consecutive trading days, the 33% of the Options due to vest on the second anniversary of the date such Options are granted shall vest immediately at the end of such 20th day.   2.   The name of the Plan is changed effective as of January 12, 2001 from the Amended & Restated Medpartners, Inc. 1997 Long Term Incentive Compensation Plan to the Caremark Rx, Inc. 1997 Stock Incentive Plan. All references in any Company documents to the Amended & Restated Medpartners, Inc. 1997 Long Term Incentive Compensation Plan shall, after January 12, 2001, be a reference to the Caremark Rx, Inc. 1997 Stock Incentive Plan.   3.   All other provisions of the Plan not inconsistent herewith are hereby confirmed and ratified.   Approved by the Board of Directors by resolutions on January 12, 2001.   Second Amendment to the Caremark Rx, Inc. 1997 Stock Incentive Plan Page 2

  Exhibit 10.2   (ATARI LOGO) [y26731y2673101.gif]   Execution Copy EMPLOYMENT AGREEMENT      THIS AGREEMENT (the “Agreement”) is entered into on September 1, 2006 by and between ATARI, INC. (the “Company”) and David Pierce (the “Executive”).      IN CONSIDERATION of the mutual agreements set forth below, the Company and Executive agree as follows:      1. Employment:           (a) Service as President and Chief Executive Officer. During the Term of this Agreement, the Company will employ the Executive as the President and Chief Executive Officer of the Company. The Executive will report directly to the Board of Directors. During the Term of this Agreement, the Executive will have responsibility for overseeing all operating departments of the Company, determining policies, procedures and practices for the Company, developing business plans and strategies, selecting and overseeing senior executive personnel and overseeing development of budgets for presentation to the Board of Directors, and the Executive will have all other duties, responsibilities and authority that are customary for the president and chief executive officer of a publicly traded company, and such other duties commensurate with the scope and dignity of his position as are assigned to him by the Board of Directors and communicated to him by the Chairman of the Board.           (b) Service on Boards of Directors. During the Term of this Agreement, the Executive will, subject to the mutual agreement of the Executive and of the Board, serve as an officer or director of subsidiaries of the Company or as a director of companies in which the Company has significant equity investments.      2. Term: The Term of this Agreement will commence on September 5, 2006 (the “Employment Date”) and will continue until August 31, 2009. Notwithstanding anything contained herein to the contrary, the Company will enter into good faith discussions with Executive regarding an extension or renewal of this Agreement not later than one hundred and eighty (180) days prior to the end of the Term. However, this shall not be deemed to bind the Company to renew.      3. Full Time Employment:      (a) During the Term of this Agreement, the Executive will devote his full working time and efforts to his duties under this Agreement. Without limiting the generality of the foregoing, the Executive will not engage in any activity which conflicts or interferes with the performance of his duties under this Agreement, except that the Executive may attend to personal and family affairs and investments, be involved in not for profit, charitable and professional activities and, with the prior consent of the Board, not to be unreasonably withheld or delayed, serve on public   --------------------------------------------------------------------------------   (ATARI LOGO) [y26731y2673101.gif]   Execution Copy for profit company boards, provided that those activities do not, in aggregate, materially interfere with the Executive’s performance of his duties under this Agreement. The Executive shall be subject to all policies, procedures, directives and rules that may be adopted by the Board of Directors from time to time, provided the Executive has been given written notice thereof or has otherwise in fact been made aware of the existence of the same.      (b) Executive shall be provided a private office, secretarial services and such other facilities, supplies, personnel and services as are required or reasonably requested for the performance of Executive’s duties hereunder. Executive shall be based in New York City and shall travel as and when Executive or the Board deems such travel to be necessary and appropriate.      4. Compensation:           (a) Base Salary: During the Term of this Agreement, the Company will pay the Executive a base salary at the rate of $600,000 per annum, payable in equal installments in accordance with the Company’s customary payroll practice, but no less frequently than monthly. The Executive’s base salary may be reviewed annually by the Compensation Committee of the Board for increase. Any such increase will be in the sole discretion of the Compensation Committee and the Company will have no obligation to increase the Executive’s compensation.           (b) Annual Incentive Bonus: The Executive will be eligible for an annual incentive payment (the “Incentive Bonus”) with regard to each fiscal year of the Company based on achievement in the fiscal year of revenue and profit targets and the achievement of strategic objectives agreed upon by the Executive and the Board (on recommendation of the Compensation Committee) before the beginning of the fiscal year (or, with regard to the fiscal year during which this Agreement is executed, agreed upon before or promptly after the date of this Agreement). The Incentive Bonus with regard to a fiscal year will be 50% of the Executive’s then-current annual base salary if the revenue and profit targets for the fiscal year are met or exceeded, plus an additional 50% of the Executive’s then-current annual base if the Compensation Committee determines in its good faith business judgment that the other strategic objectives for the fiscal year are fully met or exceeded, or a lesser percentage or percentages to the extent the revenue and profit targets or the strategic objectives are not achieved.      Notwithstanding what is said in the preceding paragraph, the Executive’s Incentive Bonus for the fiscal year ending March 31, 2007 (the “2007 Fiscal Year”) will be limited to 50% of the Executive’s annual base salary (the “2007 Bonus Eligibility”). The Executive will receive 50% of the 2007 Bonus Eligibility if before the end of the 2007 Fiscal Year, the Company raises at least twenty-five million dollars in debt or equity financing (not including purchases or sales of assets) with the active participation of the Executive, and the Executive will receive the other 50% of his 2007 Bonus Eligibility if the Executive achieves all of the strategic objectives agreed upon before 2 --------------------------------------------------------------------------------   (ATARI LOGO) [y26731y2673101.gif]   Execution Copy or promptly after the date of this Agreement by the Executive and the Board (on recommendation of the Compensation Committee).      The Incentive Bonus for the last fiscal year of the Term of this Agreement will be prorated based on the number of days the Executive is employed under this Agreement as a percentage of the total number of days worked in the fiscal year.           (c) Long-Term Incentive:                (i) The Company will grant the Executive on the Employment Date, options to purchase 1,000,000 shares of the Company’s common stock with an exercise price equal to the last sale price at the NASDAQ Market on the date of grant. Except as otherwise provided in this Agreement, the stock options granted will become exercisable with respect 25% of the shares to which they relate on the first anniversary of the Employment Date with the remainder vesting 6.25% per quarter thereafter and expire on the tenth anniversary of the Employment Date.                (ii) The Compensation Committee or the Board may, in its discretion, from time to time grant the Executive additional stock options or other cash or equity based long term incentive awards.      5. Expenses: The Company will reimburse the Executive for reasonable travel and other expenses incurred by the Executive in the performance of his duties under this Agreement in accordance with the Company Travel and Entertainment policies and procedures established by the Company from time to time for senior executives including requirements for submission of itemized expense statements. During the term of this Agreement, the Executive will have the use of a Company credit card and will be entitled to business-related air travel in business class, or if not available, first class.. Notwithstanding anything contained herein to the contrary, Executive will be entitled to First Class airfare when traveling on flights of four (4) hours or more.      6. Benefits:           (a) General. During the Term of this Agreement, the Executive will be entitled to participate in all benefit plans and programs that the Company makes available to its most senior executives. Nothing in this Agreement will, however, preclude the Company from terminating or amending from time to time any employee benefit plan or program.           (b) Life Insurance. During the Term of this Agreement, the Company will maintain, and pay the premiums for, a policy of insurance on the Executive’s life in the amount of $1,000,000, payable to beneficiaries designated by the Executive, or, if the Executive does not designate beneficiaries, payable to the Executive’s estate.           (c) Directors and Officers Insurance. Notwithstanding anything contained herein to the contrary, during the Term of this Agreement, Company will obtain and maintain Directors and Officers liability insurance coverage for Executive. 3 --------------------------------------------------------------------------------   (ATARI LOGO) [y26731y2673101.gif]   Execution Copy           (d) Vacation. During the Term of this Agreement, executive will be entitled to, in addition to standard Company holidays, four (4) weeks of paid vacation and the last week in December off during each year of the Term.      7. Place of Employment: The Executive’s principal office will be at the Company’s office in New York City, New York. The Company may, however, require the Executive to travel to and render services at other locations, as the Company may reasonably deem necessary.      8. Executive’s Covenants:           (a) Confidential Information                (i) Existence of Confidential Information. During the Term of this Agreement, the Executive will have access to information about the Company and its subsidiaries that is not available to the general public and is treated by the Company as confidential (“Confidential Information”). Confidential Information includes all information that the Company treats as trade secrets, proprietary information or confidential information, all other information that has or could have commercial value or other utility to the Company, and all information the disclosure of which could be detrimental to the interests of the Company, whether or not the information is specifically labeled as confidential information by the Company. By way of example, and without limitation, Confidential Information includes information about existing and planned products, business strategies, production techniques, marketing plans, pricing plans, and relationships with suppliers, customers and others with whom the Company or its subsidiaries have business relationships. However, Confidential Information does not include information which (A) is generally available to the public other than as a result of disclosure by the Executive (except disclosure by the Executive in the performance of his duties under this Agreement), (B) was available to the Executive on a non-confidential basis prior to the date of this Agreement, or (C) becomes available to the Executive (x) other than from the Company or a person who disclosed it in violation of a confidentiality obligation to the Company, and (y) not as a result of activities by the Executive on behalf of the Company.                (ii) Protection of Confidential Information. During and after the Term of this Agreement, the Executive will not use Confidential information for any purpose other than in connection with his duties to the Company and the Executive will not disclose Confidential Information other than to employees of or consultants to the Company or its subsidiaries or other persons who have business relationships with the Company that require the Confidential Information in connection with those business relationships. Notwithstanding anything to the contrary contained herein, the provisions of this Section 8(a) (ii) shall not prevent the Executive from using his personal know-how in subsequent employment that does not violate Section 8(e).                (iii) Confidentiality Obligations to Third Parities. Without limiting what is said in the preceding subparagraphs, the Executive will not, during or after the Term of this Agreement, violate, or cause the Company to violate, any obligations of the Company to any third person to keep confidential information obtained from, or that otherwise is the property of, that third person. 4 --------------------------------------------------------------------------------   (ATARI LOGO) [y26731y2673101.gif]   Execution Copy                (iv) Required Disclosures. Nothing in this Agreement will prevent the Executive from disclosing any information that he is required by law to disclose. However, the Executive will promptly inform the General Counsel of the Company of any required disclosure, and the Executive will cooperate with the Company in all reasonable ways (at the Company’s expense) to minimize the extent to which he is required to disclose Confidential Information, including, at the request of the Company, cooperating in efforts by the Company to obtain a protective order seeking to avoid or limit a requirement that the Executive disclose Confidential Information.           (b) Assistance with Regard to Intellectual Property Rights. The Executive will assist the Company in all reasonable ways to obtain and enforce United States and foreign intellectual property rights owned by the Company in all countries, including executing, verifying and delivering documents and performing other acts reasonably requested by the Company, and including appearing, at the Company’s expense, as a witness, in order to enable the Company to obtain or enforce Intellectual Property Rights.           (c) Delivery of Records, Etc. When the Executive’s employment with the Company ceases, the Executive will, at the Company’s expense, turn over to the Company all the Company’s records, and all materials containing Confidential Information, in the Executive’s possession, and the Executive will provide to the Company all information, including passwords, that is necessary to enable the Company to access all information belonging to the Company that has been stored by the Executive on electronic systems maintained by the Company. Without limiting what is said in the preceding sentence, the Executive will not remove from the Company’s premises without its prior written consent any records, documents or equipment belonging to the Company, including those which relate to or contain Confidential Information or Executive Intellectual Properties. Notwithstanding the above, Executive may keep all of his personal files (i.e. personal rolodex, contacts contained in Executive palm pilot, etc.).           (d) Non-Solicitation/Non-Hire. For a period of twelve months after the end of the Term of this Agreement, the Executive will not, directly or indirectly, solicit any employee of the Company to terminate his or her employment with the Company, other than his secretary and/or personal assistant (if hired during his tenure) or hire any person who is, and was when the Term of this Agreement ended, an employee of the Company. This paragraph will not, however, prevent a company with which the Executive is associated after the Term of this Agreement from advertising employment opportunities in trade publications or publications of general circulation, so long as those advertisements are not targeted at employees of the Company or its subsidiaries.           (e) Non-Competition: Provided Company is not in breach of its obligations to make payments as required by this Agreement, until the latest of (i) the end of the Term of this Agreement, (ii) the end of the period, if any, during which the Executive will receive severance payments under Section 11 (d) of this Agreement, and (iii) if the Term of this Agreement terminates because of a resignation by the Executive without cause, the date specified in Section 2 for termination of the Term of this Agreement, the Executive will not directly or indirectly, whether as an employee, an owner or otherwise, be involved with any company that 5 --------------------------------------------------------------------------------   (ATARI LOGO) [y26731y2673101.gif]   Execution Copy develops, publishes or distributes video games in the United States of America, including publishing or distributing video games over the internet. Nothing in this paragraph will, however, prevent the Executive from owning as a passive investor less than 1% of the outstanding shares of a company the shares of which are listed on a national securities exchange, or traded on a national trading market, in the United States of America.      9. Intellectual Property Developed by Executive.           (a) Ownership of Intellectual Property. The Executive acknowledges and agrees that the Company will be the owner of all rights with regard to inventions (whether or not patentable), processes, ideas, works of authorship and other intellectual properties developed, created or discovered by the Executive in the course of his work for the Company or acquired by the Executive as a result of his position with the Company (“Executive Intellectual Properties”). The Executive will, during or after the Term of this Agreement, execute and deliver to the Company, at the Company’s expense, any documents of assignment or confirmations of ownership that the Company reasonably requests to assign to the Company, or confirm the Company’s ownership of, particular Executive Intellectual Properties. In addition, the Executive will, during or after the Term of this Agreement, execute and deliver to the Company, at the Company’s expense, any applications for patents, copyrights or other intellectual property protections with regard to Executive Intellectual Properties that the Company requests, which will either show the Company as the owner of the Executive Intellectual Properties or will show the Executive as the owner of the Executive Intellectual Property, but will be accompanied by documents of assignment sufficient to transfer ownership of the Executive Intellectual Properties to the Company. The Executive irrevocably appoints the Company and each of its duly authorized officers and agents as the Executive’s agent and attorney in fact, to execute on behalf of the Executive, verify, and file any documents, and to perform any other lawful acts, that the Executive is required by this Paragraph to execute or to perform, with the same effect as though the Executive had executed the documents or performed the acts himself.           (b) Waiver of Credit. The Executive expressly waives any rights the Executive may have to control the content or appearance of any Company Invention, to seek credit as its author/inventor or to seek compensation for any Company Invention in addition to the compensation to which the Employee is entitled under this Agreement for serving as an employee of the Company.      10. Non-Disparagement: During and after the Term of this Agreement, neither the Company nor the Executive will take any action which is intended, or would reasonably be expected, to harm the other’s reputation or which would reasonably be expected to lead to unwanted or unfavorable publicity regarding the other of them. Nothing in this Section 10 will, however, (i) preclude the Executive from making non-defamatory statements regarding the Company and taking other actions in the course of engaging in legitimate competitive activities not prohibited by Section 8(e), (ii) preclude the Company from making any filings or public announcements that it is advised by counsel are required in order to ensure that it will comply with all applicable securities laws and securities exchange or securities quotation system rules, or 6 --------------------------------------------------------------------------------   (ATARI LOGO) [y26731y2673101.gif]   Execution Copy (iii) preclude the Executive, the Company or any representative of the Company from testifying truthfully and completely, or from fully complying with any legal process, in any judicial or quasi-judicial proceeding or with regard to any governmental inquiry.      11. Termination:           (a) Death of Executive: The Executive’s employment, and the Term of this Agreement, will terminate automatically upon the Executive’s death. If the Term of this Agreement terminates because of the Executive’s death, the Company will pay to the Executive’s estate or designated beneficiary, (i) any salary that the Executive has earned but that remains unpaid as of the date of termination, any non-reimbursed business expenses and any bonus due for any completed fiscal year (“Accrued Amounts”), (ii) all installments of the Executive’s base salary that would be due during the remainder of the Term of this Agreement specified in Section 2 if the Executive had continued to be employed under this Agreement during the remainder of that term, and (iii) a pro rata portion of the Executive’s Incentive Bonus for the year in which the Term of this Agreement terminates determined as provided in Section 4(b) (the “Pro Rata Bonus). In addition, all stock options held by the Executive when the Term of this Agreement terminates because of the Employee’s death will become fully vested and immediately exercisable when the Term of this Agreement terminates, and will be exercisable for the period of one year after the day on which the Term of this Agreement terminates, or until such earlier date with regard to particular options as is the expiration date specified in those options. Notwithstanding the foregoing, such termination will not prejudice any benefits payable to the Executive or the Executive’s beneficiaries that are fully vested as of the date of termination pursuant to this Section 11(a).           (b) Disability of the Executive: If the Executive is unable to perform in all material respects his duties under this Agreement because of physical or mental disability to the extent that a New York State licensed health care provider deems, in accordance with the procedure set forth below, that Executive is unable to substantially perform his usual and customary duties under this Agreement for a period of more than six consecutive months, the Company may, by a notice given to the Executive while the Executive continues to be unable to perform in all material respects his duties under this Agreement, terminate the Executive’s employment and the Term of this Agreement on a date specified in the notice (which may be the day the notice is given). In the event of such termination, the Company will pay Executive (i) the Accrued Amounts, (ii) all installments of the Executive’s base salary that would be due during the remainder of the Term of this Agreement specified in Section 2 if the Executive had continued to be employed under this Agreement during the remainder of that term, and (iii) the Pro Rata Bonus, and the Executive will remain eligible for such short-term and long-term disability benefits as the Company provides to its senior executives generally under any programs by which the Executive is covered. In that regard, following the termination of the Term of this Agreement, the Executive will, to the extent permitted by any applicable disability plan, be considered an employee solely for the purpose of receiving disability benefits under disability plans. During any period before or after the Term of this Agreement terminates when the Executive collects disability benefits under a plan or insurance policy maintained by the Company, the base salary 7 --------------------------------------------------------------------------------   (ATARI LOGO) [y26731y2673101.gif]   Execution Copy to which the Executive is entitled under Section 4(a) or under this Paragraph will be reduced by the amount of the disability payments the Executive receives. All stock options held by the Executive when the Term of this Agreement terminates because of the Employee’s disability will become fully vested and immediately exercisable when the Term of this Agreement terminates, and will be exercisable for the period of one year after the day on which the Term of this Agreement terminates or until such earlier date with regard to particular options as the expiration date specified in those options. For the purposes of determining disability status under this Agreement, the parties agree that Executive shall be permitted in the first instance to seek certification of same from a licensed health care provider of his own choosing. Should Company have any reason to doubt the validity of the certification from the licensed health care provider chosen by Executive, the Company shall have the right, at Company’s expense, that Executive obtain the opinion of a second health care provider, approved by the Company. In the event that the second opinion described above materially differs from or contradicts the first opinion received from the health care provider chosen by the Executive, the Company reserves the right at its expense, to require that Executive obtain the opinion of a third health care provider approved jointly, through good faith consultations, by the parties. The opinion of the third health care provider shall be deemed final and binding on the parties.           (c) Termination for Cause:                (i) The Company will have the right to terminate the Executive’s employment and the Term of this Agreement for Cause at any time during the Term of this Agreement by a notice in writing to the Executive describing in detail the Cause that is the reason for the termination and the date (which may be the day on which the notice is given) on which the Term of this Agreement will terminate.                (ii) For purposes of this Agreement, “Cause” will be defined as:                     (A) Willful failure or refusal to attempt in good faith to perform any of Executive’s material duties, responsibilities, or obligations under this Agreement which is not cured within 10 days after a written notice to the Executive that failure to cure the failure will result in termination of the Term of this Agreement.                     (B) Breach in a material respect of any of the covenants or agreements set forth in Section 8 or 10 of this Agreement which is not curable, or if it is curable, has not been cured within 10 days after proper written notice;                     (C) Fraud, theft or material dishonesty that effects the Company;                     (D) Conviction of a felony or plea of nolo contendre involving a felony, whether or not involving the Company;                     (E) A breach in a material respect of any policy of the Company, of which Executive has received written notice, that says that violation may result in termination of employment; or 8 --------------------------------------------------------------------------------   (ATARI LOGO) [y26731y2673101.gif]   Execution Copy                     (F) Gross neglect in carrying out the Executive’s duties, responsibilities, or obligations under this Agreement, which has a materially adverse effect on the Company.                (iii) If the Company notifies the Executive that it is terminating the Term of this Agreement for Cause, the Executive may, within five days after the notice from the Company, request a hearing before the Compensation Committee of the Board regarding whether there in fact is Cause. If the Executive requests a hearing, the Term of this Agreement will not terminate under this Paragraph until the Compensation Committee has held the hearing and reasonably determined whether there was or was not Cause. If the Compensation Committee determines that there was not Cause, the Company’s notice will be deemed withdrawn, and the Executive’s employment under this Agreement will continue as though no notice had been given. If the Compensation Committee determines that there was Cause, the Term of this Agreement will terminate on the later of the day after the day on which the Compensation Committee makes the determination and the day specified in the notice the Company had given to the Executive.                (iv) If the Company terminates the Term of this Agreement for Cause, the Executive will be entitled to the Accrued Amounts at the date the Term of this Agreement terminates, but the Executive will not be entitled to receive any bonus with regard to the fiscal year in which the Term of this Agreement terminates or any other incentive payments (other than unpaid balances of prior year bonuses, to the extent not precluded by law) and all stock options held by the Executive when the Term of this Agreement terminates will terminate when the Term of this Agreement terminates, and will no longer be exercisable after that time.           (d) Termination by Company Without Cause or by Executive for Good Reason. If the Company terminates the Executive’s employment under this Agreement during its Term for any reason other than the Executive’s death or disability or Cause, or if the Executive voluntarily resigns for “Good Reason” (as defined below):                (i) The Company will pay the Executive each month, without mitigation, the sum equal to one-twelfth of his annual base salary at the rate in effect when his employment terminates, and continue to provide the Executive with the medical benefits it has been providing in accordance with Section 6, for six months after the Executive’s employment terminates;                (ii) If the Executive does not, within six months after the Executive’s employment terminates, obtain substantially full time employment with another employer, or become engaged in business on a substantially full time basis as a self-employed person, the Company will pay the Executive each month the sum equal to one-twelfth of his annual base salary at the rate in effect when his employment terminates, and continue to provide the Executive with the medical benefits it has been providing in accordance with Section 6, for an additional three months after the end of the six month period. 9 --------------------------------------------------------------------------------   (ATARI LOGO) [y26731y2673101.gif]   Execution Copy                (iii) If the Executive does not, within nine months after the Executive’s employment terminates, obtain substantially full time employment with another employer, or become engaged in business on a substantially full time basis as a self-employed person, the Company will pay the Executive each month the sum equal to one-twelfth of his annual base salary at the rate in effect when his employment terminates, and continue to provide the Executive with the medical benefits it has been providing in accordance with Section 6, for an additional three months after the end of the nine month period.                (iv) The Company will pay the Executive, promptly after it is determined, the Pro-Rata Bonus;                (iv) All stock options held by the Executive will become fully vested and immediately exercisable when the Executive’s employment terminates, and will be exercisable for the period of three months (or, if the Executive’s employment terminates after the first anniversary of the Employment Date, the period of six months) after the day on which the Executive’s employment terminates or until such earlier date with regard to particular options as the expiration date specified in those options,                (v) For purposes of this Agreement, a resignation by the Executive will be for: Good Reason if it occurs within 60 days after the occurrence or any of the following:                     (A) a change in the Executive’s direct reporting relationship from that provided in Paragraph 1;                     (B) a material diminution or adverse change in the Executive’s position, office or duties (other than temporarily while Executive is incapacitated);                     (C) the assignment to the Executive of duties that are inconsistent in a material respect with the Executive’s position, and failure to withdraw the assignment of those duties within 10 days after written notice from the Executive to the Company that failure to withdraw the assignment of those duties will result in the Executive’s resignation for Good Reason;                     (D) a Change of Control and, within one year after the Change of Control, a change in the location of the Employee’s principal office, without the Executive’s consent, to a location outside the New York City metropolitan area; or                     (E) a material breach of this Agreement by the Company, and failure to cure the breach within 10 days after notice from the Executive to the Company that failure to cure the breach will result in the Executive’s resignation for Good Reason.                (vi) For the purposes of this Agreement, a “Change of Control” means: (i) the direct or indirect sale, lease, exchange or other transfer of all or substantially all (35% or more) of the assets of the Company to any person or entity or group of persons or entities acting in concert as a partnership or other group (a “Group of Persons”); (ii) the merger consolidation 10 --------------------------------------------------------------------------------   (ATARI LOGO) [y26731y2673101.gif]   Execution Copy or other business combination of the Company with or into another corporation with the effect that the shareholders of the Company, immediately following the merger, consolidation other business combination, hold 35% or less of the combined voting power of the then outstanding securities of the surviving corporation of such merger, consolidation or other business combination ordinarily having the right to vote in the election of directors; (iii) the replacement of a majority of the Board of Directors in any given year as compared to the directors who constituted the Board of Directors at the beginning of such year, and such replacement shall not have been approved by the Board of Directors, as constituted at the beginning of such year; and/or (iv) a person or group of persons shall, as a result of a tender or exchange offer, open market purchase, privately negotiated purchase or otherwise, have become a beneficial owner (within the meaning of Rule 13-d under the Securities Exchange Act of 1934, as amended) of securities of the Company representing 35% or more of the combined voting power of the then outstanding securities of such corporation ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of directors.           (f) Resignation of Executive without Good Reason. If the Executive resigns during the Term of this Agreement other than for Good Reason, the Term of this Agreement will terminate on the effective date of the resignation and the Executive will be entitled to the Accrued Amounts at the effective date of the resignation, but the Executive will not be entitled to receive any bonus with regard to the fiscal year during which the Executive resigns or the fiscal year during which the resignation becomes effective, or to any other incentive payments (other than unpaid balances of prior year bonuses) after the Executive resigns, and all stock options held by the Executive will terminate when the Executive resigns and will no longer be exercisable after that time. The termination of the Term of this Agreement under this Paragraph will not preclude the Company from seeking damages or any other relief to which it is entitled because the Executive did not fulfill his obligations under this Agreement for the entire term specified in Section 2.           (g) Sole Compensation to Executive because of Termination. The payments and benefits to which the Executive is entitled under this Section 11 will be the sole compensation to which the Executive is entitled following, or as a result of, the termination of the Executive’s employment prior to the termination date specified in Section 2. The Company may condition the making of any payments under this Section 11 upon the Executive’s delivering to the Company a document in which the Executive releases the Company from, and waives any rights against the Company with regard to, any claims or liabilities relating to the employment of the Executive under this Agreement or the termination of this Agreement, other than (i) rights under this Section 11 and (ii) any Accrued Amounts at the date when the Term of this Agreement terminates. Neither this paragraph, nor the release and waiver, will affect any vested rights the Executive has when the Term of this Agreement terminates under any incentive or benefit plans in which the Executive participates. The Executive shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement, including, without limitation, any severance provided for in this Section 11, by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Agreement be reduced or subject to any type of setoff as the result of self-employment or services performed for another 11 --------------------------------------------------------------------------------   (ATARI LOGO) [y26731y2673101.gif]   Execution Copy employer or third party or for any other reason. Notwithstanding the foregoing, in the event that any portion of the Executive’s Annual Salary has been earned but not paid or any reimbursable business expenses have been incurred by the Executive but not reimbursed, in each case to the date of termination of his employment, such amounts shall be paid to the Executive within ten (10) days following such date of termination.      12. Effect of Change of Control. If there is a Change in Control, as that term is defined in Section 11(d)(vi), after March 31, 2007, at the time when the Change of Control occurs, all stock options held by the Executive will become fully vested and immediately exercisable, all restricted stock of the Company held by the Executive will become non-forfeitable and all other unvested rights of the Executive under incentive plans of the Company will become fully vested and non-forfeitable.      13. Governing Law.           (a) Governing Law. This Agreement will be governed by and construed under the laws of the State of New York without giving effect to any principles of conflicts of laws that would apply the laws of any other jurisdiction.           (b) Arbitration. Except as provided in Section 13(c), all controversies or claims arising out of or relating to this Agreement, or otherwise relating to or arising from the Executive’s employment during the Term of this Agreement or the termination of that employment, will be resolved by binding arbitration before a single arbitrator conducted in New York County in accordance with the rules of the American Arbitration Association then in effect, and any award that may be rendered by the arbitrator may be enforced in any state or Federal court sitting in New York County, New York. The arbitrator will have no authority to change or modify any provision of this Agreement. The Executive will be entitled to reimbursement for reasonable attorneys’ fees in any arbitration proceeding brought in accordance with this Paragraph unless the arbitrator determines that the Executive’s overall position in the arbitration is frivolous or that the Executive asserted it in bad faith.           (c) Claims not Subject to Arbitration Section 13(b) will not apply to an effort by the Company to enforce, or to recover damages for a breach of, any material provision of Section 8, 9 or 10. Any action or proceeding relating to any of those provisions may be brought in any state or federal court sitting in New York County, New York. The Company and the Executive each (i) consents to the personal jurisdiction of each of those courts in any action or proceeding relating to any provision of Section 8, 9 or 10, (ii) agrees not to object to, or seek to change, the venue of any such action or proceeding brought in any of those courts, whether because of inconvenience of the forum or otherwise (but nothing in this Paragraph will prevent a party from removing an action or proceeding from a state court to a Federal court sitting in that county) and (iii) agrees that process in any such action or proceeding may be served by registered mail or in any other manner permitted by the rules of the court in which the action of proceeding is brought. 12 --------------------------------------------------------------------------------   (ATARI LOGO) [y26731y2673101.gif]   Execution Copy           (d) Right to Injunction. The Executive acknowledges that if the Executive breaches any of his material obligations under any of Sections 8, 9 and 10, the Company is likely to suffer irreparable damages the amount of which cannot readily be calculated. Therefore, the Executive agrees that the Company will be entitled to seek injunctive or other equitable relief with regard to any threatened or ongoing violation of any of those provisions. That relief will be in addition to, and not instead of, any other relief to which the Company is entitled.      14. Benefit of the Agreement. This Agreement will be for the benefit of the Executive and the Company and any permitted successors or assigns.      15. Assignment:           (a) The Company: The Company may not assign any of its rights or obligations under this Agreement, except that the Company may assign its rights and obligations under this Agreement to any purchaser, or person who otherwise becomes the owner, of all or substantially all of the Company’s business or assets and which is obligated to fulfill the Company’s obligations under this Agreement by operation of law, agreement, or otherwise.           (b) The Executive: The Executive may not assign or delegate any of his rights or obligations under this Agreement, except that if the Executive dies, his monetary rights under this Agreement will inure to the benefit of his estate or designated beneficiary as provided in Section 11(a).      16. Miscellaneous:      a) No Conflict: The Executive represents and warrants that neither his employment with the Company nor his performance of any of his obligations under this Agreement will conflict with or violate any obligations the Executive has to any other person, whether under an agreement or otherwise.      b) Legal Fees: The Executive will be reimbursed for the agreed to legal fees incurred in the negotiation and review of the Employment Agreement which are $30,000.00 (gross). The Executive’s attorney shall bill Atari, Inc. directly for such fees, with narrative, and the invoice shall be paid within thirty (30) days after the delivery of his invoice.      c) Cooperation:                (i) Following termination of the Term of this Agreement, the Executive will cooperate with the Company, as reasonably requested by the Company and subject to the Company’s reimbursement of the Executive’s reasonable out-of-pocket expenses, to effect an orderly transition of the Executive’s responsibilities and to ensure that the Company is aware of all material matters being handled by Executive.                (ii) During and after the Term of this Agreement, the Executive will, at the Company’s expense, provide all information and other assistance that the Company may 13 --------------------------------------------------------------------------------   (ATARI LOGO) [y26731y2673101.gif]   Execution Copy reasonably request in connection with any legal, quasi-legal or other governmental proceeding, including any external or internal investigation, involving the Company or any of its affiliates relating to activities in which Executive was involved during the Term of this Agreement and in which Executive’s interests are not adverse to those of the Company.           (c) Entire Agreement: This Agreement contains the entire agreement between the parties regarding the subject matter of this Agreement and supercedes any prior agreements or understandings between the parties regarding that subject matter.           (d) Amendment: This Agreement may be amended only by a writing which makes express reference to this Agreement and which is signed by the Executive and by the Company.           (e) Severability: If any provision of this Agreement is held to be invalid or unenforceable in whole or in part, the remainder of this Agreement will remain in full force and effect, and the invalid or unenforceable provision wilt be deemed modified to the extent necessary to make the provision valid and enforceable while carrying out to the fullest extent possible the intent of the parties expressed in the original provision.           (f) Construction: The headings and captions of this Agreement are for convenience only and are not intended to have no effect in construing or interpreting this Agreement. The language in this Agreement will in all cases be construed according to its fair meaning and not strictly for or against the Company or the Executive. As used in this Agreement, the word “Company” includes the Company and its subsidiaries and any purchaser of, or successor to, all or substantially all of the Company’s business or assets which is obligated to fulfill the Company’s obligations under this Agreement by operation of law, agreement, or otherwise           (g) Notices: Any notice or other communication under or with respect to this Agreement must be in writing and will be deemed given when it is delivered in person or sent by facsimile or email transmission to the Company or the Executive, as the case may be, at the Company’s principal offices, or on the third day after the day on which it is mailed to the Company or the Executive, as the case may be, by first class mail addressed to the Company or the Executive at the Company’s principal offices, except that after the Term of this Agreement terminates, any notice or other communication to the Executive will be deemed given when it is delivered in person or sent by facsimile or email transmission, or on the third day after the day on which it is mailed by first class mail, to the Executive at an address specified by the Executive to the Company in the manner provided in this Paragraph (or, if the Executive does not specify an address, at the Company’s principal offices). Courtesy copies of all notices to Executive will be sent to Uncyk, Borenkind and Nadler, LLP, 114 West 47th Street, 22nd floor, New York, NY 10036-8401, Attn: Barry H. Platnick, Esq. 14 --------------------------------------------------------------------------------   (ATARI LOGO) [y26731y2673101.gif]   Execution Copy           (h) Insurance and Indemnification:                (i) The Company will include the Executive as an insured under any directors and officers liability insurance policy maintained by the Company during the Term of this Agreement.                (ii) The Company will indemnify the Executive to the fullest extent permitted by law and the Company’s certificate of incorporation and by-laws with regard to claims or liabilities during the Term of this Agreement or relating acts of the Executive as an officer and employee of the Company during the Term of this Agreement.           (i) Counterparts: This Agreement may be executed in one or more counterparts, some of which may contain signatures of fewer than all the parties or may contain facsimile copies of the signatures of some of the parties. Each of those counterparts will be an original copy of this Agreement, but all of them together will constitute one and the same agreement.                   ATARI, INC.                               By:    (-s- BRUNO BONNELL) [y26731y2673102.gif]       9/1/2006                       Bruno Bonnell       Date         Chairman of the Board &                 Chief Creative Officer                               ACCEPTED AND AGREED TO:                               By:    (-s- DAVID PIERCE) [y26731y2673103.gif]       9/1/2006                       David Pierce       Date     15

Exhibit 10.1   DLJ MB IV HRH, LLC Eleven Madison Avenue, 16th Floor New York, New York 10010 December 1, 2006 Morgans Hotel Group 475 Tenth Avenue New York, New York 10018 Attn:  David Smail Re:          Financing Waiver Date Dear Mr. Smail: Reference is hereby made to that certain Contribution Agreement dated as of November 7, 2006 (as amended on November 20, 2006, November 22, 2006, November 28, 2006, November 29, 2006 and November 30, 2006, the ”Contribution Agreement”) by and among DLJ MB IV HRH, LLC (“DLJMB”) and Morgans Hotel Group Co. (“Morgans”).  Capitalized terms used but not defined herein have the meanings given to them in the Contribution Agreement. This letter is to confirm our agreement that, for all purposes under the Contribution Agreement, the Financing Waiver Date shall be extended from 5:00 p.m. Eastern Standard Time on Friday, December 1, 2006 to the earlier of (a) 5:00 p.m. Eastern Standard Time on Saturday, December 2, 2006; and (b) such time as DLJMB and Morgans shall have entered into an amendment and restatement of the Contribution Agreement in a form mutually acceptable to such parties. This letter supersedes any prior agreements relating to the subject matter hereof, and shall be deemed to be effective as of 4:59 p.m. Eastern Standard Time on Friday, December 1, 2006. Please acknowledge that the foregoing conforms to Morgans’ understanding with respect to the extension of the Financing Waiver Date, by signing this letter below and returning it to DLJMB. -------------------------------------------------------------------------------- This letter may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute one and the same instrument.   Very truly yours,       DLJ MB IV HRH, LLC       By: /s/ Steven Rattner       Steven Rattner         Agreed to and Acknowledged as of   December 1, 2006:       Morgans Hotel Group Co.       By: /s/ W. Edward Scheetz             cc:           Stephen G. Gellman, Esq.     --------------------------------------------------------------------------------

  Exhibit 10.4 CONTINUING GUARANTY TO:WELLS FARGO BANK, NATIONAL ASSOCIATION      1. GUARANTY; DEFINITIONS. In consideration of any credit or other financial accommodation heretofore, now or hereafter extended or made to Lindsay Italia, S.r.l. (Borrowers”), or any of them, by WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”), and for other valuable consideration, the undersigned Lindsay Corporation (“Guarantor”), unconditionally guarantees and promises to pay to Bank, or order, on demand in lawful money of the United States of America and in immediately available funds, any and all Indebtedness of any of the Borrowers to Bank. The term “Indebtedness” is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities of Borrowers, or any of them, heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, including under any swap, derivative, foreign exchange, hedge, deposit, treasury management or other similar transaction or arrangement, and whether any of the Borrowers may be liable individually or jointly with others, or whether recovery upon such Indebtedness may be or hereafter becomes unenforceable. This Guaranty is a guaranty of payment and not collection.      2. MAXIMUM LIABILITY; SUCCESSIVE TRANSACTIONS; REVOCATION; OBLIGATION UNDER OTHER GUARANTIES. The liability of Guarantor shall not exceed at any time the sum of (a) $13,195,000.00 (b) all accrued and unpaid interest on any Indebtedness, and (c) all costs and expenses pertaining to the enforcement of this Guaranty and/or the collection of the Indebtedness. Notwithstanding the foregoing, Bank may permit the Indebtedness of Borrowers to exceed Guarantor’s liability. This is a continuing guaranty and all rights, powers and remedies hereunder shall apply to all past, present and future Indebtedness of each of the Borrowers to Bank, including that arising under successive transactions which shall either continue the Indebtedness, increase or decrease it, or from time to time create new Indebtedness after all or any prior Indebtedness has been satisfied, and notwithstanding the death, incapacity, dissolution, liquidation or bankruptcy of any of the Borrowers or Guarantor or any other event or proceeding affecting any of the Borrowers or Guarantor. This Guaranty shall not apply to any new Indebtedness created after actual receipt by Bank of written notice of its revocation as to such new Indebtedness; provided however, that loans or advances made by Bank to any of the Borrowers after revocation under commitments existing prior to receipt by Bank of such revocation, and extensions, renewals or modifications, of any kind, of Indebtedness incurred by any of the Borrowers or committed by Bank prior to receipt by Bank of such revocation, shall not be considered new Indebtedness. Any such notice must be sent to Bank by registered U.S. mail, postage prepaid, addressed to its office at Nebraska Main RCBO, 1919 Douglas Street, Omaha, NE 68102, or at such other address as Bank shall from time to time designate. The obligations of Guarantor hereunder shall be in addition to any obligations of Guarantor under any other guaranties of any liabilities or obligations of any of the Borrowers or any other persons heretofore or hereafter given to Bank unless said other guaranties are expressly modified or revoked in writing; and this Guaranty shall not, unless expressly herein provided, affect or invalidate any such other guaranties.   --------------------------------------------------------------------------------        3. OBLIGATIONS INDEPENDENT; SEPARATE ACTIONS; WAIVER OF STATUTE OF LIMITATIONS; REINSTATEMENT OF LIABILITY. The obligations hereunder are independent of the obligations of Borrowers, and a separate action or actions may be brought and prosecuted against Guarantor whether action is brought against any of the Borrowers or any other person, or whether any of the Borrowers or any other person is joined in any such action or actions. Guarantor acknowledges that this Guaranty is absolute and unconditional, there are no conditions precedent to the effectiveness of this Guaranty, and this Guaranty is in full force and effect and is binding on Guarantor as of the date written below, regardless of whether Bank obtains collateral or any guaranties from others or takes any other action contemplated by Guarantor. Guarantor waives the benefit of any statute of limitations affecting Guarantor’s liability hereunder or the enforcement thereof, and Guarantor agrees that any payment of any Indebtedness or other act which shall toll any statute of limitations applicable thereto shall similarly operate to toll such statute of limitations applicable to Guarantor’s liability hereunder. The liability of Guarantor hereunder shall be reinstated and revived and the rights of Bank shall continue if and to the extent for any reason any amount at any time paid on account of any Indebtedness guaranteed hereby is rescinded or must otherwise be restored by Bank, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, all as though such amount had not been paid. The determination as to whether any amount so paid must be rescinded or restored shall be made by Bank in its sole discretion; provided however, that if Bank chooses to contest any such matter at the request of Guarantor, Guarantor agrees to indemnify and hold Bank harmless from and against all costs and expenses, including reasonable attorneys’ fees, expended or incurred by Bank in connection therewith, including without limitation, in any litigation with respect thereto.      4. AUTHORIZATIONS TO BANK. Guarantor authorizes Bank either before or after revocation hereof, without notice to or demand on Guarantor, and without affecting Guarantor’s liability hereunder, from time to time to: (a) alter, compromise, renew, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; (b) take and hold security for the payment of this Guaranty or the Indebtedness or any portion thereof, and exchange, enforce, waive, subordinate or release any such security; (c) apply such security and direct the order or manner of sale thereof, including without limitation, a non-judicial sale permitted by the terms of the controlling security agreement, mortgage or deed of trust, as Bank in its discretion may determine; (d) release or substitute any one or more of the endorsers or any other guarantors of the Indebtedness, or any portion thereof, or any other party thereto; and (e) apply payments received by Bank from any of the Borrowers to any Indebtedness of any of the Borrowers to Bank, in such order as Bank shall determine in its sole discretion, whether or not such Indebtedness is covered by this Guaranty, and Guarantor hereby waives any provision of law regarding application of payments which specifies otherwise. Bank may without notice assign this Guaranty in whole or in part. Upon Bank’s request, Guarantor agrees to provide to Bank copies of Guarantor’s financial statements.      5. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Bank that: (a) this Guaranty is executed at Borrowers’ request; (b) Guarantor shall not, without Bank’s prior written consent, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all or a substantial or material part of Guarantor’s assets other than in the ordinary course of Guarantor’s business; (c) Bank has made no representation to Guarantor as to the creditworthiness of any of the Borrowers; and (d) Guarantor has established adequate means of obtaining from each of the Borrowers on a continuing basis financial and other information pertaining to Borrowers’ financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events or circumstances which might in any way affect Guarantor’s risks hereunder, and Guarantor further agrees that Bank shall have no obligation to disclose to Guarantor any information or material about any of the Borrowers which is acquired by Bank in any manner.   --------------------------------------------------------------------------------        6. GUARANTOR’S WAIVERS.      (a) Guarantor waives any right to require Bank to: (i) proceed against any of the Borrowers or any other person; (ii) marshal assets or proceed against or exhaust any security held from any of the Borrowers or any other person; (iii) give notice of the terms, time and place of any public or private sale or other disposition of personal property security held from any of the Borrowers or any other person; (iv) take any other action or pursue any other remedy in Bank’s power; or (v) make any presentment or demand for performance, or give any notice of nonperformance, protest, notice of protest or notice of dishonor hereunder or in connection with any obligations or evidences of indebtedness held by Bank as security for or which constitute in whole or in part the Indebtedness guaranteed hereunder, or in connection with the creation of new or additional Indebtedness.      (b) Guarantor waives any defense to its obligations hereunder based upon or arising by reason of: (i) any disability or other defense of any of the Borrowers or any other person; (ii) the cessation or limitation from any cause whatsoever, other than payment in full, of the Indebtedness of any of the Borrowers or any other person; (iii) any lack of authority of any officer, director, partner, agent or any other person acting or purporting to act on behalf of any of the Borrowers which is a corporation, partnership or other type of entity, or any defect in the formation of any such Borrower; (iv) the application by any of the Borrowers of the proceeds of any Indebtedness for purposes other than the purposes represented by Borrowers to, or intended or understood by, Bank or Guarantor; (v) any act or omission by Bank which directly or indirectly results in or aids the discharge of any of the Borrowers or any portion of the Indebtedness by operation of law or otherwise, or which in any way impairs or suspends any rights or remedies of Bank against any of the Borrowers; (vi) any impairment of the value of any interest in any security for the Indebtedness or any portion thereof, including without limitation, the failure to obtain or maintain perfection or recordation of any interest in any such security, the release of any such security without substitution, and/or the failure to preserve the value of, or to comply with applicable law in disposing of, any such security; (vii) any modification of the Indebtedness, in any form whatsoever, including any modification made after revocation hereof to any Indebtedness incurred prior to such revocation, and including without limitation the renewal, extension, acceleration or other change in time for payment of, or other change in the terms of, the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; or (viii) any requirement that Bank give any notice of acceptance of this Guaranty. Until all Indebtedness shall have been paid in full, Guarantor shall have no right of subrogation, and Guarantor waives any right to enforce any remedy which Bank now has or may hereafter have against any of the Borrowers or any other person, and waives any benefit of, or any right to participate in, any security now or hereafter held by Bank. Guarantor further waives all rights and defenses Guarantor may have arising out of (A) any election of remedies by Bank, even though that election of remedies, such as a non-judicial foreclosure with respect to any security for any portion of the Indebtedness, destroys Guarantor’s rights of subrogation or Guarantor’s rights to proceed against any of the Borrowers for reimbursement, or (B) any loss of rights Guarantor may suffer by reason of any rights, powers or remedies of any of the Borrowers in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging Borrowers’ Indebtedness, whether by operation of law or otherwise, including any rights Guarantor may have to a fair market value hearing to determine the size of a deficiency following any foreclosure sale or other disposition of any real property security for any portion of the Indebtedness.      7. BANK’S RIGHTS WITH RESPECT TO GUARANTOR’S PROPERTY IN BANK’S POSSESSION. In addition to all liens upon and rights of setoff against the monies, securities or other property of Guarantor given to Bank by law, Bank shall have a lien upon and a right of setoff against all monies, securities and other property of Guarantor now or hereafter in the possession of or on deposit with Bank, whether held in a general or special account or deposit or for safekeeping or otherwise, and every such lien and right of setoff may be exercised without demand upon or notice to Guarantor. No lien   --------------------------------------------------------------------------------   or right of setoff shall be deemed to have been waived by any act or conduct on the part of Bank, or by any neglect to exercise such right of setoff or to enforce such lien, or by any delay in so doing, and every right of setoff and lien shall continue in full force and effect until such right of setoff or lien is specifically waived or released by Bank in writing.      8. SUBORDINATION. Any Indebtedness of any of the Borrowers now or hereafter held by Guarantor is hereby subordinated to the Indebtedness of Borrowers to Bank. Such Indebtedness of Borrowers to Guarantor is assigned to Bank as security for this Guaranty and the Indebtedness and, if Bank requests, shall be collected and received by Guarantor as trustee for Bank and paid over to Bank on account of the Indebtedness of Borrowers to Bank but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty. Any notes or other instruments now or hereafter evidencing such Indebtedness of any of the Borrowers to Guarantor shall be marked with a legend that the same are subject to this Guaranty and, if Bank so requests, shall be delivered to Bank. Bank is hereby authorized in the name of Guarantor from time to time to file financing statements and continuation statements and execute such other documents and take such other action as Bank deems necessary or appropriate to perfect, preserve and enforce its rights hereunder.      9. REMEDIES; NO WAIVER. All rights, powers and remedies of Bank hereunder are cumulative. No delay, failure or discontinuance of Bank in exercising any right, power or remedy hereunder shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Bank of any breach of this Guaranty, or any such waiver of any provisions or conditions hereof, must be in writing and shall be effective only to the extent set forth in writing.      10. COSTS, EXPENSES AND ATTORNEYS’ FEES. Guarantor shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys’ fees (to include outside counsel fees and all allocated costs of Bank’s in-house counsel), expended or incurred by Bank in connection with the enforcement of any of Bank’s rights, powers or remedies and/or the collection of any amounts which become due to Bank under this Guaranty, and the prosecution or defense of any action in any way related to this Guaranty, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Guarantor or any other person or entity. All of the foregoing shall be paid by Guarantor with interest from the date of demand until paid in full at a rate per annum equal to the greater of ten percent (10%) or Bank’s Prime Rate in effect from time to time.      11. SUCCESSORS; ASSIGNMENT. This Guaranty shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Guarantor may not assign or transfer any of its interests or rights hereunder without Bank’s prior written consent. Guarantor acknowledges that Bank has the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, any Indebtedness of Borrowers to Bank and any obligations with respect thereto, including this Guaranty. In connection therewith, Bank may disclose all documents and information which Bank now has or hereafter acquires relating to Guarantor and/or this Guaranty, whether furnished by Borrowers, Guarantor or otherwise. Guarantor further agrees that Bank may disclose such documents and information to Borrowers.      12. AMENDMENT. This Guaranty may be amended or modified only in writing signed by Bank and Guarantor.   --------------------------------------------------------------------------------        13. APPLICATION OF SINGULAR AND PLURAL. In all cases where there is but a single Borrower, then all words used herein in the plural shall be deemed to have been used in the singular where the context and construction so require; and when there is more than one Borrower named herein, or when this Guaranty is executed by more than one Guarantor, the word “Borrowers” and the word “Guarantor” respectively shall mean all or any one or more of them as the context requires.      14. UNDERSTANDING WITH RESPECT TO WAIVERS; SEVERABILITY OF PROVISIONS. Guarantor warrants and agrees that each of the waivers set forth herein is made with Guarantor’s full knowledge of its significance and consequences, and that under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any waiver or other provision of this Guaranty shall be held to be prohibited by or invalid under applicable public policy or law, such waiver or other provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such waiver or other provision or any remaining provisions of this Guaranty.      15. GOVERNING LAW. This Guaranty shall be governed by and construed in accordance with the laws of the State of Nebraska.      16. ARBITRATION.      (a) Arbitration. The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise, in any way arising out of or relating to this Guaranty and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination.      (b) Governing Rules. Any arbitration proceeding will (i) proceed in a location in Nebraska selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to herein, as applicable, as the “Rules”). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.      (c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.   --------------------------------------------------------------------------------        (d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of Nebraska or a neutral retired judge of the state or federal judiciary of Nebraska, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator’s discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of Nebraska and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Nebraska Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.      (e) Discovery. In any arbitration proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party’s presentation and that no alternative means for obtaining information is available.      (f) Class Proceedings and Consolidations. No party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except parties who have executed this Guaranty or any other contract, instrument or document relating to any Indebtedness, or to include in any arbitration any dispute as a representative or member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity.      (g) Payment Of Arbitration Costs And Fees. The arbitrator shall award all costs and expenses of the arbitration proceeding.      (h) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the documents between the parties or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the documents or any relationship between the parties.   --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty as of December 27, 2006. Lindsay Italia, S.r.l.           By:                   Title:                    

  Exhibit 10.1 STERLING CONSTRUCTION COMPANY, INC. Restricted Stock Agreement       Award Date:   [__________________________]       Award Recipient:   [__________________________]       Number of Shares of Common Stock:   [__________________________]       Termination (Vesting) Date:   At 5:00 p.m. Central Time on the day immediately preceding the [year] Annual Meeting of Stockholders This Restricted Stock Agreement (this “Agreement”) is made effective on the Award Date set forth above and is entered into between Sterling Construction Company, Inc., a Delaware corporation (the “Company”) and the above-named Award Recipient (the “Grantee”) pursuant to the Company’s 2001 Stock Incentive Plan (the “Plan”) which is incorporated herein by reference. The Grantee acknowledges that he has received a copy of the Plan. Capitalized terms used but not defined in this Agreement have the meanings given to them in the Plan. This Award constitutes the equity portion of non-employee director compensation due to the Grantee that has been established by the Corporate Governance & Nominating Committee of the Board of Directors (the “Board.”) In consideration of the premises and the covenants contained herein, the parties agree as follows: 1.   Grant of Restricted Stock. Subject to the terms and conditions of this Agreement, the Company awards to the Grantee, and the Grantee accepts the number of shares of common stock of the Company set forth above. Those shares together with any additional shares of stock of the Company issued on account of those shares as a result of stock dividends, stock splits or recapitalizations (whether by way of mergers, consolidations, combinations or exchanges of shares or the like) are referred to in this Agreement as the “Restricted Stock.”)   2.   Restrictions. Until the termination of the restrictions, the Restricted Stock may not be sold, assigned, transferred, pledged or otherwise disposed of or encumbered except as provided in this Agreement. No rights or interests of the Grantee under this Agreement or under the Plan may be assigned, encumbered or transferred except by will or the laws of descent and distribution. On the date the Grantee ceases to be a director of the Company for any reason other his death or Disability (as defined below) all Restricted Stock that is then subject to the restrictions imposed under this Section 2 shall be forfeited and returned to the Company unless the Board in its discretion shall determine otherwise. Definition of Disability. As used herein, the term “Disability” means the Grantee’s inability by reason of physical or mental impairment to perform service as a director for ninety or more days within any six-month period. Any dispute as to whether a Disability exists will be finally resolved by an independent qualified physician acceptable to the Company and the Grantee or his personal representative, as appropriate, or, if the Company and the   --------------------------------------------------------------------------------   Grantee or his representative are unable to agree on an independent qualified physician, by a panel of three physicians, one designated by the Company, one designated by the Grantee or his representative, and one designated by the two physicians so designated. The cost of the determination shall be borne by the Company. 3.   Termination of Restrictions. The restrictions set forth in Section 2, above — Shall terminate as to the Restricted Stock on the Termination Date set forth above, Shall terminate earlier in the event the Grantee no longer serves as a member of the Board by reason of his death or Disability, and Shall terminate in the event of a Change in Control of the Company as described in Section 9, below.     Whether and when Vesting has occurred (other than by reason of the passage of time) shall be determined by the Board in its sole discretion.   4.   Rights as Stockholder. Except for the restrictions and the other limitations and conditions set forth in this Agreement, the Grantee as owner of the Restricted Stock shall have all the rights of a stockholder, including but not limited to the right to receive any dividends paid on the Restricted Stock and the right to vote the Restricted Stock.   5.   Stock Certificates. Each certificate representing Restricted Stock shall be registered in the name of the Grantee and shall be deposited with the Company by the Grantee together with a stock power endorsed in blank and shall bear the following (or a similar) legend: “The transferability of this certificate and the shares of stock represented hereby are subject to the terms, conditions and restrictions (including forfeiture provisions) contained in a stock incentive plan and in an agreement between the registered owner and the issuer. A copy of the plan and the agreement will be furnished to the holder of this certificate by the issuer without charge upon written request.” Upon the termination of the restrictions imposed by this Agreement, the Company shall return to the Grantee (or to the Grantee’s legal representative, as appropriate) a certificate for the Restricted Stock without the legend referred to in Section 0, above. 6.   Tax Withholding. The Grantee shall pay to the Company or shall make provision satisfactory to the Company for payment of any taxes required by law to be paid by or withheld from the Grantee with respect to the Restricted Stock no later than the date of the event creating the tax liability. To the extent permitted by law, the Company may deduct any such tax obligation if not paid when due from any payment of any kind due from the Company to the Grantee.   7.   Securities and Other Laws. It shall be a condition to the Grantee’s right to receive the Restricted Stock hereunder that the Company may, in its discretion, require — that the Restricted Stock shall have been duly listed, upon official notice of issuance, upon any national securities exchange or automated quotation system on which the Company’s common stock may then be listed or quoted; that either (a) a registration statement under the Securities Act of 1933 (the “Act”) with respect to the Restricted Stock shall be in effect; or (b) in the opinion of counsel to the Company, the proposed issuance and delivery of the Restricted Stock to the Grantee shall be exempt from registration under the Act in which event, the Grantee shall have made such undertakings and agreements with the Company as the Company may reasonably require; and   --------------------------------------------------------------------------------   that such other steps, if any, as counsel to the Company shall consider necessary to comply with any law applicable to the issuance of the Restricted Stock shall have been taken by the Company or the Grantee, or both. The certificate representing the Restricted Stock may contain such legends as counsel for the Company shall consider necessary to comply with any applicable law. 8.   Adjustment in Provisions. Upon any change from time to time in the outstanding common stock of the Company by reason of a stock dividend, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares or other such transaction affecting the Company’s common stock, the relevant parts of this Agreement shall be appropriately adjusted by the Company, if necessary, to reflect such change equitably.   9.   Change in Control. Notwithstanding any other provision of this Agreement, in order to preserve the Grantee’s rights under this Agreement, upon a Change in Control of the Company, all the restrictions imposed on the Restricted Stock by Section 2, above, shall terminate.   10.   Notice of Election Under Section 83(b). If the Grantee makes an election under Section 83(b) of the Internal Revenue Code of 1986, as amended, and the regulations and rulings promulgated thereunder or under comparable provisions of other laws, he will provide a copy thereof to the Company within thirty days of the filing of such election with the Internal Revenue Service or other authority.   11.   Amendments. The Board may amend, modify or terminate this Agreement, including substituting therefor another Award of the same or a different type, provided that the Grantee’s consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Grantee.   12.   Decisions by the Board. Any dispute or disagreement that arises under, or as a result of, or pursuant to, this Agreement shall be resolved by the Board in its sole and absolute discretion, and any such resolution or any other determination by the Board under, or pursuant to, this Agreement and any interpretation by the Board of the terms of this Agreement or the Plan shall be final, binding, and conclusive on all persons affected thereby. For purposes of this Agreement, any action that is required to be or that may be taken by the Board, shall mean taken in accordance with the by-laws of the Company by the directors then in office, but excluding therefrom the Grantee so that the Board shall be considered to consist of all directors then in office other than the Grantee. In Witness Whereof, the Board has caused this Agreement to be executed by the Chairman of the Board, and the Grantee has hereunto set his hand and seal, all effective on the Award Date. Sterling Construction Company, Inc.                                     By:                     Patrick T. Manning, Chairman       [Name of the Grantee]      

Exhibit 10.5 TERMINATION AND RELEASE AGREEMENT This Termination and Release Agreement (the “Agreement”) is entered into as of July 18, 2006 by and among Trenton E. Taylor (the “Executive”), Westbank Corporation (“WBC”), a Massachusetts corporation, Westbank, a Massachusetts chartered bank and trust company and a wholly-owned subsidiary of WBC, and NewAlliance Bancshares, Inc. (“NewAlliance”), a Delaware corporation. RECITALS: WHEREAS, NewAlliance, NewAlliance Bank, WBC and Westbank are entering into an Agreement and Plan of Merger, dated as of July 18, 2006 (the “Merger Agreement”); and WHEREAS, Section 7.5.7 of the Merger Agreement provides that NewAlliance, WBC, Westbank and the Executive shall enter into this Agreement, which shall terminate the change of control agreement between WBC, Westbank and the Executive dated December 17, 2003 (the “Change of Control Agreement”) as of the Effective Time of the Merger, and in lieu of any rights and payments under the Change of Control Agreement, the Executive shall be entitled to the rights and payments set forth herein; NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Executive, WBC, Westbank and NewAlliance agree as follows: 1. Actions to be Taken in 2006. (a) The Executive hereby agrees to take the following actions between the date hereof and December 29, 2006, it being the intention of the parties hereto that all of such actions shall be fully effective and consummated no later than December 29, 2006 (or such other date as may be specified below): (i) consent, to the extent any such consent is required by the Executive, to the accelerated vesting as of the date the shareholders of WBC approve the Merger Agreement of all unvested restricted stock awards granted to the Executive with respect to the common stock of WBC, provided that any unvested restricted stock awards scheduled to vest prior to such date shall vest on their originally scheduled vesting date; (ii) accept a lump sum cash payment from WBC or Westbank on December 22, 2006 in the amount of $125,000 (with applicable withholding taxes to be subtracted from such amount), representing a partial prepayment of the cash severance the Executive is entitled to under Section 6(b) of the Change of Control Agreement; (iii) accept on or before December 29, 2006 such prepayment, if any, of the dollar amount specified in Section 2(a) below that may be mutually agreed to by WBC and NewAlliance in order to avoid the potential reduction in payments under Section 2(c) below; and -------------------------------------------------------------------------------- (iv) cooperate with NewAlliance and WBC and take such other steps as may in good faith be requested of the Executive by NewAlliance in order to avoid the potential reduction in payments under Section 2(c) below. (b) WBC shall take all steps necessary to accelerate as of the date the shareholders of WBC approve the Merger Agreement the vesting of all of the unvested restricted stock awards granted to the Executive, and WBC or Westbank shall pay to the Executive on December 22, 2006 the amount specified in Section 1(a)(ii) above. (c) In the event the above actions are taken but are insufficient to avoid the potential reduction in payments under Section 2(c) below, then WBC or Westbank shall prepay to the Executive on or before December 29, 2006 such portion of the dollar amount specified in Section 2(a) below as shall be mutually agreed to by WBC and NewAlliance (which agreement shall not be unreasonably withheld or delayed). 2. Payments to Be Made as of the Effective Time of the Merger. (a) As of the Effective Time of the Merger, provided the Executive is still employed by WBC immediately prior to such date and provided that the Executive and WBC have taken all of the actions required to be taken pursuant to Section 1 hereof, WBC or Westbank shall pay to the Executive a lump sum cash amount equal to $222,576, subject to adjustment as set forth in Section 2(c) below (the “Maximum Amount”), less applicable tax withholdings and less any portion thereof that is prepaid in December 2006 pursuant to Sections 1(a)(iii) and 1(c) above. In consideration of such payment and the other provisions of this Agreement, the Executive, WBC, Westbank and NewAlliance hereby agree that the Change of Control Agreement and the Executive’s employment with WBC shall be terminated without any further action of any of the parties hereto, effective immediately prior to the Effective Time of the Merger, except as set forth in Section 4 hereof. The Executive agrees that the above payment shall be in complete satisfaction of all of his rights to payments or benefits under the Change of Control Agreement, except as set forth in Section 4 hereof. (b) WBC and the Executive represent and warrant that the information with respect to the Executive contained in Section 4.14.8 of the WBC Disclosure Schedule to the Merger Agreement accurately reflects the Executive’s taxable Form W-2 income for each of the four years ended December 31, 2005 and contains a complete listing of all payments or benefits to the Executive that could be deemed to be a parachute payment under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), based on the assumptions set forth in such schedule. (c) Each of the parties hereto agrees that if the actions specified in Section 1 above are taken as required, then based on Section 2(b) above the payments and benefits to be provided to the Executive should not trigger any tax reimbursement payments pursuant to Section 13 of the Change of Control Agreement. In the event any of the actions specified in Section 1 above is not taken as required, or if any of the representations in Section 2(b) is not correct, and if such failure results in the Maximum Amount, either alone or together with other payments and benefits which the Executive has the right to receive from NewAlliance, WBC or Westbank, whether pursuant to this Agreement or otherwise, being a “parachute payment” under Section 2 -------------------------------------------------------------------------------- 280G of the Code, then the Maximum Amount payable by WBC or Westbank pursuant to Section 2(a) hereof shall be reduced by the amount which is the minimum necessary to result in no portion of the payment payable by WBC or Westbank under Section 2(a) being non-deductible to WBC, Westbank or NewAlliance (or any successors thereto) pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code. If any of the payments or benefits to be provided by WBC, Westbank or NewAlliance are subject to the excise tax imposed by Section 4999 of the Code but are not required to be reduced by this Section 2(c), then the indemnity under Section 13 of the Change of Control Agreement (which section remains in full force and effect pursuant to Section 4 of this Agreement) shall be provided to the Executive by NewAlliance; provided, however, that if the amount of the indemnity is known as of the Effective Time of the Merger, then such indemnity shall be provided by either WBC or Westbank at the request of NewAlliance. (d) As of the Business Day immediately prior to the Effective Date of the Merger, provided the Executive is still employed by WBC immediately prior to such date, WBC or Westbank shall pay to the Executive an additional lump sum cash amount equal to $102,467, less applicable tax withholdings, in complete satisfaction of all of the Executive’s rights to payments or benefits under the Executive Supplemental Retirement Plan Agreement between the Executive and Westbank (formerly Park West Bank and Trust Company) dated July 2, 2001 (the “SERP Agreement”). In consideration of such payment, the parties hereto agree that the SERP Agreement shall be terminated without any further action of any of the parties hereto on or before the date of such payment in accordance with the terms of the Merger Agreement. (e) The parties hereto agree that the payments pursuant to Sections 1(a)(ii) and (iii) above should not trigger any of the excise taxes or interest penalties under Section 409A of the Code based on the current provisions of such section and the proposed regulations issued under Section 409A of the Code. However, in the event the final regulations issued under Section 409A are construed so as to impose the excise tax and interest penalties specified under Section 409A of the Code on any of the payments under Sections 1(a)(ii) or (iii) of this Agreement, then NewAlliance shall provide a tax indemnification to the Executive so that the Executive is in the same after-tax position he would have been in if the excise tax and interest penalties under Section 409A of the Code had not been imposed on such payments; provided, however, that if the amount of the indemnity is known as of the Effective Time of the Merger, then such indemnity shall be provided by either WBC or Westbank at the request of NewAlliance. 3. Payment of Fringe Benefits. (a) NewAlliance agrees to provide the Executive with continued health, dental, life and disability coverage, pursuant to either the policies currently offered by WBC and Westbank or the policies to be offered by NewAlliance to the Continuing Employees of WBC, until the earlier of thirty (30) calendar months following the Effective Time of the Merger or the Executive’s commencement of full-time employment with a new employer, subject to the terms and conditions of such policies, with the Executive responsible for paying the same share of any premiums, copayments or deductibles as if he was an employee and with the disability and life insurance coverage subject to the maximum coverage limits in the current policies of WBC or Westbank, except as set forth below in this Section 3(a). The health and dental coverage shall include any dependents of the Executive who are covered by WBC or Westbank as of the date of 3 -------------------------------------------------------------------------------- this Agreement and who remain covered by WBC or Westbank as of the Effective Time of the Merger. In the event the Executive’s participation in any such plan is barred, NewAlliance shall arrange to provide the Executive with benefits substantially similar to those which the Executive would otherwise have received under such plans from which his continued participation is barred or pay to the Executive a cash amount equal to the amount NewAlliance would have paid for such coverage if the Executive was still an employee. In addition, notwithstanding the foregoing, if the provision of any of the benefits covered by this Section 3(a) would trigger the 20% tax and interest penalties under Section 409A of the Code either due to the nature of such benefit or the length of time it is being provided, then the benefit(s) that would trigger such tax and interest penalties due to the nature of the benefit shall not be provided at all and the benefit(s) that would trigger the tax and interest penalties if provided beyond the “limited period of time” set forth in the regulations under Section 409A shall not be provided beyond such limited period of time (collectively, the “Excluded Benefits”), and in lieu of the Excluded Benefits NewAlliance shall pay to the Executive, in a lump sum within 30 days following termination of employment or within 30 days after such determination should it occur after termination of employment, a cash amount equal to the amount NewAlliance would have paid for such Excluded Benefits in the absence of Section 409A of the Code. (b) In calculating the value of the benefits to be provided pursuant to Section 3(a) above, the parties agree to assume that the premiums in effect as of August 31, 2006 will increase by 15% per year to cover anticipated premium increases over the 30 month period specified in Section 3(a) above. 4. Releases. Upon payment of the amounts set forth in Section 2(a) hereof (as such amount may be adjusted pursuant to Section 2(c) hereof) and in Section 2(d) hereof, the Executive, for himself and for his heirs, successors and assigns, does hereby release completely and forever discharge WBC, Westbank and their successors from any obligation under the Change of Control Agreement, except for the provisions of Section 13 of the Change of Control Agreement which shall remain in full force and effect, and under the SERP Agreement. The obligations of NewAlliance to provide benefits pursuant to Section 3 above shall continue for the period specified therein. This Agreement shall not release WBC, Westbank or NewAlliance from any of the following: (a) obligations to pay to the Executive wages earned up to the Effective Time of the Merger; (b) the payment of any of the Executive’s vested benefits, or honoring any of the Executive’s rights, under the WBC Employee Plans, excluding any bonus plans, employment agreement, change of control agreement or other severance agreement or plan, (c) the payment of the Merger Consideration with respect to the Executive’s common stock of WBC or stock options or restricted stock awards with respect to the common stock of WBC, or (d) the obligations of NewAlliance under Section 7.6 of the Merger Agreement. 5. General. (a) Heirs, Successors and Assigns. The terms of this Agreement shall be binding upon the parties hereto and their respective heirs, successors and assigns. (b) Final Agreement. This Agreement represents the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior understandings, written or oral. The terms of this Agreement may be changed, modified or discharged only by an 4 -------------------------------------------------------------------------------- instrument in writing signed by each of the parties hereto. In the event the Internal Revenue Service issues final regulations under Section 409A of the Code prior to the Effective Time of the Merger and such regulations are deemed to result in the imposition of the excise taxes and/or interest penalties under Section 409A of the Code on any of the payments or benefits to be provided under this Agreement, then the parties hereto agree to negotiate in good faith an amendment to this Agreement to avoid such excise taxes and/or interest penalties to the extent possible, provided that the amounts payable to the Executive under Sections 1, 2(a) and 2(d) of this Agreement shall not be delayed beyond the Effective Time of the Merger or reduced in the aggregate. (c) Withholdings. WBC, Westbank and NewAlliance may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as may be required to be withheld pursuant to applicable law or regulation. (d) Governing Law. This Agreement shall be construed, enforced and interpreted in accordance with and governed by the laws of the State of Connecticut, without reference to its principles of conflicts of law, except to the extent that federal law shall be deemed to preempt such state laws. (e) Defined Terms. Any capitalized terms not defined in this Agreement shall have as their meaning the definitions contained in the Merger Agreement. (f) Voluntary Action and Waiver. The Executive acknowledges that by his free and voluntary act of signing below, the Executive agrees to all of the terms of this Agreement and intends to be legally bound thereby. The Executive acknowledges that he has been advised to consult with an attorney prior to executing this Agreement. (g) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. 6. Effectiveness. Notwithstanding anything to the contrary contained herein, this Agreement shall be subject to consummation of the Merger in accordance with the terms of the Merger Agreement, as the same may be amended by the parties thereto in accordance with its terms. In the event the Merger Agreement is terminated for any reason, this Agreement shall be deemed null and void with respect to all actions not yet taken pursuant to this Agreement. [Signature page follows]   5 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, NewAlliance, WBC and Westbank have each caused this Agreement to be executed by their duly authorized officers, and the Executive has signed this Agreement, effective as of the date first above written. WITNESS: EXECUTIVE:         /s/ Robert J. Perlak /s/ Trenton E. Taylor  Name: Robert J. Perlak Name: Trenton E. Taylor             ATTEST: WESTBANK CORPORATION             /s/ Robert J. Perlak By:  /s/ Donald R. Chase Name: Robert J. Perlak Name: Donald R. Chase   Title: President and Chief Executive Officer         ATTEST: WESTBANK             /s/ Robert J. Perlak By:  /s/ Donald R. Chase Name: Robert J. Perlak Name: Donald R. Chase   Title: President and Chief Executive Officer         ATTEST: NEWALLIANCE BANCSHARES, INC.             /s/ Brian Arsenault By:  /s/ Merrill B. Blanksteen Name: Brian Arsenault Name: Merrill B. Blanksteen   Title:   Executive Vice President and Chief   Financial Officer   6 --------------------------------------------------------------------------------

  Exhibit 10.1 1. Section 1 of the Plan shall be amended to add a reference to director participation in the Plan, and shall read in its entirety as follows:      1. Purpose. The purpose of the 2005 Stock Incentive Plan (this “Plan”) of Horizon Offshore, Inc. (“Horizon”) is to increase stockholder value and to advance the interests of Horizon and its subsidiaries (collectively, the “Company”) by furnishing a variety of equity incentives (the “Incentives”) designed to attract, retain and motivate officers, employees, directors, consultants and advisors and to strengthen the mutuality of interests between such persons and Horizon’s stockholders. Incentives may consist of options to purchase shares of Horizon’s common stock (the “Common Stock”), stock appreciation rights, shares of restricted stock, restricted stock units or other stock-based awards, the value of which is based upon the value of the Common Stock, all on terms determined under this Plan. As used in this Plan, the term “subsidiary” means any corporation, limited liability company or other entity of which Horizon owns (directly or indirectly) within the meaning of Section 424(f) of the Internal Revenue Code of 1986, as amended (the “Code”), 50% or more of the total combined voting power of all classes of stock, membership interests or other equity interests issued thereby. 2. Section 2.2 shall be amended to delete the last sentence. 3. Section 3 shall be amended to add the following sentence to the end of the paragraph: Directors who are not also employees of the Company (“Outside Directors”) may participate in the Plan only as specifically provided in Section 12 hereof. 4. The first sentence of Section 4.5(a) shall be amended to delete the reference to Section 4 and shall read in its entirety as follows: In the event of any recapitalization, reclassification, stock dividend, stock split, combination of shares or other change in the Common Stock, all limitations on numbers of shares of Common Stock provided in this Plan and the number of shares of Common Stock subject to outstanding Incentives shall be equitably adjusted in proportion to the change in outstanding shares of Common Stock. 5. New Section 12 shall be added to the Plan, and shall read in its entirety as follows: 12. Stock Options for Outside Directors 12.1 Grant of Options. Outside Directors shall receive the following:      (a) Each Outside Director shall be automatically granted non-qualified stock options to purchase 250,000 shares of Common Stock on the 21st calendar day after mailing an information statement in accordance with Rule 14c-2(b) under the 1934 Act; and      (b) On the day following each annual meeting of stockholders of Horizon occurring after December 31, 2005, each Outside Director shall be automatically granted non-qualified stock options to purchase up to 250,000 shares of Common Stock, the exact number of which shall be set by the Board of Directors.      12.2 Exercisability of Stock Options. Subject to the Committee’s right to accelerate the exercisability of any stock option and subject to the Committee’s rights under Section 11.12, the stock options granted to Outside Directors under this Section 12 shall be exercisable one year after the date of grant and shall expire ten years following the date of grant.      12.3 Exercise Price. The exercise price of the stock options granted to Outside Directors shall be equal to the Fair Market Value, as defined in the Plan, of a share of Common Stock on the date of grant.   --------------------------------------------------------------------------------   The exercise price may be paid as provided in Section 5.5 hereof.      12.4 Exercise After Termination of Board Service. In the event an Outside Director ceases to serve on the Board, the stock options granted hereunder must be exercised, to the extent otherwise exercisable at the time of termination of Board service, within one year from termination of Board service; provided, however, that in the event of termination of Board service as a result of retirement (at age 65 or later or after having completed five or more years of service on the Board), the stock options may be exercised within five years from the date of termination of Board service. Notwithstanding the foregoing, no stock options may be exercised later than ten years after the date of grant.  

  Exhibit 10.28 Confidential       EXECUTION VERSION LOAN AGREEMENT      THIS LOAN AGREEMENT (this “Agreement”) is dated and entered into as of February 14, 2006 by and between SIRION THERAPEUTICS, INC., a North Carolina corporation (“Borrower”), and PHARMABIO DEVELOPMENT INC., a North Carolina corporation (“Lender”). BACKGROUND      WHEREAS, Borrower has requested certain credit facilities and Lender is willing to extend such credit facilities to Borrower, subject to and upon the terms and conditions of this Agreement;      NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties hereby agree as follows: ARTICLE I Definitions      1.1 Definitions. Capitalized terms used but not defined in the text of this Agreement shall have the meanings ascribed to them on Exhibit A attached hereto and incorporated herein by reference. ARTICLE II Amount and Terms of Loan      2.1 Advances.           (a) Subject to and upon the terms and conditions set forth herein, Lender agrees, at any time and from time to time, from and after date hereof and prior to December 31, 2006 (the “Maturity Date”), to make advances (each an “Advance” and collectively the “Advances”) to Borrower at such times and in such amounts as Borrower shall request pursuant to this Agreement, up to an aggregate principal amount of Five Million Dollars ($5,000,000) (the “Commitment”) in lawful money of the United States of America in immediately available funds. The Commitment shall become available to Borrower only as follows:   (i)   Two Hundred Fifty Thousand Dollars ($250,000) of the Commitment shall be available on the date hereof;     (ii)   Two Million Two Hundred Fifty Thousand Dollars ($2,250,000) shall be available upon the occurrence of Milestone One, at which point the Commitment shall equal an   --------------------------------------------------------------------------------         aggregate principal amount of Two Million Five Hundred Thousand Dollars ($2,500,000), subject to the terms and conditions of this Agreement. “Milestone One” shall mean the earlier to occur of (A) the consummation by Borrower of a Licensing Transaction (as defined below) that provides for the payment by Borrower of aggregate up-front consideration (i.e., fees payable upon consummation as compared, for example, with milestone, royalty or similar payments) in excess of One Million Dollars ($1,000,000), or (B) the consummation by Borrower of at least two Licensing Transactions, without regard to the amount of up-front consideration. For purposes of this Agreement, a “Licensing Transaction” shall mean a transaction, approved by Borrower’s Board of Directors (including the affirmative vote of at least one director designated by Lender), by which Borrower licenses, controls or otherwise gains rights to a Product.     (iii)   Upon the occurrence of Milestone One and Milestone Two, an additional Two Million Five Hundred Thousand Dollars ($2,500,000) shall be available, at which point the Commitment shall equal an aggregate principal amount of Five Million Dollars ($5,000,000), subject to the terms and conditions of this Agreement. “Milestone Two” shall mean the earlier to occur of (A) the consummation by Borrower of two or more Licensing Transactions that collectively provide for the payment by Borrower of aggregate up-front consideration in excess of Two Million Dollars ($2,000,000), or (B) the consummation by Borrower of at least four Licensing Transactions, without regard to the amount of up-front consideration.           (b) Notwithstanding anything to the contrary herein, Lender shall have no obligation to make any Advances in excess of the $250,000 aggregate amount specified in Section 2.1(a)(i) above unless and until Lender’s investment committee shall have approved the availability of each of the Commitment amounts under Section 2.1(a)(ii) and Section 2.1(a)(iii). Lender agrees to use commercially reasonable efforts to obtain such approval promptly after the date hereof.           (c) Borrower may use the Commitment, as in effect from time to time, on a revolving basis by borrowing Advances, repaying the Advances in whole or in part, and reborrowing, all in accordance with the terms and conditions of this Agreement. The aggregate outstanding amount of the Advances at any time shall not exceed the Commitment as in effect at such time. If at any time, the aggregate outstanding principal amount of the Advances exceeds the Commitment, Borrower shall immediately pay to Lender the amount of such excess in immediately available funds. 2 --------------------------------------------------------------------------------             (d) Each Advance shall be a principal amount of a loan, evidenced by the Note referred to below.      2.2 Use of Proceeds. Borrower will use the Advances only for Licensing Transactions or for company operations and working capital purposes (a) consistent with Borrower’s budget as approved by Borrower’s Board of Directors (including the affirmative vote of at least one director designated by Lender), or (b) otherwise as approved by Borrower’s Board of Directors (including the affirmative vote of at least one director designated by Lender).      2.3 Notices of Advances; Disbursement of Funds.           (a) Whenever Borrower desires to obtain an Advance, Borrower shall give to Lender a written notice of the requested Advance, signed by an authorized officer of Borrower (each a “Notice of Advance”), and received no later than 1:00 p.m. United States Eastern Time ten (10) Business Days before the day on which Borrower desires the Advance to be made. The Notice of Advance shall specify: (i) the aggregate principal amount of the Advance to be made; (ii) the date on which Borrower desires the Advance to be made, which date shall be a Business Day; and (iii) an account of Borrower to which the Advance shall be directed and wire transfer instructions. The giving of each Notice of Advance shall constitute a representation and warranty by Borrower to Lender that the conditions precedent set forth in Section 3.2 have been satisfied.           (b) Whenever Borrower desires to obtain an Advance, Lender shall make available to Borrower, at the account of Borrower specified to Lender, not later than 2:00 p.m. United States Eastern Time on the date specified in the applicable Notice of Advance the aggregate amount of such requested Advance, subject to terms and conditions of this Agreement. Each such amount shall be an Advance under this Agreement and the Note referred to below. Each Notice of Advance requesting an Advance shall be irrevocable when sent by Borrower, unless otherwise agreed by Lender.           (c) The amount of each Advance shall not be less than the lesser of (i) Two Hundred Fifty Thousand Dollars 250,000 or (ii) the entire principal amount remaining under the Commitment at the date of such Advance.           (d) Notwithstanding anything to the contrary contained herein, unless otherwise determined by Borrower’s Board of Directors (including the affirmative vote of at least one director designated by Lender), subject to Section 2.1(b),                (i) if Milestone One shall have occurred and any Commitment amount remains available under Section 2.1(a)(ii) as of the first closing of a Qualified Financing (the “Remaining Milestone One Amount”), then (A) immediately prior to such closing, the Borrower shall be deemed to have received an Advance in an amount equal to the Remaining Milestone One Amount (which amount shall be converted as described in Section 2.6), and (B) promptly 3 --------------------------------------------------------------------------------   following such closing, Lender shall make available to Borrower, at the account of Borrower specified to Lender, an amount equal to the Remaining Milestone One Amount; and                (ii) if Milestone Two shall have occurred and any Commitment amount remains available under Section 2.1(a)(iii) as of the first closing of a Qualified Financing (the “Remaining Milestone Two Amount”), then (A) immediately prior to such closing, the Borrower shall be deemed to have received an Advance in an amount equal to the Remaining Milestone Two Amount (which amount shall be converted as described in Section 2.6), and (B) promptly following such closing, Lender shall make available to Borrower, at the account of Borrower specified to Lender, an amount equal to the Remaining Milestone Two Amount.      2.4 Note and Security Agreement. Borrower’s obligation to pay the principal of, and interest on, the Advances made by Lender shall be evidenced by a single promissory note (the “Note”) duly executed and delivered by Borrower in the form of Exhibit B attached hereto and secured by a security interest under the security agreement the parties are entering into contemporaneously with this Agreement (the “Security Agreement”). All Advances made by Lender to Borrower, and all payments in respect thereof, shall be recorded by Lender and shall be set forth on the grid attached to the Note. Failure to make any such notation on such grid, however, shall not affect Borrower’s obligations in respect of such Advances.      2.5 Repayment; Interest; Reduction of Commitment.           (a) Unless converted earlier as set forth below, Borrower shall pay the aggregate outstanding principal amount of, and all accrued interest on, all Advances on or before the Maturity Date, unless any such amount becomes due and payable sooner pursuant to the provisions of this Agreement. Borrower may prepay any Advance or any accrued interest on Advances at any time and from time to time without penalty, on the following terms and conditions: (i) Borrower shall give Lender at least three (3) Business Days’ prior written notice of its intent to prepay and of the amount of the prepayment, (ii) the prepayment shall have been approved by Borrower’s Board of Directors (including the affirmative vote of at least one director designated by Lender), and (iii) each prepayment shall not be less than the lesser of $250,000 all principal and accrued interest then outstanding.           (b) Borrower agrees to pay interest in respect of the outstanding principal amount of each Advance from the date the proceeds are made available to Borrower until repaid. Interest on the outstanding principal amount of each Advance shall accrue and be payable at a rate per annum equal to eight percent (8%), or, if less, the maximum rate permitted by Law (the “Base Rate”). Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed.           (c) Accrued interest shall be due and payable upon any payment of principal, on the amount paid.           (d) The outstanding principal amount of an Advance or any accrued interest amounts thereon that are not paid when due shall accrue interest on a daily basis at the lesser of 4 --------------------------------------------------------------------------------   (i) three percent (3%) in excess of the Base Rate, or (ii) the maximum rate permitted by Law, such accrual beginning on the date payment is due and continuing until the date payment is made in full.           (e) All payments of principal and interest described above shall be made to Lender in lawful money of the United States of America in immediately available funds at such place or account as Lender may designate from time to time.           (f) If Borrower’s rights with respect to any Product are terminated pursuant to the terms and conditions of the agreements governing the applicable Licensing Transaction, then such Licensing Transaction shall be treated as if it had never been consummated for purposes of determining whether Milestone One or Milestone Two have occurred. If pursuant to the preceding sentence Milestone One or Milestone Two shall be determined not to have occurred, then the Commitment automatically shall be deemed reduced effective as of the date that Borrower’s rights with respect to the applicable Product were terminated.      2.6 Automatic Conversion.           (a) Notwithstanding anything to the contrary contained herein, unless otherwise determined by Borrower’s Board of Directors (including the affirmative vote of at least one director designated by Lender), all outstanding principal amounts of Advances and any accrued but unpaid interest amounts thereon will automatically be converted upon the first closing of a Qualified Financing into the type of New Securities offered in such Qualified Financing and Lender’s obligation to make Advances hereunder shall be terminate.           (b) The number of shares of New Securities into which such principal and interest shall be converted shall be determined as described in this Section 2.6(b).                (i) If the pre-money valuation of Borrower in connection with the Qualified Financing is equal to or less than three times the aggregate outstanding principal of, and accrued but unpaid interest on, all Advances, then such principal and interest shall be converted into that number of shares of New Securities that on an as-converted to Common Stock basis (i.e., as if the New Securities were converted to Common Stock based on the conversion rate of the New Securities) when added to the aggregate Fully-Diluted Common Stock immediately before the first closing of such Qualified Financing (such sum, the “Pre-Money Fully-Diluted Common Stock”) would be equal to the Applicable Percentage of the Pre-Money Fully-Diluted Common Stock. “Applicable Percentage” means the greater of (A) sixty percent (60%) or (B) that percentage equal to (x) the aggregate outstanding principal of all Advances and accrued interest thereon divided by (y) the pre-money valuation of Borrower in connection with the Qualified Financing.                (ii) If the pre-money valuation of Borrower in connection with the Qualified Financing is greater than three times the aggregate outstanding principal of, and accrued but unpaid interest on, all Advances, then such principal and interest shall be converted 5 --------------------------------------------------------------------------------   into that number of shares of New Securities that on an as-converted to Common Stock basis would be equal to fifty percent (50%) of the Pre-Money Fully-Diluted Common Stock.           (c) Borrower will not, by amendment of its Articles of Incorporation or Bylaws, or through any reorganization, recapitalization, reclassification, merger, consolidation, transfer of assets, dissolution, issue or sale of securities, or any other action, avoid or seek to avoid the observance or performance of any of the terms of this Section 2.6, but will at all times in good faith assist in carrying out all the provisions of this Section 2.6 and in taking all such action as be necessary or appropriate in order to protect the rights of Lender against impairment.           (d) Borrower shall, as soon as reasonably practicable after the first closing of a Qualified Financing issue and deliver to Lender a certificate or certificates for the number of shares of New Securities to which Lender is entitled upon conversion pursuant to this Section 2.6.      2.7 Alternative Milestone Payment. If Milestone Two shall not have occurred by the first closing of a Qualified Financing, then promptly following the occurrence of Milestone Two, Lender shall make available to Borrower, at the account of Borrower specified to Lender, an amount equal to Two Million Five Hundred Thousand Dollars ($2,500,000); provided, however, that Lender’s obligation under this Section 2.7 shall terminate if Milestone Two shall not have occurred by December 31, 2007, and, provided further, that Lender shall have no obligation under this Section 2.7 unless and until Lender’s investment committee shall have approved the availability of either the Commitment amount under Section 2.1(a)(iii) or the milestone payment under this Section 2.7. For the avoidance of doubt, the Parties acknowledge that the milestone payment under this Section 2.7 is in lieu of Advances that Borrower might have received with respect to the Commitment amount under Section 2.1(a)(iii) had Milestone Two occurred before consummation of a Qualified Financing. ARTICLE III Conditions Precedent      3.1 Initial Conditions Precedent to Lender’s Obligations. The obligation of Lender to perform its obligations under this Agreement is subject to the condition precedent that Lender shall have received from Borrower on the date hereof a certificate, executed by the appropriate officer of Borrower and dated as of the date hereof, together with and certifying (i) a copy of the Articles of Incorporation of Borrower, as amended and in effect as of the date hereof; (ii) a copy of the Bylaws of Borrower, as amended and in effect as of the date hereof; (iii) a copy of the resolutions of the Board of Directors of Borrower authorizing the execution and delivery of the Transaction Documents and the performance by Borrower of the Transactions as in full force and effect as of the date hereof; (iv) that the representations and warranties contained in ARTICLE IV are true and correct as of the date hereof; (v) that Borrower has complied with all the agreements and satisfied all the conditions herein on its part to be performed or satisfied on or prior to the date hereof; and (vi) that no event has occurred and is continuing that constitutes an 6 --------------------------------------------------------------------------------   Event of Default (as defined in Section 7.1 hereof) or that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.      3.2 Conditions Precedent to All Advances. The obligation of Lender to make each Advance shall be subject to the further conditions precedent that, on the date of such Advance:           (a) the representations and warranties contained in ARTICLE IV are true and correct in all material respects on and as of the date of such Advance (except that those representations and warranties which are qualified as to material, materiality, Material Adverse Effect or similar expressions, or are subject to the same or similar type exceptions, shall be true and correct in all respects), before and after giving effect to such Advance, as though made on and as of such date;           (b) Borrower shall have performed, satisfied and complied with all covenants, agreements and conditions required under the Transaction Documents to be performed, satisfied or complied with on or prior to the date of such Advance;           (c) no event has occurred and is continuing, or would result from such Advance, which constitutes an Event of Default, or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and           (d) all principal amount of Advances, accrued interest or commitment fees under this Agreement, which are due and payable at the time of such Advance, if any, shall have been paid in full. ARTICLE IV Representations and Warranties      Borrower hereby represents and warrants to Lender as follows:      4.1 Organization and Qualification. Borrower is a corporation duly organized, validly existing and in good standing under the Laws of the State of North Carolina, and Borrower is qualified to do business as a foreign corporation in each jurisdiction in which such qualification is required, except where failure to so qualify has not had, or would not reasonably be expected to have, a Material Adverse Effect. Borrower does not own or control, directly or indirectly, any interest in any other corporation, partnership, limited liability company, joint venture, association, or other business entity. Borrower has all requisite corporate power and authority to own, lease and operate its properties and to carry on its businesses as now conducted and as proposed to be conducted.      4.2 Authority and Consents. Borrower has all necessary corporate power and authority to execute and deliver the Transaction Documents and to consummate the Transactions. The execution and delivery of the Transaction Documents and consummation of the Transactions have been duly authorized by all necessary corporate action on the part of 7 --------------------------------------------------------------------------------   Borrower and no other corporate proceedings on the part of Borrower are necessary to authorize the Transaction Documents or to consummate the Transactions. The Transaction Documents have been duly and validly executed and delivered by Borrower and constitute valid, legal and binding agreements of Borrower, enforceable against Borrower in accordance with their respective terms. No consent, authorization or order of, or filing or registration with, any Governmental or Regulatory Authority is required to be obtained or made by Borrower for the execution, delivery and performance of the Transaction Documents or the consummation of the Transactions. Neither the execution, delivery and performance of the Transaction Documents by Borrower nor the consummation by Borrower of the Transactions will (a) conflict with or result in any breach of any provision of the Articles of Incorporation or Bylaws of Borrower; (b) violate any Law applicable to Borrower or the Transactions; or (c) result in the creation of any Lien upon any assets of Borrower pursuant to the terms or provisions of, or will not conflict with, result in the breach or violation of, or constitute, either by itself or upon notice or the passage of time or both, a default under any agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which Borrower is a party or by which Borrower or any of its properties may be bound.      4.3 Capitalization. The authorized capital stock of the Company consists of (i) one million (1,000,000) shares of Common Stock, of which One Hundred Thousand (100,000) shares are issued and outstanding. All such issued and outstanding shares have been duly authorized and validly issued, are fully paid and nonassessable, and are owned beneficially and of record by Susan Benton (25,000 shares), Phillipe Boulangeat (25,000 shares), Barry Butler (25,000 shares), and Dr. Roger Vogel (25,000 shares). There are no outstanding rights, options, warrants, conversion rights or agreements for the purchase or acquisition from the Company of any shares of its capital stock other than the rights created by the Transaction Documents. There are no preemptive or similar rights to purchase or otherwise acquire shares of capital stock of the Company pursuant to the Company’s Articles of Incorporation or any agreement to which the Company is a party, there are no rights of any Person to require the Company to purchase securities of the Company held by such Person, and there is no agreement or restriction (such as a right of first refusal, right of first offer, proxy, voting trust or voting agreement) with respect to the sale or voting of any shares of capital stock of the Company (whether outstanding or issuable upon conversion or exercise of outstanding securities) other than the rights created by the Transaction Documents.      4.4 Absence of Undisclosed Liabilities. No Debt is outstanding with respect to or owed by Borrower. On the date hereof, Borrower does not have any material liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, arising out of transactions entered into, or any state of facts existing on or prior to the date of this Agreement that would be required under GAAP to be reported on the balance sheet of Borrower, other than liabilities and obligations arising in connection with the Transactions.      4.5 No Defaults. Borrower is not in violation or default of any provision of its Articles of Incorporation or Bylaws, or in breach of or default with respect to any provision of any agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which it is a party or by which it or any of its properties 8 --------------------------------------------------------------------------------   are bound; and there does not exist any state of fact which, with notice or lapse of time or both, would constitute an event of default or default, as defined in such documents or instruments, on the part of Borrower, and, to Borrower’s knowledge, no other party to any such documents or instruments is in default thereunder in any respect.      4.6 Contracts and Other Commitments. On the date hereof, Borrower does not have and is not bound by any contract, agreement, mortgage, deed of trust, lease, franchise, license, indenture, commitment, or other instrument, written or oral, absolute or contingent.      4.7 No Litigation or Other Actions. There are no legal or governmental actions, suits, proceedings or investigations pending or, to Borrower’s knowledge, threatened to which Borrower is or may be a party or of which property owned, licensed or leased by Borrower is or may be the subject. Borrower is not a party to or subject to the provisions of any material injunction, judgment, decree or order of any Governmental or Regulatory Authority.      4.8 Properties and Assets. Borrower has valid title to all the properties and assets used or held for use in its business, subject to no Lien of any kind except those under the Security Agreement or those that are not material in amount and do not adversely affect the use made and proposed to be made of such property by Borrower. Borrower holds its leased properties under valid and binding leases. Borrower does not own any registered Intellectual Property. Borrower has not received notice or other communication of any actual, alleged, or potential infringement, misappropriation or unauthorized use of Intellectual Property owned or used by any other person.      4.9 Compliance with Laws. Borrower has been and is in compliance in all material respects with all applicable Laws in respect of the conduct of its business, the ownership of its properties and all Products. Borrower has all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being conducted unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals, individually or in the aggregate, has not had, and would not reasonably be expected to have, a Material Adverse Effect.      4.10 Taxes. Borrower has filed all federal, state, local and foreign income and other tax returns required to be filed by it and has paid or accrued all taxes shown as due thereon, except where failure to do so would not reasonably be expected have a Material Adverse Effect, and Borrower has no knowledge of a tax deficiency which has been or might be asserted or threatened against it.      4.11 Key Personnel. As of the date hereof, Susan Benton, Phillipe Boulangeat, and Barry Butler are employees of Borrower. As of the date hereof, no officer, consultant or key employee of Borrower has terminated or, to the knowledge of Borrower, has any present intention of terminating his or her employment or engagement with Borrower.      4.12 FDA Matters. Neither Borrower nor any officer, consultant or key employee of Borrower has (a) been debarred by the FDA; (b) been debarred, excluded, suspended, or otherwise ineligible to participate in federal health care programs such as Medicare or Medicaid 9 --------------------------------------------------------------------------------   or in federal procurement and non-procurement programs; (c) been a party to a settlement, consent, or similar agreement with the FDA, Office of Inspector General, or U.S. District Attorney regarding the promotion or marketing of any pharmaceutical product; or (d) been convicted of violating any applicable Laws as a result of its promotion or marketing of any pharmaceutical product.      4.13 Disclosure. Borrower understands and confirms that Lender will rely on the foregoing representations in effecting the Transactions. All disclosure provided to Lender regarding Borrower, its business and the Transactions, including the representations in this Agreement, furnished by or on behalf of Borrower, taken together in the aggregate, are true and correct and do 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 material event or circumstance has occurred or information exists with respect to Borrower or its condition (financial or otherwise), properties, business, prospects, or results of operations, which has not been disclosed to Lender. ARTICLE V Covenants of Borrower      So long as any of the Advances or other obligations of Borrower under this Agreement shall remain unpaid or outstanding or Lender shall have any Commitment hereunder, Borrower shall comply with the following covenants:      5.1 Compliance with Licensing Transaction Agreements. Borrower shall perform and fulfill all of its obligations, and shall cause its Subsidiaries, if any, to perform and fulfill all of their respective obligations under each of the agreements related to any Licensing Transaction as necessary to maintain Borrower’s and its Subsidiaries’ respective rights in such agreements in full force and effect in all material respects. Borrower shall provide written notice to Lender within five (5) Business Days of Borrower’s or any of its Affiliate’s receipt of any notice from any other parties to any of the agreements described in the preceding sentence proposing or threatening to terminate any such agreement. Borrower shall use commercially reasonable efforts to ensure that all agreements related to any Licensing Transaction do not include any terms or conditions that prohibit or restrict (a) Borrower granting a security interest in Borrower’s rights thereunder, (b) assignment by Borrower of such agreements to Borrower’s Affiliates, or (c) any change of control of Borrower (or Affiliate assignee of Borrower).      5.2 Notice of Events of Default and Certain Other Events. Borrower agrees to provide prompt (but in any case not later than three (3) Business Days after any such event) written notice to Lender of the occurrence of any Event of Default, or any litigation, governmental proceeding or investigation or other event that would reasonably be expected to have a Material Adverse Effect.      5.3 FDA Correspondence. Borrower agrees to promptly (and in any case not later than three Business Days after submission or receipt) provide to Lender copies of material correspondence to or from the FDA related to any Product including, without limitation, any FDA action letters. Additionally, Borrower shall use commercially reasonable efforts to keep 10 --------------------------------------------------------------------------------   Lender informed of, and provide copies of material data and other primary documents regarding, all material Product developments, including, clinical trial results, other regulatory communications, Intellectual Property status, prescription and net sales data, and manufacturing and supply information.      5.4 Compliance. Borrower shall comply in all material respects with all applicable Laws in respect of the conduct of its business, the ownership of its properties and all Products. Borrower shall maintain in full force and effect all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.      5.5 No Grant of Rights. Borrower will not grant any right to any third party that would conflict with the rights granted to Lender hereunder or enter into any agreement that would impair its ability to perform its obligations under this Agreement.      5.6 Maintenance of Insurance. Borrower shall at all times maintain insurance in full force and effect with sound and reputable insurance companies of the types and in the amounts that Borrower reasonably believes is adequate for its business, including, but not limited to, insurance covering product liability and all real and personal property owned, licensed or leased by Borrower against all risks customarily insured against by similarly situated companies.      5.7 Debt. Without the prior written consent of Lender, Borrower shall not create or incur or allow to be created, incurred or exist any Debt, except Debt which is junior and subordinate in right of payment to the Obligations (such Debt being referred to herein as “Junior Debt”), so long as prior to the creation of such Junior Debt the holder thereof has agreed to subordination terms and conditions in form and substance reasonably satisfactory to Lender providing for the subordination of the Junior Debt to the Obligations.      5.8 Liens. Without the prior written consent of Lender, Borrower shall not create or incur or allow to be created, incurred or exist any Lien upon or with respect to any of Borrower’s assets or properties, except Liens securing Debt or other obligations which are junior and subordinate in right of payment to the Obligations (such Liens being referred to herein as “Junior Liens”), so long as prior to the creation of such Junior Liens the holder thereof has agreed to subordination terms and conditions in form and substance reasonably satisfactory to Lender providing for the subordination of the Junior Liens to the Obligations.      5.9 Disposition of Assets Related to Products. Borrower agrees not to sell, assign, license, lease or otherwise transfer all or any significant portion of its assets, properties or rights owned (or otherwise held) relating to any Product, in one or a series of related transactions, unless such disposition has been approved by Borrower’s Board of Directors (including the affirmative vote of at least one director designated by Lender).      5.10 Corporate Existence; Business. Borrower will (a) maintain and preserve in full force and effect its corporate existence, and (b) continue to engage in the business in which it is engaged on the date hereof. 11 --------------------------------------------------------------------------------   ARTICLE VI Grant of Certain Preferred Rights by Borrower to Lender      Borrower hereby grants to Lender (which for purposes of this ARTICLE VI shall mean and include its Affiliates) a preferred provider relationship whereby Lender shall have a first and preferred opportunity to negotiate for a period of thirty (30) days with Borrower (which for purposes of this ARTICLE VI shall mean and include its Subsidiaries, if any) to provide to Borrower any services which Lender provides to customers, which Borrower has decided to outsource or otherwise engage a service provider to perform during five year period following the date hereof, including without limitation clinical development, sales and marketing services, commercialization services, and similar services. Borrower shall allow and grant Lender the right to provide such services if Lender agrees to provide such services on competitive terms and conditions. ARTICLE VII Events of Default      7.1 Events of Default. The occurrence of each of the following events shall be considered an event of default (each an “Event of Default”):           (a) Borrower shall fail to pay any principal of, or interest on, the Note when the same becomes due and payable and three (3) Business Days have elapsed following receipt of notice of such non-payment from Lender to Borrower;           (b) any representation or warranty made by Borrower under this Agreement shall prove to have been incorrect or untrue in any material respect when made or deemed made;           (c) Borrower shall fail to perform or observe any term, covenant or agreement contained in this Agreement required to be performed or observed by Borrower in any material respect;           (d) one or more judgments, decrees or orders for the payment of money shall be entered against Borrower involving in the aggregate a liability of $250,000 or more, and any such judgment, decree or order shall continue without discharge or stay for a period of sixty (60) days;           (e) Borrower or any of its Affiliates is (i) debarred by the FDA; (ii) debarred, excluded, suspended, or otherwise ineligible to participate in federal health care programs such as Medicare or Medicaid or in federal procurement and non-procurement programs; (iii) a party to a settlement, consent, or similar agreement with the FDA, Office of Inspector General, or U.S. District Attorney regarding the promotion or marketing of any Product with a fine greater than $250,000; or (iv) convicted of violating any Law as a result of its promotion or marketing of any Product; 12 --------------------------------------------------------------------------------             (f) Borrower shall default in the performance or observance of any agreement or instrument relating to any Debt, or any other event shall occur or condition exist, and the effect of such default, event or condition is to cause or permit the holder of any such Debt to cause any such Debt to become due prior to its stated maturity;           (g) Lender shall determine in good faith that a material adverse change shall have occurred in the condition (financial or otherwise), properties, business, prospects or results of operations of Borrower that materially impairs Borrower’s ability to satisfy its obligations under the Loan Documents;           (h) the Security Agreement ceases to be in full force and effect;           (i) either Barry Butler shall have terminated his employment with Borrower, or Dr. Roger Vogel shall have ceased to devote at least fifty percent (50%) his full professional time to the performance of services as a consultant to or independent contractor of Borrower;           (j) Borrower shall (i) commence a voluntary case under the federal bankruptcy Laws (as now or hereafter in effect), (ii) file a petition seeking to take advantage of any other Laws relating to bankruptcy, insolvency, reorganization, winding up or composition for adjustment of debts, (iii) consent to or fail to contest in a timely manner any petition filed against it in an involuntary case under such bankruptcy Laws or other Laws, (iv) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, (v) admit in writing its inability to pay its Debts as they become due, (vi) make a general assignment for the benefit of creditors, or (vii) take any corporate action for the purpose of authorizing or effecting any of the foregoing; or           (k) a case or other proceeding shall be commenced against Borrower or any of its subsidiaries in any court of competent jurisdiction seeking (i) relief under the federal bankruptcy Laws (as now or hereafter in effect) or under any other Laws relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like for Borrower or any of its subsidiaries or for all or any substantial part of their respective assets, and such case or proceeding shall continue without dismissal or stay for a period of sixty (60) consecutive days, or an order granting the relief requested in such case or proceeding (including, but not limited to, an order for relief under such federal bankruptcy Laws) shall be entered.      7.2 Effect of Event of Default. If any Event of Default shall have occurred, then Lender (a) may, by notice to Borrower, declare the Commitment and Lender’s obligation to make Advances to be terminated, whereupon the same shall forthwith terminate, and (b) may, by notice to Borrower, declare the Note, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Note, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by Borrower; provided, however, that if an Event of Default specified in Sections 7.l(j) or 7.1(k) shall occur, 13 --------------------------------------------------------------------------------   (i) the Commitment and the obligation of Lender to make Advances shall automatically be terminated and (ii) the Note, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by Borrower. ARTICLE VIII Miscellaneous      8.1 Entire Agreement; Amendments. This Agreement and the other Transaction Documents embody the entire agreement and understanding between the parties hereto with respect to the subject matter thereof and supersede all prior agreements (oral or written), understandings, negotiations and discussions dealing with the same subject matter. No statement, representation, warranty, covenant or agreement of any kind not expressly set forth in the Transaction Documents shall affect, or be used to interpret, change or restrict, the express terms and provisions of the Loan Documents. If any provision contained in this Agreement shall be deemed to conflict with any provision of any of the other Transaction Documents, then the provision contained in this Agreement shall be controlling. The parties, from time to time during the term of this Agreement, may modify any of the provisions hereof only by an instrument in writing duly executed by the parties.      8.2 Notices. All notices and other communications required to be given by either party shall be in writing. All notices shall be to the parties and addresses listed below (or other addresses provided by written notice to the other party under this Section 8.2), and shall be deemed sufficiently given (a) when received, if delivered personally or sent by facsimile transmission with confirmed receipt, or (b) one Business Day after the date mailed by first class mail or sent by a nationally recognized overnight delivery service with charges prepaid for next Business Day delivery.               If to Borrower:   Sirion Therapeutics, Inc.         c/o Rx Development Resources, LLC         3110 Cherry Palm Drive, Suite 350         Tampa, FL 33619         Attention: President         Fax: (813) 910-9585               With a copy to         (which shall not         constitute notice):   R. Reid Haney         Ward Rovell, Professional Association         101 E. Kennedy Boulevard         Suite 4100         Tampa, Florida 33602         Fax: (813) 222-8701 14 --------------------------------------------------------------------------------                 If to Lender:   PharmaBio Development Inc.         4709 Creekstone Drive         Riverbirch Bldg., Suite 200         Durham, NC 27703         Attn: President         Fax: (919) 998-2090               With copies to         (which shall not         constitute notice):   PharmaBio Development Inc.         4709 Creekstone Drive         Suite 200, Riverbirch Building         Durham, NC 27703         Attention: General Counsel         Fax: 919-998-2090                   Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P.         2500 Wachovia Capitol Center         Raleigh, NC 27601         Attn: Christopher B. Capel         Fax: (919) 821-6800      8.3 No Waiver; Remedies. No failure or delay on the part of Lender in either exercising or enforcing any right under this Agreement will operate as a waiver of, or impair, any such right. No single or partial exercise or enforcement of any such right will preclude any other or further exercise or enforcement thereof or the exercise or enforcement of any other right. No waiver of any such right will have effect unless given in a signed writing. No waiver of any such right will be deemed a waiver of any other right. The rights and remedies set forth in this Agreement are cumulative and not exclusive of any rights or remedies provided by Law or otherwise.      8.4 Severability. If any part or parts of any Loan Document are held to be illegal, void or ineffective, the remaining portions of such Loan Document shall remain in full force and effect. If any of the terms or provisions is in conflict with any applicable Laws, then such term(s) or provision(s) shall be deemed inoperative to the extent that they may conflict therewith, and shall be deemed to be modified or conformed with such Laws. In the event of any ambiguity respecting any term or terms hereof, the parties agree to construe and interpret such ambiguity in good faith in such a way as is appropriate to ensure its enforceability and viability.      8.5 Interpretation. The headings contained in this Agreement are used only as a matter of convenience, and in no way define, limit, construe or describe the scope or intent of any section of this Agreement. All references to “Dollars” or $ shall mean the official currency of the United States of America except as expressly stated otherwise in this Agreement.      8.6 Publicity. Except as otherwise required by applicable Law or by obligations pursuant to any listing agreement with or rules of any securities exchange or automated quotation system, each party shall, and shall cause its Affiliates to, not, issue any press release or make any 15 --------------------------------------------------------------------------------   other public statement relating to, connected with or arising out of the Loan Documents or the matters contained therein without the other parties’ prior written approval, which approval shall not be unreasonably withheld or delayed.      8.7 Further Assurances. Each party shall, without further consideration, take such further action and execute and deliver such further documents as may be reasonably requested by the other party in order to carry out the provisions and purposes of this Agreement.      8.8 Counterparts. This Agreement and any amendment hereto may be executed in any number of counterparts and any party hereto may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument. The execution of this Agreement and any such amendment by any party hereto will not become effective until counterparts hereof have been executed by both parties hereto. The exchange of copies of this Agreement or amendments thereto and of signature pages by facsimile transmission or by email transmission in portable digital format, or similar format, shall constitute effective execution and delivery of such instrument(s) as to the parties and may be used in lieu of the original Agreement or amendment for all purposes. Signatures of the parties transmitted by facsimile or by email transmission in portable digital format, or similar format, shall be deemed to be their original signatures for all purposes.      8.9 Governing Law. This Agreement, and the rights and obligations of the parties arising hereunder or in connection herewith, including, without limitation, the interpretation, performance, enforcement, breach or termination thereof and any remedies relating thereto, shall be governed by and construed in accordance with the Laws of the State of North Carolina, as applied to agreements executed and performed entirely in the State of North Carolina, without regard to its conflicts of law rules.      8.10 Attorneys’ Fees. In any action, proceedings or litigation by Lender to collect amounts due and payable to Lender under the Loan Documents, Lender shall be entitled to recover from Borrower all fees, costs and expenses of collection, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expense of appeals.      8.11 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns, provided that Borrower may not assign or transfer any or all of its rights or delegate any or all of its obligations under the Loan Documents, including by operation of law, without the prior written consent of the Lender, and any attempted assignment or transfer by Borrower without consent shall be null and void. Nothing in this Section 8.11 shall preclude the transfer of Borrower’s rights and obligations under the Loan Documents in conjunction with a merger in which Borrower is not the surviving entity.      8.12 Disclaimer. Neither Lender nor Borrower, nor any of such party’s Affiliates, directors, officers, employees, subcontractors or agents shall have, under any legal theory (including, but not limited to, contract, negligence and tort liability), any liability to any other 16 --------------------------------------------------------------------------------   party hereto for any loss of opportunity or goodwill, or any type of special, incidental, indirect or consequential damage or loss, in connection with or arising out of this Agreement.      8.13 Jurisdiction. Any action or proceeding seeking to enforce any provision of, or based upon any right arising out of, this Agreement may be brought against either party in the courts of the State of North Carolina, or, if it has or can acquire jurisdiction, in the United States District Court for the Eastern District of North Carolina, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding. [signature page follows] 17 --------------------------------------------------------------------------------   [Signature Page to Loan Agreement]      IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.                   BORROWER:                       SIRION THERAPEUTICS, INC.                       By:   /s/ Barry Butler                       Name:  Barry Butler         Title:  President/Chief Executive Officer                       LENDER:                       PHARMABIO DEVELOPMENT INC.                       By:   /s/ Tom Perkins                        Name:  Tom Perkins         Title:  Senior Vice President     18 --------------------------------------------------------------------------------   EXHIBIT A DEFINITIONS      “Affiliate” shall mean any individual or entity directly or indirectly controlling, controlled by or under common control with, the specified individual or entity. For purposes of this Agreement, a person shall be deemed to control another person if such person possesses, directly or indirectly, the power to direct or cause the direction of the management, business and affairs of such other person, whether through the ownership of voting securities, by contract, or otherwise.      “Business Day” shall mean any day, other than a Saturday, Sunday or legal holiday, during which banks in North Carolina are open for the conduct of their banking business.      “Common Stock” shall mean Borrower’s common stock, $0.001 par value per share.      “Debt” shall mean (i) indebtedness for borrowed money, (ii) obligations evidenced by notes, bonds, debentures, or other similar instruments, (iii) obligations to pay the deferred purchase price of property or services, (iv) obligations as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases, and (v) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (iv) above; provided, however, Debt shall not include any Debt of Borrower under this Agreement.      “FDA” shall mean the United States Food and Drug Administration.      “Fully-Diluted Common Stock” on any date shall mean the sum of (i) the Company’s outstanding Common Stock shares, (ii) if applicable, shares of Common Stock issued or issuable upon conversion of any preferred stock of the Company, upon conversion of any convertible debt of the Company (other than under the Loan Documents) or upon exercise of any outstanding rights, options and warrants to acquire Common Stock, and (iii) if any, Common Stock shares available for grant under any existing stock option plan or other equity compensation plan or that will be available for grant under any such plans that are taken into account for purposes of establishing the pre-money valuation of Borrower in a Qualified Financing.      “GAAP” shall mean generally accepted accounting principles, applied on a consistent basis.      “Governmental or Regulatory Authority” shall mean any foreign, federal, state, or local court, or governmental or regulatory agency or authority.      “Intellectual Property” shall mean all: trade, business, product and domain names; trademarks; service marks; copyrights; patents; inventions; discoveries; trade secrets; business and technical information; proprietary compilations of data or information; know-how; formulas   --------------------------------------------------------------------------------   and techniques; methods; regulatory filings and approvals; computer software; all intellectual property rights, registrations, licenses and applications pertaining to any of the foregoing; and all related documentation and goodwill.      “Investors’ Rights Agreement” shall mean the Investors’ Rights Agreement among the Parties and certain founding shareholders of Borrower, dated as of the date hereof, being entered into contemporaneously herewith.      “Law” shall mean any federal, state, provincial, local or foreign law, statute, rule, regulation, order, writ, injunction, judgment or decree of any Governmental or Regulatory Authority.      “Lien” shall mean any lien, security interest, mortgage, pledge, encumbrance, charge or claim.      “Loan Documents” shall mean this Agreement, the Note, the Security Agreement, and any other documents required or necessary to consummate the transactions contemplated by this Agreement.      “Material Adverse Effect” shall mean a material adverse effect on the condition (financial or otherwise), properties, business, prospects or results of operations of Borrower, or a material adverse effect on the manufacture, marketing, distribution or sale of any Product in the United States or other jurisdiction with respect to which Borrower has acquired rights pursuant to any Licensing Transaction.      “New Securities” shall mean a new class of Borrower’s preferred stock having any preference, priority as to dividends, assets or other rights superior to any preference, priority as to dividends, assets or other rights of Borrower’s existing capital stock.      “Obligations” shall mean Borrower’s liabilities and obligations under the Loan Documents.      “Product” shall mean any ophthalmic product acquired in connection with a Licensing Transaction.      “Qualified Financing” shall mean Borrower’s sale to venture capital, private equity, institutional or similar investors (other than Lender or Lender’s Affiliates), one or more of which did not previously hold shares of capital stock of Borrower, of New Securities, in a single transaction, or in a series of related transactions, in which (i) the consideration paid to Borrower by such venture capital, private equity, institutional or similar investors (other than Lender or Lender’s Affiliates) in such transaction(s) is at least Fifteen Million Dollars ($15,000,000), and (ii) the pre-money valuation of Borrower is at least Fifteen Million Dollars ($15,000,000).      “Transactions” shall mean, collectively, the transactions contemplated by the Transaction Documents. 2 --------------------------------------------------------------------------------        “Transaction Documents” shall mean, collectively, the Loan Documents and the Investors’ Rights Agreement.      Additional defined terms are set forth in the location indicated below:       Defined Term   Location “AAA”   § 8.15(b) “Advances”   § 2.1(a) “Agreement”   Preamble “Applicable Percentage”   § 2.6(b)(i) “Base Rate”   § 2.5(b) “Borrower”   Preamble “Commitment”   § 2.1 (a) “Dispute”   § 8.14 “Event of Default”   § 7.1 “Junior Debt”   § 5.7 “Junior Liens”   § 5.8 “Lender”   Preamble “Licensing Transaction”   § 2.1(a)(ii) “Maturity Date”   § 2.1(a) “Milestone One”   § 2.1(a)(ii) “Milestone Two”   § 2.1(a)(iii) “Note”   § 2.4 “Notice of Advance”   § 2.3(a) “Post-Conversion Fully-Diluted Common Stock”   § 2.6(b)(i) “Remaining Milestone One Amount”   § 2.3(d)(i) “Remaining Milestone Two Amount”   § 2.3(d)(ii) “Security Agreement”   § 2.4 3 --------------------------------------------------------------------------------   EXHIBIT B FORM OF NOTE   --------------------------------------------------------------------------------   EXECUTION VERSION PROMISSORY NOTE       $5,000,000   February 14, 2006      FOR VALUE RECEIVED, SIRION THERAPEUTICS, INC., a North Carolina corporation (“Borrower”), hereby promises to pay to the order of PHARMABIO DEVELOPMENT INC., a North Carolina corporation (“Lender”), in lawful money of the United States of America in immediately available funds, the lesser of (i) the principal sum of Five Million ($5,000,000) and (ii) the aggregate unpaid principal amount of all Advances (as defined in the Loan Agreement referred to below) made by Lender to Borrower pursuant to the Loan Agreement (as defined below), together with interest accrued thereon. The interest shall accrue on the unpaid principal amount of each Advance at the rates and in the manner provided in the Loan Agreement. Payment of the principal amount of this Note and accrued interest on this Note shall be made at the times and in the manner provided in the Loan Agreement. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Loan Agreement.      Each Advance made by Lender to Borrower, and all payments made on account of the principal amount hereof, shall be recorded and endorsed by Lender on the grid attached hereto which is a part of this Note. Failure to so record and endorse such Advances and payments, however, shall not affect Borrower’s obligations in respect of such Advances.      This Promissory Note is the Note referenced in the Loan Agreement between Borrower and Lender dated as of the date of this Note (as same may be amended from time to time, the “Loan Agreement”), and is entitled to the benefits of the Loan Agreement. The Loan Agreement, among other things, (i) provides for the making of certain Advances by Lender to Borrower from time to time, the principal amount of each such Advance being a principal amount evidenced by this Note, and (ii) provides that this Note is secured by, and Borrower has granted a security interest in, certain of its assets as set forth in that certain Security Agreement between Borrower and Lender dated as of the same date as this Note.      In case an Event of Default (as defined in the Loan Agreement) shall occur and be continuing, the unpaid principal amount of, and accrued interest on, this Note may be declared to be due and payable in the manner and with the effect provided in the Loan Agreement.      Borrower hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note.      This Note shall be governed by and construed in accordance with the Laws of the State of North Carolina without regard to the conflicts of law rules of such state.      Lender and Borrower agree that disputes relating to this Note shall be subject to the provisions of the Loan Agreement entitled “Internal Review” and “Arbitration” set forth in Sections 8.14 and 8.15 thereof, respectively.                   BORROWER:                       SIRION THERAPEUTICS, INC.                       By:                           Name:         Title:       --------------------------------------------------------------------------------   ADVANCES AND PAYMENTS OF PRINCIPAL                       Amount   Amount of Principal   Unpaid   Notation Date   of Advance   Paid or Prepaid   Principal Balance   Made By                                                        

Exhibit 10.1       AmSouth Bancorporation     C. Dowd Ritter AmSouth Bank     Chairman, President and Post Office Box 11007     Chief Executive Officer Birmingham, Alabama 35288     [AmSouth Logo]   May 24, 2006           Board of Directors AmSouth Bancorporation c/o John Buchanan, Corporate Secretary 1900 5th Avenue North Birmingham, AL 35205     Re: Waiver of Employment Rights Gentlemen and Mrs. Ingram: I am writing in connection with our entering a merger agreement with Regions Financial Corporation. I am confident that this transaction is in the best interests of AmSouth Bancorporation and its shareholders. Although my employment agreement would entitle me to become Chairman of the Board of Directors of the combined Regions/AmSouth, if the merger closes, I hereby waive this right for so long as Mr. Jack Moore serves as Chairman. After that time, I will serve as Chairman for the remainder of my employment agreement. I look forward to working with Mr. Jack Moore and serving as Chief Executive Officer and President of the combined company.     Sincerely, /s/ C. Dowd Ritter C. Dowd Ritter

Exhibit 10.44         Building Materials Holding Corporation 2005 Deferred Compensation Plan for Executives (Effective as of January 1, 2005)               --------------------------------------------------------------------------------     Table of Contents Page   ARTICLE 1. DEFINITIONS 51 1.1 Account 51 1.2 Beneficiary 51 1.3 Change in Control 51 1.4 Code 52 1.5 Committee 52 1.6 Company 52 1.7 Company Contributions 52 1.8 Disability 52 1.9 Effective Date 52 1.10 Eligible Compensation 52 1.11 Hardship 53 1.12 Key Employee 53 1.13 LTIP 53 1.14 Participant 53 1.15 Plan 53 1.16 Plan Year 53 1.17 Regulations 54 1.18 Separation from Service 54 1.19 Trust or Trust Agreement 54 1.20 Trust Fund 54 1.21 Trustee 54       ARTICLE 2. ELIGIBILITY 54       ARTICLE 3. DEFERRED COMPENSATION 54 3.1 Deferral Elections 54 3.2 Vesting 56 3.3 Election of Payment Terms 56       ARTICLE 4. PAYMENT OF DEFERRED COMPENSATION 58 4.1 Payment upon Distribution Event 58 4.2 Withdrawal for Hardship 58 4.3 Payment upon Change in Control 58 4.4 Payment upon Disability 58 4.5 Payment upon Death 58 4.6 Designation of Beneficiary 59 4.7 Administration of Payments 59 4.8 Permitted Acceleration of Payments 59       ARTICLE 5. TRUST AND INVESTMENT 60 5.1 Accounts 60 5.2 Participants’ Rights Unsecured 60 5.3 Trust Agreement 60 5.4 Investment of Contribution 60       --------------------------------------------------------------------------------     ARTICLE 6. AMENDMENT AND TERMINATION 61       ARTICLE 7. ADMINISTRATION 61 7.1 Administration 61 7.2 Applying for Benefits 61 7.3 Liability of Committee; Indemnification 67 7.4 Expenses 67       ARTICLE 8. GENERAL AND MISCELLANEOUS 67 8.1 Rights Against Company 67 8.2 Assignment or Transfer 68 8.3 Severability 68 8.4 Construction 68 8.5 Governing Law 68 8.6 Payment Due to Incompetence 68 8.7 Taxes 68 8.8 Insurance 69 8.9 Attorney’s Fees 69 8.10 Plan Binding on Successors and Assignees 69 Appendices Acknowledgment   Distribution Election   Executive Election of Deferral   Beneficiary Designation     --------------------------------------------------------------------------------   BUILDING MATERIALS HOLDING CORPORATION 2005 DEFERRED COMPENSATION PLAN FOR EXECUTIVES   Building Materials Holding Corporation, a Delaware corporation (the “Company”) hereby establishes an unfunded plan for the purpose of providing deferred compensation for a select group of management and highly compensated employees in compliance with Section 409A of the Internal Revenue Code, as amended (the “Code”). RECITALS   WHEREAS, the Participants identified by the Compensation Committee of the Board of Directors of the Company, or any other committee designated by the Board of Directors of the Company to administer the Plan in accordance with Article 8 of the Plan (the “Committee”), as eligible to participate in the Plan (each a “Participant,” or collectively the “Participants”) provide services to the Company; and WHEREAS, the Company desires to adopt an unfunded deferred compensation plan and the Participants desire the Company to pay certain deferred compensation and/or related benefits to or for the benefit of the Participants, or a designated Beneficiary, or both; NOW, THEREFORE, the Company hereby establishes this deferred compensation plan to take the place of the 1999 Deferred Compensation Plan for Executives with respect to any compensation earned on or after January 1, 2005. ARTICLE 1.  DEFINITIONS   1.1 Account. means the separate account(s) established under the Plan and the Trust for each participating Participant.  The Company shall furnish each Participant with an annual statement of his or her Account balance.   1.2 Beneficiary. means the beneficiary designated by the Participant to receive the Participant’s deferred compensation benefits in the event of his or her death.   1.3 Change in Control. means the occurrence of any of the following, limited to the extent any such occurrence is consistent with the definition of a “change in control event” described in Code Section 409A or related Regulations:     (a) when any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 as amended (“Exchange Act”) (other than the Company, a Subsidiary or a Company benefit plan, including any trustee of such plan acting as trustee) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities, where such person’s beneficial ownership of the Company’s securities was not initiated by the Company or approved by the Company’s Board of Directors; or       --------------------------------------------------------------------------------       (b) the occurrence of a transaction requiring shareholder approval, and involving the sale of all or substantially all of the assets of the Company or the merger of the Company with or into another corporation, where such merger was not initiated by the Company and in which Company is not the surviving parent entity; or     (c) a change in the composition of the Board of Directors of the Company during any 12-month period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or     (d) any liquidation or dissolution of the Company.   1.4 Code. means the Internal Revenue Code of 1986, as amended from time to time.  Reference to any Code section shall include any successor or comparable provision of the Code or application Regulations.   1.5 Committee. means the Compensation Committee of the Board of Directors of the Company or any other committee designated by the Board of Directors of the Company to administer the Plan in accordance with Article 8.   1.6 Company. means Building Materials Holding Corporation, a Delaware Corporation, any successor organization thereto, and any corporation or other entity that must be aggregated with Building Materials Holding Corporation pursuant to the Code or Regulations.   1.7 Company Contributions. means the Company’s discretionary contribution, if any, pursuant to Section 3.1(b).   1.8 Disability. means—     (a) the condition of being unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or     (b) by reason of suffering from any medically determinable physical or mental impairment that is expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company   1.9 Effective Date. means January 1, 2005.   1.10 Eligible Compensation. means projected annual compensation, determined on an annual basis by the Company at or before the beginning of the Plan Year, which may consist of salary, bonus, and/or other cash-based or stock-based incentive payments, but which shall not include any special or non-recurring compensatory payments such as hiring bonuses, moving or relocation bonuses or automobile allowances.       --------------------------------------------------------------------------------     1.11 Hardship. refers to a distribution made on account of an unforeseeable immediate and heavy financial need of the Participant and that is necessary to satisfy that financial need in accordance with Code Section 409A and the related Regulations.     (a) Amount.  The amounts distributed with respect to an emergency cannot exceed the amounts necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).     (b) Circumstances.  Whether a Participant has an immediate and heavy financial need shall be determined by the Committee based on all relevant facts and circumstances, and shall refer to a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code Section 152(a)) of the Participant; loss of the Participant’s property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.   1.12 Key Employee. means—     (a) an officer of the Company having an annual compensation greater than $130,000 (as adjusted),     (b) a 5% owner of the Company, or     (c) a 1% owner of the Company having annual compensation from the Company of more than $150,000.   For purposes of subsection (a), no more than 50 employees (or, if lesser, the greater of 3 employees or 10% of the employees) shall be treated as officers.   1.13 LTIP. means an incentive program designated by the Company from time to time as the Building Materials Holding Corporation Long Term Incentive Plan, as amended from time to time.   1.14 Participant. means each employee of the Company designated by the Company to be entitled to defer compensation pursuant to the Plan and includes a Participant’s Beneficiary where the context so requires.     1.15 Plan. means the Building Materials Holding Corporation 2005 Deferred Compensation Plan for Executives, as amended from time to time.   1.16 Plan Year. means the year beginning each January 1 and ending December 31.       --------------------------------------------------------------------------------     1.17 Regulations. means the rules, regulations, interpretations and procedures promulgated under the Code, as modified from time to time.   1.18 Separation from Service. means the termination of employment or association of the Participant as an employee or director of the Company eligible for participation in a deferred compensation plan, and includes termination by way of resignation, removal or Disability.  A Participant who is on temporary leave of absence, whether with or without pay, shall be deemed not to have terminated employment or association.  “Separation from Service” shall be interpreted in accordance with the meaning of “separation from service” or similar term under Code Section 409A and related Regulations.   1.19 Trust or Trust Agreement. means the Trust Agreement applicable to the Plan, as amended from time to time, entered into between the Company and the Trustee to carry out the provisions of the Plan.   1.20 Trust Fund. means the cash and other assets and/or properties held and administered by Trustee pursuant to the Trust to carry out the provisions of the Plan.   1.21 Trustee. means the designated Trustee acting at any time under the Trust.     ARTICLE 2.  ELIGIBILITY   For any Plan Year, eligibility to participate in the Plan shall be limited to key management employees of the Company who have Eligible Total Compensation in excess of $100,000 for the prior or estimated upcoming Plan Year.  To the extent that the number of Participants eligible to participate in the Plan exceeds 2% of the Company’s total employee population, those eligible to be Participants who have the lowest Eligible Compensation in the prior Plan Year shall not be eligible for the following Plan Year.   The Committee shall designate Participants who shall be covered by the Plan in a separate Acknowledgment (in the form provided by the Committee) for each such Participant.  Participation in the Plan shall commence as of the date such Acknowledgment is signed by the Participant and delivered to the Company, provided that deferral of compensation under the Plan shall not commence until the Participant has complied with the election procedures set forth in Article 3.  Nothing in the Plan or in the Acknowledgment should be construed to require any contributions to the Plan on behalf of the Participant by the Company. ARTICLE 3.  DEFERRED COMPENSATION   3.1 Deferral Elections.     (a) Election to Defer Compensation.  Each eligible Participant may elect to defer annually the receipt of a portion of the Eligible Compensation for active service otherwise payable to him by the Company during each Plan Year or portion of a Plan Year that the Participant shall provide services to the Company.  Any Participant’s election to defer Eligible Compensation must satisfy the following conditions:       --------------------------------------------------------------------------------       (1) Newly Eligible Participants.  An employee who first becomes a Participant during a Plan Year shall have 30 days from the date of becoming a Participant to submit the required election documents for the then-current Plan Year.       (2) Plan Year Elections.  Each other election must be made no later than the day prior to the beginning of the Plan Year with respect to which the Compensation to be deferred is otherwise payable to the Participant or such later date as may be permitted under Code Section 409A.     (3) Minimum and Maximum Deferrals.  The minimum annual deferral amount, which must be withheld from base salary, is $5,000.  The maximum deferral percentage is 80% of Eligible Compensation.     (4) Conditions of Election.  Any deferral election must be in writing, signed by the Participant, and delivered to the Company, together with all other documents required, as determined by the Committee.  Each deferral election shall be irrevocable with respect to any Eligible Compensation covered by the election, including Compensation payable in the Plan Year in which the election suspending or modifying the prior deferral election is delivered to the Company.  Each election or discontinuance of an election will continue in force for each successive year until or unless suspended or modified by the filing of a subsequent election with the Company by the Participant in accordance with subsection (a)(2).  The election to defer Eligible Compensation shall be in the form provided by the Committee.     (b) Company Contributions.  The Company shall not be obligated to make any other contribution to the Plan on behalf of any Participant at any time.  Company may make Company Contributions to the Plan on behalf of one or more the Participants.  Company Contributions, if any, made to Participant Accounts shall be determined in the sole and absolute discretion of the Company, and may be made without regard to whether the Participant to whose Account such contribution is credited has made, or is making, deferrals.  The Company shall not be bound or obligated to apply any specific formula or basis for calculating the amount of any Company Contributions, and the Company shall have sole and absolute discretion as to the allocation of Company Contributions among Participants’ Accounts.  The use of any particular formula or basis for making a Company Contribution in one year shall not bind or obligate the Company to use such formula or basis in any other year.       --------------------------------------------------------------------------------       (c) LTIP.  Participants who are eligible for the LTIP may elect to defer monies received as a result of the LTIP through the Plan.  Such deferral determination must be made no later than the latest date permitted in accordance with Code Section 409A and related Regulations.  An employee may also decide to convert all, or a portion of, their pay out to Company common stock which will be issued in the Participant’s name in an amount based on the market price on the day that the Committee approves the pay out.  Such decision to convert part of the deferral to stock must also be made prior to the final Fiscal Year of the cycle.   Distribution election for the stock must be for the entire amount of stock deferred for that year following at least one year of deferral.     (d) Administration of Deferral Elections.  The Company shall withhold the amount or percentage of base salary specified to be deferred in equal amounts for each payroll period and shall withhold the amount or percentage of cash bonus specified to be deferred at the time or times such bonus is or otherwise would be paid to the Participant.  The amount or percentage of base salary and bonus, as applicable, that a Participant elects to defer will remain constant for the Plan Year of the election and shall not be subject to change during the Plan Year.  “Base salary” means a Participant’s regular annual compensation for a Plan Year, determined as of the first day of that year, excluding bonuses, commissions, overtime, incentive payments, non-monetary awards, and other special compensation, before reduction for compensation deferred pursuant to all qualified and non-qualified plans of the Company.  “Cash bonus” means amounts (if any) awarded under the annual bonus policy maintained by the Company, any commissions earned on sales and any payments made under the Company’s LTIP.   3.2 Vesting.  All deferrals from Eligible Compensation elected by the Participant shall be fully vested at all times.  Notwithstanding any provision of the Plan to the contrary, Company Contributions, if any, may be subject to a substantial risk of forfeiture in accordance with the terms of a vesting schedule, which may be selected by the Company in its sole and absolute discretion.   3.3 Election of Payment Terms.     (a) Initial Election - Time of Distribution.  By the later of December 31, 2005 and the date that is 30 days after becoming eligible for the Plan, each Participant will submit an election of the time of distribution applicable to the Participant’s entire Account.  Participants may choose among the following times for distribution in accordance with the form provided by the Committee:     (1) upon the Participant’s reaching a specified age,     (2) upon the passage of a specified number of years,     (3) upon the Participant’s Separation from Service with the Company or, in the case of Key Employees, a date that is 6 months after the date of Separation from Service (or, if earlier, the Participant’s date of death), or       --------------------------------------------------------------------------------       (4) upon the earliest to occur of—     (A) the Participant’s reaching a specified age,     (B) the passage of a specified number of years, and     (C) the Participant’s Separation from Service with the Company or, in the case of Key Employees, a date that is 6 months after the date of Separation from Service (or, if earlier, the Participant’s date of death),     (5) upon the latest to occur of—     (A) the Participant’s reaching a specified age,     (B) the passage of a specified number of years, and     (C) the Participant’s Separation from Service with the Company or, in the case of Key Employees, a date that is 6 months after the date of Separation from Service (or, if earlier, the Participant’s date of death).     (b) Initial Election - Method of Distribution.  By the later of December 31, 2005 and the date that is 30 days after becoming eligible for the Plan, each Participant (or Beneficiary) will submit an election of the method of distribution applicable to the Participant’s entire Account.  Participants may choose among the following methods of distribution in accordance with the form provided by the Committee:     (1) a lump sum payment, or     (2) monthly installments over a designated period of 5 or 10 years.   In the event the Participant fails properly to designate the method of distribution, subject to a subsequent election made under subsection (c), such amounts shall be payable in the form of a lump sum.   (c) Subsequent Elections to Change Timing or Method of Distribution.  A Participant may not accelerate the time or schedule of any payment under the Plan, except as provided in Regulations.  Any change to an election regarding the timing or method of distribution must satisfy the following conditions:     (1) the subsequent election to delay a payment must be made no later than 12 months prior to the date of the first scheduled payment; and     (2) the first payment must be deferred for a period of at least 5 years from the date the payment would otherwise have been made.       --------------------------------------------------------------------------------   If such subsequent election does not satisfy the conditions specified in this subsection, the prior election shall be used to determine the timing and form of payment.  The last effective election accepted and acknowledged by the Committee shall govern the payment of the Participant’s Account.  Elections under this subsection will not affect the timing of distributions made on account of Disability, death or Hardship except as provided in Article 4. ARTICLE 4.  PAYMENT OF DEFERRED COMPENSATION   4.1 Payment upon Distribution Event.  Except as otherwise provided in this article, a Participant will be entitled to receive all amounts credited to the Participant’s Account in accordance with the terms of his or her elections under Article 3.   4.2 Withdrawal for Hardship.  A Participant may apply for distributions from his or her Account to the extent that the Participant demonstrates to the reasonable satisfaction of the Committee that he or she needs the funds due to Hardship.  Any Participant receiving a distribution on account of Hardship shall be ineligible to defer any additional compensation under the Plan until the first day of the Plan Year following the second anniversary of the date of the distribution. In addition, a new election of deferral must be submitted to the Company as a condition of participation in the Plan.   4.3 Payment upon Change in Control. Notwithstanding any other provisions of this Plan, the aggregate balances credited to and held in the Participants’ Accounts shall be distributed to the Participants in a lump sum within 30 days of a Change in Control or such longer period as may be required by the Code or Regulations; provided that, in the case of a Key Employee, any payment made on account of a Separation of Service following a Change in Control shall not be made until a date that is 6 months after the date of Separation from Service.   4.4 Payment upon Disability.  Upon a Participant’s Disability, as determined by the Committee in its sole discretion, prior to the date when payment of his or her Accounts would otherwise commence under Article 3, the Participant will be entitled to receive all amounts credited to the Accounts as of the date of Disability according to the method of payment elected by the Participant.   4.5 Payment upon Death.  Upon a Participant’s Separation from Service by reason of death, prior to the date when payment of his or her Accounts would otherwise commence under Article 3, the Participant’s Beneficiary will be entitled to receive all amounts credited to the Accounts of the Participant as of the date of death according to the method of payment elected by the Participant, or to the extent permissible under Code Section 409A, according to the method of payment elected by the Beneficiary.  Upon the death of the Participant following the commencement of distribution, but prior to complete distribution of the entire balance of the Participant’s Accounts, the balance of the Participant’s Accounts on the date of death shall continue to be paid in the elected form of payment to the Participant’s Beneficiary.       --------------------------------------------------------------------------------     4.6 Designation of Beneficiary.  The Participant may designate a Beneficiary or Beneficiaries to receive any amount due hereunder by the Participant by written notice thereof to the Company at any time prior to his or her death and may revoke or change the Beneficiary so designated without the Beneficiary’s consent by written notice delivered to Company at any time and from time to time prior to the Participant’s death.  If the Participant is married and a resident of a community property state, one half of any amount due under the Plan which is the result of an amount contributed to the Plan during the Participant’s marriage is the community property of the Participant’s spouse and the Participant may designate a Beneficiary or Beneficiaries to receive only the Participant’s one-half interest. If the Participant shall have failed to designate a Beneficiary, or if no such Beneficiary shall survive him, then such amount shall be paid to his or her estate. Designations of Beneficiaries shall be in the form provided by the Committee.   4.7 Administration of Payments.  Distribution of the lump sum or the first installment shall be made or commence within 90 days following the date of the distribution event.  Subsequent installments, if any, shall be made on the first day of each month following the first installment as determined by Company.  The amount of each installment shall be calculated by dividing the Account balance as of the date of the distribution by the number of installments remaining pursuant to the Participant’s distribution election.  Each such installment, if any, shall take into account earnings credited to the balance of the Account remaining unpaid.   4.8 Permitted Acceleration of Payments.  To the extent permitted by Code Section 409A and related Regulations, the Company may, in the sole discretion of the Committee, commence distribution to Participant, Participant’s Beneficiary or other appropriate payee the portion of Participant’s Account authorized for distribution in accordance with Code Section 409A and related Regulations, including the following:     (a) amounts payable to an individual other than the Participant under a domestic relations order approved by the Committee in its sole discretion;     (b) de minimis cashout payments that result in the termination of the entirety of a Participant’s interest in the Plan, if the payment is made on or before the later of December 31 of the Plan Year in which occurs the Participant’s Separation from Service or the date 2½ months after the Participant’s Separation from Service and the payment is not greater than $10,000.  Such an amendment may be made with respect to previously deferred amounts under the plan as well as amounts to be deferred in the future; and     (c) payment to Participant to pay the Federal Insurance Contributions Act tax imposed under Code Section 3101 and 3121(v)(2) on Eligible Compensation deferred under the Plan, grossed up as permitted under applicable Regulations.       --------------------------------------------------------------------------------   ARTICLE 5.  TRUST AND INVESTMENT   5.1 Accounts.  The Company shall establish separate Accounts for each Participant who participates in the Plan.  No special fund shall be established nor shall any note or security be issued by the Company with respect to a Participant’s Accounts.   5.2 Participants’ Rights Unsecured.  The right of the Participant or his or her Beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Company, and neither the Participant nor his or her Beneficiary shall have any rights in or against any amount credited to his or her Account or any other specific assets of the Company, except as otherwise provided in the Trust.  Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between the Plan and the Company or any other person.     5.3 Trust Agreement.  The Company may establish the Trust for the purpose of retaining assets set aside by the Company pursuant to the Trust Agreement for payment of all or a portion of the amounts payable pursuant to the Plan.  Any benefits not paid from the Trust shall be paid solely from the Company’s general funds, and any benefits paid from the Trust shall be credited against and reduced by a corresponding amount the Company’s liability to the Participants under the Plan.  No special or separate fund, other than the Trust Agreement, shall be established and no other segregation of assets shall be made to assure the payment of any benefits hereunder.  All Trust Funds shall be subject to the claims of general creditors of the Company in the event the Company is insolvent (as that term is defined in the Trust Agreement).  The obligations of the Company to pay benefits under the Plan constitute an unfunded, unsecured promise to pay and Participants shall have no greater rights than general creditors of the Company.  Trust assets shall not, at any time, be located outside of the United States or be transferred outside of the United States, whether or not such assets are available to satisfy claims of general creditors.   5.4 Investment of Contribution.     (a) The investment options available to each Participant shall be determined by the Company and set forth in a separate written document, a copy of which shall be attached hereto and by this reference is incorporated herein.  Each Participant shall have the right to direct the Trustee as to the investment of his or her Account in accordance with policies and procedures implemented by the Trustee.  The Company shall not be liable for any investment decision made by any Participant while the funds attributable to the Participant’s Account are held by the Trustee.     (b) Accounts shall be credited with the actual financial performance or earnings generated by such investments directed by the Participant and made by the Trustee, until the Account has been fully distributed to the Participant or to the Participant’s Beneficiary.       --------------------------------------------------------------------------------       (c) Notwithstanding any provision of the Plan to the contrary, the Committee or the Trustee may determine not to take into account the Participant’s designated investments and may invest the Participant’s Account in any other manner as the Committee or the Trustee shall determine.   ARTICLE 6.  AMENDMENT AND TERMINATION   The Committee shall have the right to amend the Plan at any time and from time to time, including a retroactive amendment.  Any such amendment shall become effective upon the date stated therein, and shall be binding on all Participants, except as otherwise provided in such amendment; provided, however, that said amendment shall not affect benefits adversely to the affected Participant without the Participant’s written approval.  Benefits accruing to a Participant pursuant to any employment agreement in effect between the Company and the Participant that entitles the Participant to participate in and to certain rights under the Plan shall not be affected by an amendment of the Plan. ARTICLE 7.  ADMINISTRATION   7.1 Administration.  The Committee shall administer and interpret the Plan in accordance with the provisions of the Plan and the Trust Agreement.  Any determination or decision by the Committee shall be conclusive and binding on all persons who at any time have or claim to have any interest whatever under the Plan.  To the extent required to avoid penalties under section 409A of the Internal Revenue Code, the Committee intends to interpret and operate the Plan in all respects in compliance with Code Section 409A and related Regulations.   7.2 Applying for Benefits.  The following claims procedures are generally applicable to claims filed under the Plan.  To the extent required by law and to the extent the Committee is ruling on a claim for benefits on account of a disability, the Plan will follow, with respect to that claim, claims procedures required by law for plans providing disability benefits.     (a) General Procedures.  Subject to the provisions of subsection (b), the following procedures shall apply in the determination of claims under the Plan.     (1) Filing a Claim.  All applications and claims for benefits shall be filed in writing by the Participant, his or her Beneficiary, or the authorized representative of the claimant, by completing the procedures required by the Committee.  The procedures shall be reasonable and may include the completion of forms and the submission of documents and additional information.     (2) Review of Claim.  The Committee shall review all applications and claims for benefits and shall decide whether to approve or deny the claim in whole or in part.  If a claim is denied in whole or in part, the Committee shall provide written notice of denial to the claimant within a reasonable period of time no later than 90 days after the Committee receives the claim, unless special circumstances require an extension of time for processing the claim.  If an extension is required, the Committee shall notify the claimant in writing (including by electronic media) by the end of the initial 90-day period and indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render a decision on the claim.  The extension shall not exceed an additional 90 days.  The notice of denial shall be written (including in electronic media) in a manner calculated to be understood by the claimant and shall include the following:       --------------------------------------------------------------------------------       (A) specific reasons for the denial;     (B) specific references to pertinent Plan provisions;     (C) description of any additional material or information necessary for the claimant to perfect his or her claim and an explanation of why such material or information is necessary; and     (D) appropriate information as to the steps the claimant should take if he or she wishes to submit the denied claim for review, including any applicable time limits and including a statement of the claimant’s right to bring a civil action under ERISA § 502(a) following a denied claim on review.     (3) Appealing a Claims Denial.  If the claimant wishes a review of the denied claim, he or she shall notify the Committee in writing within 60 days of the claimant’s receipt of notification of the denied claim.  The claimant or the claimant’s representative may review pertinent Plan documents and may submit issues or comments to the Committee in writing.  The claimant or the claimant’s representative may provide the Committee with a written statement of the claimant’s position and with written materials in support of his or her position, including documents, records and other information relating to the claim.  The claimant or the claimant’s representative may have, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim.  A document, record or other information shall be considered relevant to the claim if such document, record or other information (A) was relied upon in making the benefit determination, (B) was submitted, considered or generated in the course of making the benefit determination, without regard to whether such document, record or other information was relied upon in making the benefit determination, or (C) demonstrates compliance with the administrative processes and safeguards designed to ensure and verify that benefit claim determinations are made in accordance with the Plan and that, where appropriate, the Plan provisions have been applied consistently with respect to similarly situated claimants.       --------------------------------------------------------------------------------       (4) Review of Appeal.  The Committee shall forward all requests for review of a denied claim together with all associated documents to the Chairman of the Committee promptly after receipt.  The Committee shall make its decision on review solely on the basis of the written record, including documents and written materials submitted by the claimant and/or the claimant’s representative.  The Committee shall make a decision on review within a reasonable period of time, not later than 60 days after the Committee receives the claimant’s written request for review unless special circumstances require additional time for review of the claim.  If the Committee needs an extension of time to review the claim, it shall notify the claimant in writing before the end of the initial 60-day period, and shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the determination on review.  The extension shall not be longer than an additional 60 days.  The decision on review will be written in a manner calculated to be understood by the claimant.  If the claim is denied, the written noticed shall include specific reasons for the decision as well as specific references to pertinent Plan provisions on which the decision is based, a statement of the claimant’s right to bring an action under ERISA § 502(a) and 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, with “relevant” defined as provided in the previous subsection.       (b) Determination of Disability.  To the extent the Committee is determining a claims for benefits under the Plan on account of disability, the following procedures shall apply.     (1) Notice of Denial.  If any person claiming benefits under the Plan on account of disability is denied such benefits by the Committee, no later than 45 days after receipt of the claim by the Committee (or within 75 days if special circumstances require an extension and if written (including electronic) notice of such extension and circumstances is given to such person within the initial 45-day period), he or she shall be furnished with written notification from the Committee stating the following: The notice of denial shall be written (including in electronic media) in a manner calculated to be understood by the claimant and shall include the following:     (A) specific reasons for the denial;     (B) specific references to pertinent Plan provisions on which the adverse determination is based;     (C) description of the Plan’s review procedures and time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review;       --------------------------------------------------------------------------------       (D) if an internal rule, guideline, protocol or other similar criterion (a “Guideline”) was relied upon in making the adverse determination, either (A) a copy of the Guideline, or (B) a statement that such Guideline was relied upon in making the adverse determination and a statement that a copy of such Guideline will be provided free of charge to the claimant upon request; and     (E) if the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the Plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request.   In the case of any extension, the notice of extension shall specifically explain the standards on which entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim, and the additional information needed to resolve those issues, and the claimant shall be afforded at least 45 days within which to provide the specified information.   In the event that a period of time is extended due to a claimant’s failure to submit necessary information, the period for making the benefit determination shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information.     (2) Appeal Process.  A claimant shall have 180 days following receipt of a notification of an adverse benefit determination within which to appeal the determination.  A claimant shall be entitled to submit on appeal written comments, documents, records and other information relating to the claim.  During the time the claimant has for filing an appeal, the claimant shall be provided, upon request and free of charge, reasonable access to and copies of all documents, records and other information relevant to the claim.  The Committee shall forward all requests for review of a denied claim together with all associated documents to the Chair of the Committee promptly after receipt.  The Committee’s review of the claim shall take 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.  The review shall not give deference to the initial adverse benefit determination.  If the initial benefit determination was, in whole or in part, based on medical judgment (including determinations with regard to whether a particular treatment, drug or other item is experimental, investigational, or not medically necessary or appropriate), in deciding the appeal the Committee shall consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment.  Such professional shall be an individual who is neither an individual who was consulted in connection with the adverse benefit determination that is the subject of the appeal, nor the subordinate of any such individual.  If the Plan obtained advice from any medical or vocational experts in making the initial benefit determination, the Committee shall identify such experts to the claimant, regardless of whether the advice was relied upon in making the initial benefit determination.       --------------------------------------------------------------------------------   The Committee shall notify the claimant of the benefit determination on review within a reasonable period of time, not to exceed 45 days after receipt by the Plan of the claimant’s request for review, unless the Committee determines that special circumstances (such as the need to hold a hearing, if the Plan’s procedures provide for a hearing) require an extension of time for processing the claim.  If the Committee determines that an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 45-day period.  In no event shall such extension exceed a period of 45 days from the end of the initial period.  The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan expects to render the determination on review.   Notwithstanding the previous paragraph, if the Committee holds regularly scheduled meetings at least quarterly, the Committee shall instead make a benefit determination no later than the date of such meeting that immediately follows the Plan’s receipt of a request for review, unless the request for review is filed within 30 days preceding the date of such meeting.  In such case, a benefit determination may be made by no later than the date of the second meeting following the Plan’s receipt of the request for review.  If special circumstances (such as the need to hold a hearing, if the Plan’s procedures provide for a hearing) require a further extension of time for processing, a benefit determination shall be rendered not later than the third meeting of the Committee following the Plan’s receipt of the request for review.  If such an extension of time for review is required because of special circumstances, the Committee shall provide the claimant with written notice of the extension, describing the special circumstances and the date as of which the benefit determination will be made, prior to the commencement of the extension. The Committee shall notify the claimant of the benefit determination as soon as possible, but not later than 5 days after the benefit determination is made.       --------------------------------------------------------------------------------   The period of time within which a benefit determination on review is required to be made shall begin at the time an appeal is filed in accordance with the reasonable procedures of the Plan, without regard to whether all the information necessary to make a benefit determination on review accompanies the filing.  In the event that a period of time is extended due to a claimant’s failure to submit information necessary to decide a claim, the period for making the benefit determination on review shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information.     (3) Notification of Benefit Determination on Review.  The Committee shall provide the claimant with written notification of the Plan’s benefit determination on review.  If on review the initial denial of benefits is affirmed, the notification shall set forth, in a manner calculated to be understood by the claimant, the following:     (A) specific reason for the adverse determination;     (B) specific references to pertinent Plan provisions on which the adverse determination is based;     (C) 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) statement describing the Plan’s voluntary appeal procedures, if any, and describing the claimant’s right to obtain the information about such procedures, and a statement of the claimant’s right to bring an action under ERISA Section 502(a);     (E) if a Guideline was relied upon in making the adverse determination, either (A) a copy of the Guideline, or (B) a statement that such Guideline was relied upon in making the adverse determination and a statement that a copy of such Guideline will be provided free of charge to the claimant upon request;     (F) if the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the Plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request; and       --------------------------------------------------------------------------------       (G) the following statement: “You and your Plan may have other voluntary alternative dispute resolution options, such as mediation.  One way to find out what may be available is to contact your local U.S. Department of Labor Office and your State insurance regulatory agency.”     (c) The Committee shall have full discretionary authority to consider claims filed under the Plan and to determine eligibility, status and rights of all individuals under the Plan and to construe any and all terms of the Plan.     (d) Following the approval of a claim for benefits under the Plan, pursuant to the claims procedure set forth in this section, the Committee shall have the authority to construe and administer the Plan in a manner that is consistent with the payment of benefits in accordance with the approved claim.   7.3 Liability of Committee; Indemnification.  To the extent permitted by law, the Committee shall not be liable to any person for any action taken or omitted in connection with the interpretation and administration of the Plan unless attributable to his or her own bad faith or willful misconduct.  The Committee may employ legal counsel, consultants, actuaries and agents as they may deem desirable in the administration of the Plan and may rely on the opinion of such counsel or the computations of such consultant or other agent.  The Committee shall provide for the keeping of detailed written minutes of its actions hereunder, which shall be reviewed by the legal counsel or the consultant engaged by the Committee prior to their finalization.   7.4 Expenses.  The costs of the establishment of the Plan and the adoption of the Plan by the Company, including but not limited to legal and accounting fees, shall be borne by the Company.  The expenses of administering the Plan shall be borne by the Trust; provided, however, that the Company shall bear, and shall not be reimbursed by, the Trust for any tax liability of the Company associated with the investment of assets by the Trust.  All taxes associated with participation in the Plan, including any tax liability under Code Section 409A, shall be borne by the Participant.   ARTICLE 8.  GENERAL AND MISCELLANEOUS   8.1 Rights Against the Company.  Except as expressly provided by the Plan, the establishment of the Plan shall not be construed as giving to any Participant or to any person whomsoever, any legal, equitable or other rights against the Company, or against its officers, directors, agents or shareholders, or as giving to any Participant or Beneficiary any equity or other interest in the assets, business or shares of Company stock or giving any Participant the right to be retained in the employment of the Company.  All Participants shall be subject to discharge (with or without cause) to the same extent they would have been if the Plan had never been adopted.  The rights of a Participant hereunder shall be solely those of an unsecured general creditor of the Company.  Neither the Plan nor any action taken hereunder shall be construed as giving to any Participant the right to continue rendering services to or for the benefit of the Company or as affecting the right of the Company to dismiss any Participant.  Any benefit payable under the Plan shall not be deemed salary or other compensation for the purpose of computing benefits under any Participant benefit plan or other arrangement of the Company for the benefit of its Participants.       --------------------------------------------------------------------------------     8.2 Assignment or Transfer.  No right, title or interest of any kind in the Plan shall be transferable or assignable by any Participant or Beneficiary or be subject to alienation, anticipation, encumbrance, garnishment, attachment, execution or levy of any kind, whether voluntary or involuntary, nor subject to the debts, contracts, liabilities, engagements, or torts of the Participant or Beneficiary.  Any attempt to alienate, anticipate, encumber, sell, transfer, assign, pledge, garnish, attach or otherwise subject to legal or equitable process or encumber or dispose of any interest in the Plan shall be void.     8.3 Severability.  If any provision of the Plan shall be declared illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of the Plan but shall be fully severable, and the Plan shall be construed and enforced as if said illegal or invalid provision had never been inserted herein.     8.4 Construction.  The article and section headings and numbers are included only for convenience of reference and are not to be taken as limiting or extending the meaning of any of the terms and provisions of the Plan.  Whenever appropriate, words used in the singular shall include the plural or the plural may be read as the singular.  When used herein, the masculine gender includes the feminine gender.     8.5 Governing Law.  The validity and effect of the Plan and the rights and obligations of all persons affected hereby shall be construed and determined in accordance with the laws of the State of Delaware unless superseded by federal law, which shall govern correspondingly.   8.6 Payment Due to Incompetence.  If the Committee receives evidence that a Participant or Beneficiary entitled to receive any payment under the Plan is physically or mentally incompetent to receive such payment, the Committee may, in its sole and absolute discretion, direct the payment to any other person or Trust which has been legally appointed by the courts or to any other person determined by the Company to be a proper recipient on behalf of such person otherwise entitled to payment, or any of them, in such manner and proportion as the Company may deem proper.  Any such payment shall be in complete discharge of the Company’s obligations under the Plan.     8.7 Taxes.  All amounts payable hereunder shall be reduced by any and all federal, state, and local taxes imposed upon Participant or his or her Beneficiary, which are required to be paid or withheld by Company.  The determination of Company regarding applicable income and employment tax withholding requirements shall be final and binding on Participant.       --------------------------------------------------------------------------------     8.8 Insurance.  In the event that any Participant elects, in his or her discretion, to independently purchase an insurance policy covering the inability of the Plan or the Trust to make any payments to which Participant is entitled under the Plan or the Trust, the Company shall use its best efforts to facilitate the payment by Participant of any applicable excise taxes which become due as the result of the payment of premiums under such policy.  Nothing contained herein shall be construed as an endorsement by the Company of the purchase of such a policy or a recommendation by the Company that the purchase of such a policy is necessary or desirable as the result of Participant’s participation in the Plan.  In the event that such insurance would result in adverse tax consequences to the Participant, the Participant shall terminate such insurance.   8.9 Attorney’s Fees.  Company shall pay the reasonable attorney’s fees incurred by any Participant in an action brought against Company to enforce Participant’s rights under the Plan, provided that such fees shall only be payable in the event that the Participant prevails in such action.   8.10 Plan Binding on Successors and Assignees. The Plan shall be binding upon and inure to the benefit of the Company and its successor and assigns and the Participant and the Participant’s designee and estate.       --------------------------------------------------------------------------------   ACKNOWLEDGMENT   The undersigned Employee hereby acknowledges that Employer has selected him or her as a participant in the Building Materials Holding Corporation 2005 Deferred Compensation Plan as amended, subject to all terms and conditions of the Plan, a copy of which has been received, read, and understood by the Employee in conjunction with executing this Acknowledgment.  Employee acknowledges that he or she has had satisfactory opportunity to ask questions regarding his or her participation in the Plan and has received satisfactory answers to any questions asked.  Employee also acknowledges that he or she has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of participation in the Plan.  Employee understands that his or her participation in the Plan shall not begin until this Acknowledgment has been signed by Employee and returned to Employer.   Dated: ____________________________________________               Print Name: ____________________________________________               Signed: ____________________________________________     Employee         Dated: ____________________________________________           BUILDING MATERIALS HOLDING CORPORATION   Signed: ____________________________________________           [Officer]   r I waive enrollment in the 2005 Executive Deferred Compensation Plan for the Plan year 2006.       --------------------------------------------------------------------------------   DISTRIBUTION ELECTION   Pursuant to the Building Materials Holding Corporation 2005 Deferred Compensation Plan as amended (the "Plan"), I hereby elect to have all amounts credited to my Account during the period of my participation in the Plan, together with any interest or other earnings credited thereon, distributed to me on the terms elected below: I elect to have any distributions of money covered by this election paid to me: oupon reaching age: _____ oupon the passage of ______ years oupon termination of employment oupon the earlier to occur of termination of association with Company or passage of ___years oupon the later to occur of termination of association with Company or passage of ____years I elect to have any distribution of money covered by this election to receive distribution paid to me in: oA lump sum oAn annuity of sixty (60) monthly installments determined as of each installment date by dividing the entire amount in my Account (including interest and other earnings) by the number of installments then remaining to be paid. oAn annuity of one hundred twenty (120) monthly installments determined as of each installment date by dividing the entire amount in my Account (including interest and other earnings) by the number of installments then remaining to be paid. Dated: _________________________________________ Print Name: ____________________________________ Signed: _______________________________________     --------------------------------------------------------------------------------   ELECTION OF DEFERRAL   I elect, pursuant to the Building Materials Holding Corporation 2005 Deferred Compensation Plan (the "Plan"), to make the following deferral(s) with respect to compensation earned during the Plan Year beginning January 1, 200_ and ending December 31, 200_:         o  I waive enrollment in the 2005 Executive Deferred Compensation Plan for Plan year 2006 OR:       Deferred Compensation Plan     o  _____% of base salary (even %)         o  _____% of any mid year cash bonus (even %) paid to me by Employer for 2006 (payout in mid-2006; must be elected by December 31, 2005) and         o  _____% of any year end bonus (even %) paid to me by Employer for 2006 (payout in 2007; must be elected by June 30, 2006)         OR           o  $_____ of any mid year cash bonus paid to me by Employer for 2006 (payout in mid-2006, must be elected by December 31, 2005) and         o  $_____ of any year end bonus paid to me by Employer for 2006 (payout in 2007; must be elected by June 30, 2006)         o  OR           o  $ALL of my cash bonus paid to me by Employer over $________         Long-Term Incentive Plan (2007 Payout)         o  $_____ or _____% of any payment from a Long Term Incentive Plan and/or         o  $_____ or _____% of any payment from a Long Term Incentive Plan that I wish to have converted to BMHC stock and deferred in accordance with my instructions. This election shall take effect for the Plan Year beginning January 1, 200_.  It may be terminated or modified by me only with written notice.  If termination is not submitted by the last day of any Plan Year, the election shall take effect for the Plan Year following. The deferral of compensation hereby elected is subject to all of the terms and conditions of the Plan and of the Building Materials Holding Corporation 2005 Deferred Compensation Plan Trust Agreement as amended, copies of which the Employer has given me, and which I have read and understood. Dated:           _____________________________________ Print Name:  _____________________________________ Signed:         _____________________________________     --------------------------------------------------------------------------------   Beneficiary Designation In the event I should die prior to the receipt of all money accrued to my credit under the Building Materials Holding Corporation 2005 Deferred Compensation Plan (the “Plan”), I elect to have the balance paid to the following named individual(s) in the following percentages(s) (Complete A if you are a resident of a community property state.  Complete B if the state in which you reside is not a community property state.): A. 50%   [Spouse]           _______%   ________________________________________________________________           _______%   ________________________________________________________________           _______%   ________________________________________________________________         B. _______%   ________________________________________________________________           _______%   ________________________________________________________________           _______%   ________________________________________________________________           _______%   ________________________________________________________________ Participant     Signature: _____________________________________   Date: ____________________             Name: ________________________________________     To be completed only if any above named beneficiary is not my spouse: I, as the spouse of ____________________________________________________________________________ ________________, do hereby consent to designation of any beneficiary that might in any way impair my rights under applicable state law, including but not limited to, laws relating to Community Property, Wills, Trusts, and Intestacy.   Spouse     Signature: _____________________________________   Date: ____________________             Name: ________________________________________           --------------------------------------------------------------------------------  

-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- EXHIBIT 10.1   CLECO CORPORATION EXECUTIVE EMPLOYMENT AGREEMENT (Level 1) THIS AGREEMENT (the “Agreement”) is entered into as of this 29th day of June, 2006, by and between Samuel H. Charlton III (“Executive”), and Cleco Corporation, a Louisiana corporation (the “Company”), and is intended to supercede that certain Executive Employment Agreement between Cleco Corporation and Executive, initially effective as of July 28, 2000, and that certain letter agreement between Cleco Corporation and Executive dated February 21, 2001. 1. EMPLOYMENT AND TERM 1.1 Position. The Company shall employ and retain Executive as its Senior Vice President and Chief Operating Officer - Cleco Midstream Resources LLC or in such other capacity or capacities as shall be mutually agreed upon, from time to time, by Executive and the Company, and Executive agrees to be so employed, subject to the terms and conditions set forth herein. Executive’s duties and responsibilities shall be those assigned to him hereunder, from time to time, by the Chief Executive Officer of the Company and shall include such duties as are the type and nature normally assigned to similar executive officers of a corporation of the size, type and stature of the Company. Executive shall report to the Chief Executive Officer.   1.2 Concurrent Employment. During the term of this Agreement, Executive and the Company acknowledge that Executive may be concurrently employed by the Company and a subsidiary or other entity with respect to which the Company owns (within the meaning of Section 425(f) of the Internal Revenue Code of 1986, as amended (the “Code”)) 50% or more of the total combined voting power of all classes of stock or other equity interests (an “Affiliate”), and that all of the terms and conditions of this Agreement shall apply to such concurrent employment. Reference to the Company hereunder shall be deemed to include any such concurrent employers. 1.3 Full Time and Attention. During the term of this Agreement and any extensions or renewals thereof, Executive shall devote his full time, attention and energies to the business of the Company and will not, without the prior written consent of the Chief Executive Officer of the Company, be engaged (whether or not during normal business hours) in any other business or professional activity, whether or not such activities are pursued for gain, profit or other pecuniary advantage. Notwithstanding the foregoing, Executive shall not be prevented from (a) engaging in any civic or charitable activity for which Executive receives no compensation or other pecuniary advantage, (b) investing his personal assets in businesses which do not compete with the Company, provided that such investment will not require any services on the part of Executive in the operation of the affairs of the businesses in which investments are made and provided further that Executive’s participation in such businesses is solely that of an investor, or (c) purchasing securities in any corporation whose securities are regularly traded, provided that such purchases     -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- will not result in Executive owning beneficially at any time 5% or more of the equity securities of any corporation engaged in a business competitive with that of the Company. 1.4 Term. Executive’s employment under this Agreement shall commence as of June 29, 2006 (the “Effective Date”), and shall terminate on June 29, 2009 (such date or the last day of employment specified in any renewal or amendment hereof referred to herein as the “Termination Date”) (the period commencing as of the Effective Date and ending as of the Termination Date referred to herein as the “Employment Term”). Commencing on the second anniversary of the Effective Date and each anniversary thereafter, Executive’s employment shall automatically be extended for an additional one-year period; provided, however, that either party may provide written notice to the other that the Employment Term will not be further extended, such notice to be provided not later than 30 days prior to the end of the then current Employment Term. 2. COMPENSATION AND BENEFITS 2.1 Base Compensation. The Company shall pay Executive an annual salary equal to his annual base salary in effect as of the Effective Date, such amount shall be prorated and paid in equal installments in accordance with the Company’s regular payroll practices and policies and shall be subject to applicable withholding and other applicable taxes (Executive’s “Base Compensation”). Executive’s Base Compensation shall be reviewed no less often than annually and may be increased or reduced by the Board of Directors of the Company (the “Board”), in its sole discretion; provided, however, that Executive’s Base Compensation may not be reduced at any time unless such reduction is part of a reduction in pay uniformly applicable to all officers of the Company. 2.2 Annual Incentive Bonus. In addition to the foregoing, Executive shall be eligible for participation in the Annual Incentive Compensation Plan or similar bonus arrangement maintained by the Company or an Affiliate or such other bonus or incentive plans which the Company or its Affiliates may adopt, from time to time, for similarly situated executives (an “Incentive Bonus”). 2.3 Long-Term Incentives. In addition to the foregoing, Executive shall be eligible for participation in the 2000 Long-Term Incentive Compensation Plan maintained by the Company and such other long-term incentive plans which the Company or its Affiliates may adopt, from time to time, for similarly situated executives (a “Long-Term Incentive”). 2.4 Supplemental Retirement Benefit. In addition to the foregoing, Executive shall be eligible to participate in the Supplemental Executive Retirement Plan maintained by Cleco Utility Group Inc. or such other supplemental retirement benefit plans which the Company or its Affiliates may adopt, from time to time, for similarly situated executives (the “Supplemental Plan”).   Page 2 -------------------------------------------------------------------------------- 2.5 Other Benefits. During the term of this Agreement and in addition to the amounts otherwise provided herein, Executive shall participate in such plans, policies, and programs as may be maintained, from time to time, by the Company or its Affiliates for the benefit of senior executives or employees, including, without limitation, profit sharing, life insurance, and group medical and other welfare benefit plans. Any such benefits shall be determined in accordance with the specific terms and conditions of the documents evidencing any such plans, policies, and programs. 2.6 Reimbursement of Expenses. The Company shall reimburse Executive for such reasonable and necessary expenses as are incurred in carrying out his duties hereunder, consistent with the Company’s standard policies and annual budget. The Company’s obligation to reimburse Executive hereunder shall be contingent upon the presentment by Executive of an itemized accounting of such expenditures. 3. TERMINATION 3.1 Termination Payments to Executive. As set forth more fully in this Section 3, and except as provided in Sections 3.3 or 3.8 hereof, Executive shall be paid the greater of the amounts or benefits set forth below or the amounts or benefits provided under the terms of the separate severance plan or arrangement maintained by the Company (or its Affiliates) on account of termination of employment hereunder, but in no event will Executive be entitled to recover under both:   a. Executive’s Base Compensation accrued but not yet paid as of the date of his termination.   b. Executive’s Base Compensation payable until the Termination Date (determined without regard to the automatic renewal provisions of Section 1.4 hereof), but not less than 100% of such annual Base Compensation.   c. Executive’s Incentive Bonus payable with respect to the year of his termination, prorated to reflect Executive’s actual period of service during such year.   d. Executive’s Incentive Bonus payable in the target amount for the year in which his termination of employment occurs.   e. If Executive’s principal office is located in Pineville, Louisiana, the Company shall, at the written request of Executive:   i. Purchase his principal residence if such residence is located within 60 miles of the Company’s Pineville, Louisiana office (the “Principal Residence”) for an amount equal to the greater of (1) the purchase price of such Principal Residence plus the documented cost of any capital improvements to the Principal Residence made by Executive, or (2) the     Page 3 --------------------------------------------------------------------------------     fair market value of such Principal Residence as determined by the Company’s usual relocation practice; and   ii.  Pay or reimburse Executive for the cost of relocating Executive, his family and their household goods and other personal property, in accordance with the Company’s usual relocation practice, to any location in the United States.   Notwithstanding the foregoing, the Company shall not be obligated hereunder, unless, within 2 ½ months after the year in which occurs the termination of his employment with the Company (and its Affiliates), the Company is requested to purchase such Principal Residence or Executive has actually relocated from the Pineville, Louisiana area. Any payments by the Company pursuant to this Section 3.1e shall be made no later than March 15th of the calendar year following the calendar year in which Executive’s employment is terminated.   f. If Executive and/or his dependents elects to continue group medical coverage, within the meaning of Code Section 4980B(f)(2), with respect to a group health plan sponsored by the Company or an Affiliate (other than a health flexible spending account under a self-insured medical reimbursement plan described in Code Sections 125 and 105(h)), the Company shall pay the continuation coverage premium for the same type and level of group health plan coverage received by Executive and his electing dependents immediately prior to such termination of Executive’s employment for the maximum period provided under Code Section 4980B or until the Executive secures other employment where group health insurance is provided, whichever period is shorter.   g. Executive shall be fully vested for purposes of any service or similar requirement imposed under the Cleco Utility Group Inc. Supplemental Executive Retirement Plan (the "Supplemental Plan"), regardless of the actual number of years of service attained by Executive. Notwithstanding any provision to the contrary, the amounts set forth in Sections 3.1a, b, c, d and e hereof shall be paid no later than March 15thof the calendar year following the calendar year in which Executive’s employment is terminated.   Except as expressly provided in Section 3.3 hereof, Executive shall also be entitled to receive such compensation or benefits as may be provided under the terms of a separate plan or amendment maintained by the Company (or its Affiliates) to the extent such compensation or benefits are not duplicative of the compensation or benefits described above. 3.2 Termination for Death or Disability. If Executive dies or becomes disabled during the Employment Term, this Agreement and Executive’s employment hereunder shall immediately terminate and the Company’s obligations hereunder shall automatically cease. In   Page 4 -------------------------------------------------------------------------------- such event, the Company shall pay to Executive (or his estate) the amounts described in Sections 3.1a and 3.1c hereof. Payment shall be made in the form of one or more single-sums as soon as practicable after Executive’s death or disability or as and when such amounts are ascertainable, but in no event later than March 15th of the calendar year following the Executive’s termination of employment due to death or disability. For purposes of this Section 3.2, Executive shall be deemed “disabled” if he is actually receiving benefits or is eligible to receive benefits under the Company’s (or an Affiliate’s) separate long-term disability plan. The Board shall determine whether Executive is disabled hereunder. 3.3 Company’s Termination for Cause. This Agreement and Executive’s employment hereunder may be terminated by the Company on account of Cause. In such event, the Company shall pay to Executive the amount described in Section 3.1a hereof. Payment shall be made in the form of a single-sum not later than three days after such termination. Notwithstanding any provision of this Agreement or any other plan, policy or agreement evidencing any other compensation arrangement or benefit payable to Executive, no additional amount shall be paid to Executive, except as may be required by law. For purposes of this Agreement “Cause” means that Executive has:   a. Committed an intentional act of fraud, embezzlement or theft in the course of his employment or otherwise engaged in any intentional misconduct which is materially injurious to the Company’s (or an Affiliate’s) financial condition or business reputation;   b. Committed intentional damage to the property of the Company (or an Affiliate) or committed intentional wrongful disclosure of Confidential Information (as defined in Section 5.2) which is materially injurious to the Company’s (or an Affiliate’s) financial condition or business reputation;   c. Intentionally refused to perform the material duties of his position; or   d. A material breach of this Agreement by Executive. No act or failure to act on the part of Executive will be deemed “intentional” if it was due primarily to an error in judgment or negligence, but will be deemed “intentional” only if done or omitted to be done by Executive not in good faith and without reasonable belief that his action or omission was in the best interest of the Company (or an Affiliate). The Board, acting in good faith, may terminate Executive’s employment hereunder on account of Cause (or may determine that any termination by the Company is on account of Cause). The Board shall provide written notice to Executive, including a description of the specific reasons for the determination of Cause. Executive shall have the opportunity to appear   Page 5 -------------------------------------------------------------------------------- before the Board, with or without legal representation, to present arguments and evidence on his behalf. Following such presentation (or upon Executive’s failure to appear), the Board, by an affirmative vote of not less than 66% of its members, shall confirm whether the actions or inactions of Executive constitute Cause hereunder. 3.4 Executive’s Constructive Termination. Executive may terminate this Agreement and his employment hereunder on account of a Constructive Termination upon 30 days prior written notice to the Chief Executive Officer (or such shorter period as may be agreed upon by the parties hereto.) In such event, the Company shall provide to Executive (a) the amount described in Section 3.1a hereof, payable not later than three days after his termination of employment, (b) the amounts determined under Sections 3.1b and 3.1d hereof, payable in not more than two equal installments, one-half not later than 30 days after termination and the other one-half six months after such termination, or, if earlier, on March 15th of the calendar year following the calendar year in which such termination occurs, and (c) the benefits described in Sections 3.1e, 3.1f and 3.1g hereof. For purposes of this Agreement, “Constructive Termination” means:   a. A material reduction (other than a reduction in pay uniformly applicable to all officers of the Company) in the amount of Executive’s Base Compensation;   b. A material reduction in Executive’s authority, duties or responsibilities from those contemplated in Section 1.1 of this Agreement; or   c. A material breach of this Agreement by the Company or its Affiliates. No event or condition described in this Section 3.4 shall constitute a Constructive Termination unless (a) Executive promptly gives the Company notice of his objection to such event or condition, which notice may be provided orally or in writing to the Chief Executive Officer or her designee, (b) such event or condition is not corrected by the Company promptly after receipt of such notice, but in no event more than 30 days after receipt of notice, and (c) Executive resigns his employment with the Company (and all Affiliates) not more than 15 days following the expiration of the 30-day period described in subparagraph (b) hereof. 3.5 Termination by the Company, without Cause. The Company may terminate this Agreement and Executive’s employment hereunder, without Cause, upon 30 days prior written notice to Executive (or such shorter period as may be agreed upon by Executive and the Chief Executive officer). In such event, the Company shall provide to Executive (a) the amount described in Section 3.1a hereof, payable not later than three days after such termination, (b) the amounts determined under Sections 3.1b and 3.1d hereof, payable in not more than two equal installments, one-half not later than 30 days after termination and the other one-half six months after such termination, or, if earlier, on March 15th of the calendar year following the calendar year in which such termination occurs, and (c) the benefits described in Sections 3.1e, 3.1f and 3.1g hereof.   Page 6 -------------------------------------------------------------------------------- 3.6 Termination by Executive. Executive may terminate this Agreement and his employment hereunder, other than on account of Constructive Termination, upon 30 days prior written notice to the Company or such shorter period as may be agreed upon by the Chief Executive Officer and Executive. In such event, the Company shall pay to Executive the amount described in Section 3.1a hereof. Payment shall be made in the form of a single-sum not later than three days after such termination. No additional payments or benefits shall be due hereunder, except as may be provided under a separate plan, policy or program evidencing such compensation arrangement or benefit or as may be required by law. 3.7 Return of Property. Upon termination of this Agreement for any reason, Executive shall promptly return to the Company all of the property of the Company (and its Affiliates), including, without limitation, automobiles, equipment, computers, fax machines, portable telephones, printers, software, credit cards, manuals, customer lists, financial data, letters, notes, notebooks, reports and copies of any of the above and any Confidential Information (as defined in Section 5.2 hereof) that is in the possession or under the control of Executive. 3.8 Consideration for Other Agreements. Executive acknowledges that all or a portion of the amount payable under Section 3.1d hereof is in excess of the amount otherwise due or payable under the Annual Incentive Compensation Plan and that the payment of such excess amount shall constitute adequate consideration for the execution of such separate waivers or releases as the Company (or Affiliate) may request Executive to execute in connection with the termination of his employment hereunder. Executive agrees that failure to execute any such waiver or release within the time request by the Company shall result in the forfeiture of the excess amount payable under Section 3.1d hereof. 4. CHANGE IN CONTROL AND BUSINESS TRANSACTION 4.1 Definitions.  The terms “Change in Control” and “Business Transaction” shall have the meanings ascribed to them in the Cleco Corporation 2000 Long-Term Incentive Compensation Plan, as the same may be amended from time to time. The term “Good Reason,” when used herein, shall mean that in connection with a Change in Control:   a. Executive’s Base Compensation in effect immediately before such Change in Control is reduced or there is a significant reduction or termination of Executive’s rights to any employee benefit in effect immediately prior to the Change in Control;   b. Executive’s authority, duties or responsibilities are significantly reduced from those contemplated in Section 1.1 hereof or Executive has reasonably determined that, as a result of a change in circumstances that significantly affects his   Page 7 --------------------------------------------------------------------------------        employment with the Company (or an Affiliate), he is unable to exercise the authority, power, duties and responsibilities contemplated in Section 1.1 hereof;   c. Executive is required to be away from his office in the course of discharging his duties and responsibilities under this Agreement significantly more than was required prior to the Change in Control; or   d. Executive is required to transfer to an office or business location located more than 60 miles from the location to which he was assigned prior to the Change in Control. No event or condition described in this Section 4.1 shall constitute Good Reason unless (a) Executive gives the Company notice of his objection to such event or condition within a reasonable period after Executive learns of such event, which notice may be delivered orally or in writing to the Chief Executive Officer (or his designee), (b) such event or condition is not promptly corrected by the Company, but in no event later than 30 days after receipt of such notice, and (c) Executive resigns his employment with the Company (and its Affiliates) not more than 60 days following the expiration of the 30-day period described in subparagraph (b) hereof. 4.2 Termination In Connection With a Change in Control. If Executive’s employment described herein is terminated by the Company, without Cause (as defined in Section 3.3 hereof), or Executive terminates his employment hereunder for Good Reason at any time within the 60-day period preceding or 36-month period following such Change in Control, then notwithstanding any provision of this Agreement to the contrary and in lieu of any compensation or benefits otherwise payable hereunder:   a. The Company shall pay to Executive the amount described in Section 3.1a in the form of a single-sum not later than three days after such termination.     b. The Company shall pay an amount equal to three times Executive’s “base amount,” payable in the form of a single-sum not later than 30 days after such termination. For purposes of this agreement, “base amount” is defined as the Executive’s current annual base compensation and target annual bonus.   c. The Company shall provide to Executive and his dependents coverage under the Company’s or an Affiliate’s group medical plan for the same type and level of health benefits received by Executive and his dependents immediately prior to such termination for a period of three years or until Executive and/or his dependents obtain coverage under a reasonably satisfactory group health plan with no applicable preexisting condition limitation, whichever comes first; such coverage to be in addition to any coverage available to Executive and his dependents under Code Section 4980B.   Page 8 --------------------------------------------------------------------------------     d. Vesting shall be accelerated, any restrictions shall lapse, and all performance objectives shall be deemed satisfied as to any outstanding grants or awards made to Executive under the 2000 Long-Term Incentive Compensation Plan. Executive shall be entitled to such additional benefits or rights as may be provided in the documents evidencing such plans or the terms of any agreement evidencing such grant or award. All payments and benefits to be provided by this section 4.2d shall be paid no later than March 15th of the calendar year following the calendar year in which such termination occurs.   e. Executive shall be fully vested for purposes of any service or similar requirement imposed under the Supplemental Plan, regardless of the actual number of years of service attained by Executive. Executive shall be credited with an additional three years of age for purposes of determining his benefit percentage under the Supplemental Plan, but in no event shall such benefit percentage be less than 50%; and Executive shall be credited with an additional three years of age for purposes of determining any reduction taken with respect to benefits commencing before Executive's normal retirement date (as defined in such plan).     f. If Executive’s principal office is located in Pineville, Louisiana, the Company shall, at the written request of Executive:   i. Purchase his principal residence if such residence is located within 60 miles of the Company’s Pineville, Louisiana office (the “Principal Residence”) for an amount equal to the greater of (1) the purchase price of such Principal Residence plus the documented cost of any capital improvements to the Principal Residence made by Executive, or (2) the fair market value of such Principal Residence as determined by the Company’s usual relocation practice; and     ii. Pay or reimburse Executive for the cost of relocating Executive, his family and their household goods and other personal property, in accordance with the Company’s usual relocation practice, to any location in the United States. Notwithstanding the foregoing, the Company shall not be obligated hereunder, unless, within 2 ½ months after the year in which occurs the termination of his employment with the Company (and its Affiliates), the Company is requested to purchase such Principal Residence or Executive has actually relocated from the Pineville, Louisiana area. Any payments by the Company pursuant to this Section 4.2f shall be made no later than March 15th of the calendar year following the calendar year in which Executive’s employment is terminated.   Page 9 --------------------------------------------------------------------------------   g. The Company shall pay to Executive an amount equal to the Company’s (including all Affiliates) maximum matching contribution obligation under the Cleco Corporation 401(k) Savings and Investment Plan, as the same may be amended from time to time, for each of the three years immediately following Executive’s termination of employment, determined as if Executive was credited with at least 1,000 hours of service in each such plan year, was employed as of the last day of each plan year, and contributed the maximum permissible amount under Code Section 402(g) in each such year, but determined using the amount in effect as of the date of Executive's termination of employment; such amount shall be paid in the form of a single-sum not later than 30 days after Executive’s termination of employment hereunder.   4.3 Business Transaction. If Executive’s employment hereunder is terminated (other than on account of Cause as defined in Section 3.3 hereof) in connection with a Business Transaction, then notwithstanding any provision of this Agreement to the contrary, the Company shall pay or provide to Executive benefits as described in Section 4.2. 4.4 Tax Payment. If any payment to Executive pursuant to this Agreement or any other payment or benefit from the Company or an Affiliate in connection with a Change in Control or Business Transaction is subject to the excise tax imposed under Code Section 4999 or any similar excise or penalty tax payable under any United States federal, state, local or other law, the Company shall pay an amount to Executive such that, after the payment by Executive of all taxes on such amount, there remains a balance sufficient to pay such excise or penalty tax. Executive shall submit to the Company the amount to be paid under this Section 4.4, together with supporting documentation. If Executive and the Company disagree as to such amount, an independent public accounting firm agreed upon by Executive and the Company shall make such determination. 5. LIMITATIONS ON ACTIVITIES   5.1. Consideration for Limitation on Activities. Executive acknowledges that the execution of this Agreement and the payments described herein constitute consideration for the limitations on activities set forth in this Section 5, the adequacy of which is hereby expressly acknowledged by Executive. 5.2 Confidential Information. Executive recognizes and acknowledges that during the terms of his employment, he will have access to confidential, proprietary, non-public information concerning the Company and its Affiliates, which may include, without limitation, (a) books and records relating to operations, finance, accounting, personnel and management, (b) price, rate and volume data, future price and rate plans, and test data, (c) information related to product design and development, (d) computer software, customer lists, information obtained on competitors, and sales tactics, and (e) various other non-public trade or business information, including business opportunities, marketing or business diversification plans, methods and processes, and financial data and the like (collectively, the “Confidential Information”).   Page 10 -------------------------------------------------------------------------------- Executive agrees that he will not at any time, either while employed by the Company or afterwards, make any independent use of, or disclose to any other person or organization (except as authorized by the Company or pursuant to court order) any of the Confidential Information. 5.3 Non-Solicitation. Executive agrees that during the one-year period commencing as of the date of voluntary termination by Executive (as described in Section 3.6 hereof) or the involuntary termination of Executive on account of Cause (as described in Section 3.3 hereof), he shall not, directly or indirectly, for his own benefit or on behalf of another or to the Company’s (or an Affiliate’s) detriment:   a. Hire or offer to hire any of the Company’s (or Affiliate’s) officers, employees or agents;   b. Persuade or attempt to persuade in any manner any officer, employee or agent of the Company (or an Affiliate) to discontinue any relationship with the Company; or   c. Solicit or divert or attempt to divert any customer or supplier of the Company or an Affiliate. The provisions of this Section 5.3 shall apply in the locations set forth on B hereto, as the same may be amended from time to time. Executive acknowledges that the Company (or its Affiliates) is presently doing business in such locations and that during the Employment Term Executive will be required to provide services to or for the benefit of the Company (or its Affiliates) in such locations. The parties agree that each of the foregoing prohibitions is intended to constitute a separate restriction. Accordingly, should any such prohibition be declared invalid or unenforceable, such prohibition shall be deemed severable from and shall not affect the remainder thereof. The parties further agree that each of the foregoing restrictions is reasonable in both time and geographic scope. 5.4 Business Reputation. Executive agrees that during his employment with the Company (and its Affiliate) and at all times thereafter, he shall refrain from performing any act, engaging in any conduct or course of action or making or publishing an adverse, untrue or misleading statement which has or may reasonably have the effect of demeaning the name or business reputation of the Company or its Affiliates or which adversely affects (or may reasonably adversely affect) the best interests (economic or otherwise) of the Company or an Affiliate. 5.5 Remedies.  In the event of a breach or threatened breach by Executive of the provisions of Sections 5.2, 5.3 or 5.4 hereof, Executive agrees that the Company shall be entitled to a temporary restraining order or a preliminary injunction (without the necessity of posting bond in connection therewith) and that any additional payments or benefits due to Executive or   Page 11 -------------------------------------------------------------------------------- her dependents under Sections 3 and 4 hereof shall be canceled and forfeited. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedy available to it for such breach or threatened breach, including the recovery of damages from Executive. 6. MISCELLANEOUS 6.1 Mitigation Not Required. As a condition of any payment hereunder, Executive shall not be required to mitigate the amount of such payment by seeking other employment or otherwise, nor will any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of Executive under this Agreement. 6.2 Enforcement of this Agreement. In the event any dispute in connection with this Agreement arises with respect to obligations of Executive or the Company that were required prior to the occurrence of a Change in Control or a Business Transaction, all costs, fees and expenses, including attorney fees, of any litigation, arbitration or other legal action in connection with such matters in which Executive substantially prevails, shall be borne by, and be the obligation of, the Company. After a Change in Control or Business Transaction has occurred, Executive shall not be required to incur legal fees and the related expenses associated with the interpretation, enforcement or defense of Executive’s rights under this Agreement by litigation or otherwise. Accordingly, if, following a Change in Control or Business Transaction, the Company has failed to comply with any of its obligations under this Agreement or the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable or in any way reduce the possibility of collecting the amounts due hereunder, or institutes any litigation or other action or proceeding designed to deny or to recover from Executive the benefits provided or intended to be provided under this Agreement, Executive shall be entitled to retain counsel of Executive’s choice, at the expense of the Company, to advise and represent Executive in connection with any such interpretation, enforcement or defense, including without limitation the initiation or defense of any litigation, arbitration or other legal action, whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction. The Company shall pay and be solely financially responsible for any and all attorneys’ and related fees and expenses incurred by Executive in connection with any of the foregoing, without regard to whether Executive prevails, in whole or in part. In no event shall Executive be required to reimburse the Company for any of the costs and expenses incurred by the Company relating to arbitration, litigation or other legal action in connection with this Agreement. 6.3 No Set-Off. There shall be no right of set-off or counterclaim in respect of any claim, debt or obligation against any payment to Executive provided for in this Agreement.   Page 12 -------------------------------------------------------------------------------- 6.4 Assistance with Litigation. For a period of one year after the end of the last period for which Executive will have received any compensation under this Agreement, Executive will furnish such information and proper assistance as may be reasonably necessary in connection with any litigation in which the Company (or an Affiliate) is then or may become involved. 6.5 Headings. Section and other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 6.6 Entire Agreement. This Agreement constitutes the entire understanding and agreement among the parties hereto with respect to the subject matter hereof, and there are no other agreements, understandings, restrictions, representations or warranties among the parties other than those set forth herein. 6.7 Amendments. This Agreement may be amended or modified at any time in any or all respects, but only by an instrument in writing executed by the parties hereto. 6.8 Choice of Law. The validity of this Agreement, the construction of its terms, and the determination of the rights and duties of the parties hereto shall be governed by and construed in accordance with the internal laws of the State of Louisiana applicable to contracts made to be performed wholly within such state. 6.9 Notices. All notices and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand, (b) sent by telecopier to a telecopier number given below, provided that a copy is sent by a nationally recognized overnight delivery service (receipt requested), or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case as follows:                  If to Executive:  Samuel H. Charlton III    2916 George’s Lane    Alexandria, LA 71301                  If to the Company: Cleco Corporation                                                                2030 Donahue Ferry Road   Pineville, LA 71360   Attention: Chief Executive Officer   Telecopier: (318) 484-7777                      or to such other addresses as a party may designate by notice to the other party. 6.10 Assignment. This Agreement will inure to the benefit of and be binding upon the Company, its Affiliates, successors and assigns, including, without limitation, any person,   Page 13 -------------------------------------------------------------------------------- partnership, company, corporation or other entity that may acquire substantially all of the Company’s assets or business or with or into which the Company may be liquidated, consolidated, merged or otherwise combined, and will inure to the benefit of and be binding upon Executive, his heirs, estate, legatees and legal representatives. If payments become payable to Executive’s surviving spouse or other assigns and such person thereafter dies, such payment will revert to Executive’s estate. 6.11 Severability. Each provision of this Agreement is intended to be severable. In the event that any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable, the same shall not affect the validity or enforceability of any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provisions was not contained herein. Notwithstanding the foregoing, however, no provision shall be severed if it is clearly apparent under the circumstances that the parties would not have entered into this Agreement without such provision. 6.12 Withholding. The Company (or an Affiliate) may withhold from any payment hereunder any federal, state or local taxes required to be withheld. 6.13 Survival. Notwithstanding anything herein to the contrary, to the extent applicable, the obligations of the Company (and its Affiliates) under Sections 3 and 4, and the obligations of Executive under Sections 3 and 5, shall remain operative and in full force and effect regardless of the expiration of this Agreement. 6.14 Waiver. The failure of either party to insist in any one or more instances upon performance of any terms or conditions of this Agreement will not be construed as a waiver of future performance of any such term, covenant, or condition and the obligations of either party with respect to such term, covenant or condition will continue in full force and effect. 6.15 Section 409A. The parties intend that this Agreement comply, to the extent applicable, with the provisions of Section 409A of the Internal Revenue Code and related regulations and Treasury pronouncements ("Section 409A"). If the parties determine in good faith that any provision provided herein would result in the imposition of an excise tax under the provisions of Section 409A, Executive and the Company agree that each will use good faith efforts to reform any such provision to avoid imposition of any such excise tax in the manner that Executive and the Company mutually determine is appropriate to comply with Section 409A.   Page 14 -------------------------------------------------------------------------------- THIS AGREEMENT is executed in multiple counterparts as of the dates set forth below, each of which shall be deemed an original, to be effective as of the Effective Date designated above.             CLECO CORPORATION EXECUTIVE                 By: /s/ G.W. Bausewine                                /s/  Samuel H. Charlton III                           Samuel H. Charlton III             Its: SVP, Corporate Services                                           Date:        6/29/06                                           Date:            June 29, 2006                               Page 15 -------------------------------------------------------------------------------- CLECO CORPORATION EXECUTIVE EMPLOYMENT AGREEMENT EXHIBIT A This Exhibit B is intended to form a part of that certain Executive Employment Agreement by and between Cleco Corporation and Samuel H. Charlton III, effective as of June 29, 2006. The parties agree that the proscriptions set forth in Section 5.3 thereof shall apply in the State of Louisiana, Parishes of:     Acadia Parish Allen Parish Avoyelles Parish Beauregard Parish Calcasieu Parish Catahoula Parish Desoto Parish Evangeline Parish Grant Parish Iberia Parish Jefferson Davis Parish Lafayette Parish Lasalle Parish Natchitoches Parish Rapides Parish Red River Parish Sabine Parish St. Landry Parish St. Martin Parish St. Mary Parish St. Tammany Parish Vernon Parish Washington Parish Executive and the Company agree that the Company shall amend this Exhibit A, from time to time, to eliminate Parishes in which the Company is no longer doing business and to add Parishes in which the Company is currently doing business.   Page 16 --------------------------------------------------------------------------------    

Exhibit F.3.1 Form of Change Order Reference is made to the Wind Turbine Supply Agreement, dated as of September 29, 2006 (the “Agreement”), by and between Madison Gas and Electric Company, a Wisconsin corporation (“Buyer”), and Vestas-American Wind Technology, Inc., a California corporation (“Supplier”).  Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement. In accordance with Article 11 of the Agreement, each of Supplier and Buyer agrees to the following changes to the Agreement: 1) [Insert description of requested change in the Equipment Supply Obligations, if any, including detailed supporting information;] 2) The Contract Price shall be [increased][decreased] by the amount of $______, and the Payment Schedule shall be adjusted as follows: [insert adjustments to Payment Schedule, if any]; 3) The Project Schedule shall be adjusted as follows: [insert adjustments to Project Schedule, if any]; In all other respects the Agreement shall remain unmodified and in full force and effect. Agreed pursuant to the Agreement by: SUPPLIER: BUYER: Vestas-American Wind Technology, Inc., Madison Gas and Electric Company, a California corporation a Wisconsin corporation By: _______________________________ By: __________________________ Name: _____________________________ Name: ________________________ Title: ______________________________ Title: _________________________ Date: ______________________________ Date: _________________________ Exhibit F.3.2 Form of Shipping Certificate DATE: 1. Supplier has delivered this completed Shipping Certificate to Buyer on the above date.  Capitalized terms used but not defined herein shall have the meanings set forth in that certain Wind Turbine Supply Agreement, dated as of September 29, 2006 (the “Agreement”), by and between Madison Gas and Electric Company, a Wisconsin corporation (“Buyer”), and Vestas-American Wind Technology, Inc., a California corporation (“Supplier”). 2. [For use with Turbine Nacelles] Pursuant to Section 4.2.2 of the Agreement, Supplier hereby notifies Buyer that on _________, 200_, [insert number] Turbine Nacelles have been shipped. 3. [For use with Blades] Pursuant to Section 4.2.2 of the Agreement, Supplier hereby notifies Buyer that on _________, 200_, [insert number] blades have been shipped. 4. [For use with Hubs] Pursuant to Section 4.2.2 of the Agreement, Supplier hereby notifies Buyer that on _________, 200_, [insert number] Hubs have been shipped. 5. [For use with Tower Sections] Pursuant to Section 4.2.2 of the Agreement, Supplier hereby notifies Buyer that on _________, 200_, [insert number] Tower sections have been shipped. 6. The person signing below is authorized to submit this Shipping Certificate to Buyer for and on behalf of Supplier. SUPPLIER: Vestas–American Wind Technology, Inc., a California corporation By: ____________________________ Name: __________________________ Title: ___________________________ MG&E Turbine Supply Agreement, Exhibit F.3.3 Exhibit F.3.3 Form of Delivery Certificate SF#1091522      [ex102f303doc002.gif] [ex102f303doc002.gif]  [ex102f303doc004.gif] [ex102f303doc004.gif]  [ex102f303doc006.gif] [ex102f303doc006.gif]  [ex102f303doc008.gif] [ex102f303doc008.gif]  [ex102f303doc010.gif] [ex102f303doc010.gif]  [ex102f303doc012.gif] [ex102f303doc012.gif]                                                                                                                                                                                        MG&E Turbine Supply Agreement, Exhibit F.3.3 Document   No..__________________________ Class: 1 Transport  Control  Form Site Name: Port Railhead Job Site TRUCK/CONTAINER ID. DESCRIPTION OF GOODS EXPECTED ARRIVAL Date &TIME ACTUAL ARRIVAL DATE ACTUAL TIME OF ARRIVAL TIME UNLOADING STARTED TIME UNLOADING FINISHED TOTAL TIME UNLOADING COMMENTS If any damage parts  have been discovered or if any parts are missing fill in the Transport Claim Form All the goods received on/in the above referred to truck /container has been received on the transporters final des- tination point. The goods has been inspected and found to be in good order (excluding possible remark under Comments) SIGNATURE OF VESTAS SIGNATURE OF OWNER OR REPRESENTATIVE OF OWNER DATE AND SIGNATURE OF DRIVER NAME OF DRIVER (BLOCK LETTERS) Form PROJ004 R0 5-JUL-2005 CONFIDENTIAL AND PROPRIETARY TO VESTAS SF#1091522  [ex102f303doc014.gif] [ex102f303doc014.gif] MG&E Turbine Supply Agreement, Exhibit F.3.3 SF#1091522  [ex102f303doc016.gif] [ex102f303doc016.gif] MG&E Turbine Supply Agreement, Exhibit F.3.3 SF#1091522  [ex102f303doc018.gif] [ex102f303doc018.gif] MG&E Turbine Supply Agreement, Exhibit F.3.3 SF#1091522 Exhibit F.3.4 Form of Delayed Delivery Certificate DATE: 1. Supplier has delivered this completed Delayed Delivery Certificate to Buyer on the above date.  Capitalized terms used but not defined herein shall have the meanings set forth in that certain Wind Turbine Supply Agreement, dated as of September 29, 2006 (the “Agreement”), by and between Madison Gas and Electric Company, a Wisconsin corporation (“Buyer”), and Vestas-American Wind Technology, Inc., a California corporation (“Supplier”). 2. Pursuant to Section 4.2.3 of the Agreement, Supplier hereby certifies that [insert number] [Turbine Nacelles] [blades] [Hubs] [Tower sections] could not be delivered to the Delivery Point within thirty (30) days following its scheduled arrival at the Delivery Point due to an Excusable Event.   3. The person signing below is authorized to submit this Delayed Delivery Certificate to Buyer for and on behalf of Supplier. Vestas-American Wind Technology, Inc., a California corporation By: Name: Title:   Date:   MG&E Turbine Supply Agreement, Exhibit F.3.5 Exhibit F.3.5 Mechanical Completion Checklist SF# 1091526  [ex102f305doc002.gif] [ex102f305doc002.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc004.gif] [ex102f305doc004.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc006.gif] [ex102f305doc006.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc008.gif] [ex102f305doc008.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc010.gif] [ex102f305doc010.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc012.gif] [ex102f305doc012.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc014.gif] [ex102f305doc014.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc016.gif] [ex102f305doc016.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc018.gif] [ex102f305doc018.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc020.gif] [ex102f305doc020.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc022.gif] [ex102f305doc022.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc024.gif] [ex102f305doc024.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc026.gif] [ex102f305doc026.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc028.gif] [ex102f305doc028.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc030.gif] [ex102f305doc030.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc032.gif] [ex102f305doc032.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc034.gif] [ex102f305doc034.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc036.gif] [ex102f305doc036.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc038.gif] [ex102f305doc038.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc040.gif] [ex102f305doc040.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc042.gif] [ex102f305doc042.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc044.gif] [ex102f305doc044.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc046.gif] [ex102f305doc046.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc048.gif] [ex102f305doc048.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526  [ex102f305doc050.gif] [ex102f305doc050.gif] MG&E Turbine Supply Agreement, Exhibit F.3.5 SF# 1091526 Exhibit F.3.6 Form of Mechanical Completion Certificate Date of Mechanical Completion: _________________ 1. Reference is made to the Wind Turbine Supply Agreement, dated as of September 29, 2006 (the “Agreement”), by and between Madison Gas and Electric Company, a Wisconsin corporation (“Buyer”), and Vestas-American Wind Technology, Inc., a California corporation (“Supplier”).  Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement. 2. The undersigned, Buyer, does hereby certify and represent to Supplier with respect to Wind Turbine No. _____ that (i) such Wind Turbine and associated Tower has been assembled, erected, installed and connected to the Interconnecting Utility’s grid in accordance with the Applicable Laws and the Agreement; (ii) all necessary materials and equipment with respect to such Wind Turbine and associated Tower has been installed substantially in accordance with the Technical Specifications and applicable quality assurance procedures and checked for adjustment, rotation and lubrication; (iii) each item on the Mechanical Completion Checklist, a completed copy of which is attached hereto, has been satisfied in accordance with the Agreement; and (iv) such Wind Turbine is ready to commence Commissioning. 3. The person signing below is authorized to submit this Mechanical Completion Certificate to Supplier for and on behalf of Buyer. BUYER: Madison Gas and Electric Company, a Wisconsin corporation By: ________________________________ Name: _____________________________ Title: ______________________________ Date: _______________________________ Supplier to cross through one (1) of the following statements: A. Supplier agrees that Mechanical Completion has been achieved with respect to the enumerated Wind Turbine(s) and associated Tower(s) as set forth herein. B.  Supplier does not agree that Mechanical Completion has been achieved with respect to the enumerated Wind Turbine(s) and associated Tower(s) as set forth therein due to the omissions or defects listed below and/ or the incomplete nature of the specified obligations listed below: The person signing below is authorized to submit this form to Buyer for and on behalf of Supplier. ACCEPTED BY SUPPLIER: Vestas-American Wind Technology, Inc., a California corporation By: __________________________ Name: ________________________ Title: _________________________ Date: _________________________ MG&E Turbine Supply Agreement, Exhibit F.3.7 Exhibit F.3.7 Commissioning Completion Checklist SF# 1091529  [ex102f307doc002.gif] [ex102f307doc002.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc004.gif] [ex102f307doc004.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc006.gif] [ex102f307doc006.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc008.gif] [ex102f307doc008.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc010.gif] [ex102f307doc010.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc012.gif] [ex102f307doc012.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc014.gif] [ex102f307doc014.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc016.gif] [ex102f307doc016.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc018.gif] [ex102f307doc018.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc020.gif] [ex102f307doc020.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc022.gif] [ex102f307doc022.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc024.gif] [ex102f307doc024.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc026.gif] [ex102f307doc026.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc028.gif] [ex102f307doc028.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc030.gif] [ex102f307doc030.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc032.gif] [ex102f307doc032.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc034.gif] [ex102f307doc034.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc036.gif] [ex102f307doc036.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc038.gif] [ex102f307doc038.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc040.gif] [ex102f307doc040.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529  [ex102f307doc042.gif] [ex102f307doc042.gif] MG&E Turbine Supply Agreement, Exhibit F.3.7 SF# 1091529 Exhibit F.3.8 Form of Commissioning Completion Certificate Date of Commissioning Completion:  _________________ 1. Reference is made to the Wind Turbine Supply Agreement, dated as of September 29, 2006 (the “Agreement”), by and between Madison Gas and Electric Company, a Wisconsin corporation (“Buyer”), and Vestas-American Wind Technology, Inc. (“Supplier”).  Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement.   2. The undersigned, Supplier, does hereby certify and represent with respect to Wind Turbine No. ___ and its related components that each item on the Commissioning Completion Checklist, a completed copy of which is attached as Exhibit A, has been satisfied in accordance with the Agreement. 3. Attached hereto as Exhibit B is the completed Commissioning Data Sheet for each Wind Turbine that has achieved Commissioning Completion. 4. The person signing below is authorized to submit this form to Buyer for and on behalf of Supplier. SUPPLIER: Vestas-American Wind Technology, Inc., a California corporation By: ____________________________ Name: ____________________________ Title: ____________________________ Date: ____________________________ Buyer to cross through one (1) of the following statements: A. Buyer agrees that Commissioning Completion has been achieved with respect to the enumerated Wind Turbine(s) and related components as set forth herein.   B. Buyer does not agree that Commissioning Completion has been achieved with respect to the enumerated Wind Turbine(s) and related components as set forth herein due to the omissions, liens or defects listed below and/or the incomplete nature of the specified portions of the Equipment Supply Obligations listed below: . The person signing below is authorized to submit this form to Supplier and on behalf of Buyer. ACCEPTED BY BUYER: Madison Gas and Electric Company, a Wisconsin corporation By: ____________________________ Name: ____________________________ Title: ____________________________ Date: ____________________________   Exhibit A Completed Commissioning Completion Checklist Exhibit B Commissioning Data Sheet WTG Model: Serial No.: WTG address: Pad No.: Buyer: Address: City/Country: Telephone No.: Operation Manager: Address: Telephone No.: Vestas Service Site Representative:   Address:   Telephone No.:   MAIN SPECIFICATIONS Rotor diameter, m: Tower height, m: Rated output, main generator, kW: IDENTIFICATION NUMBERS Serial No.: Year of Manufacture: Nacelle No.: Tower No.: CONTROLLER Transformer.: Switch Gear Manufacture: Switch Gear Serial:   Phase Compensation.: Controller (CPU) unit:   UPS.: BLADES Manufacturer: Type: Serial Nos.: Weight, kg per blade:   Blade bolt type : Lot\Batch No.: HUB Serial No: Hub bolt type: Lot\Batch No.: GEAR   Manufacturer: Type: Serial No.: Interchange Ratio:   Quantity of oil, ltr.: Weight incl. oil, kg: GENERATOR   Manufacturer: Type: Serial No.: Rotational speed: Rated output, MW: Protection class: Thermal protection: Weight, kg: READING OF METERS AND HOUR COUNTER AT COMMISSIONING Hour counter, turbine OK / run, hours: Hour counter, gen. 1, hours: DATES OF PERFORMANCES Installation start, date: Turbine connected to grid, date: Exhibit F.3.9 Form of Delayed Commissioning Completion Certificate DATE: 1. Supplier has delivered this completed Delayed Commissioning Completion Certificate to Buyer on the above date.  Capitalized terms used but not defined herein shall have the meanings set forth in that certain Wind Turbine Supply Agreement, dated as of September 29, 2006 (the “Agreement”), by and between Madison Gas and Electric Company, a Wisconsin corporation (“Buyer”), and Vestas-American Wind Technology, Inc., a California corporation (“Supplier”). 2. Pursuant to Section 4.2.4 of the Agreement, Supplier hereby certifies and represents that [insert number] Wind Turbine(s) have not been Commissioned within sixty (60) days following the date of the Delivery Certificate or Delayed Delivery Certificate, as applicable, due to an Excusable Event. 3. The person signing below is authorized to submit this Delayed Commissioning Completion Certificate to Buyer for and on behalf of Supplier. Vestas-American Wind Technology, Inc., a California corporation By: Name: Title:   Date:   Exhibit F.3.10 Form of Final Completion Certificate Date of Final Completion:  _____________________ 1. Reference is made to the Wind Turbine Supply Agreement, dated as of September 29, 2006 (the “Agreement”), by and between Madison Gas and Electric Company, a Wisconsin corporation (“Buyer”), and Vestas-American Wind Technology, Inc., a California corporation (“Supplier”).  Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement. 2. The undersigned, Supplier, does hereby certify and represent as follows to Buyer: a. All of the Wind Turbines have achieved Commissioning Completion or, in the event this Final Completion Certificate is submitted pursuant to Section 4.2.5 of the Agreement, (a) Commissioning Completion of Wind Turbine No. ______ 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 7.3 of the Agreement have been satisfied with respect to the Wind Turbines that have achieved Commissioning Completion; b. A Punch List for the Equipment Supply Obligations (or, in the event this Final Completion Certificate is submitted pursuant to Section 4.2.5 of the Agreement, the Wind Turbines that have achieved Commissioning Completion) has been prepared and agreed upon between Buyer and Supplier; and c. All Supplier Documents and Deliverables required to be delivered under the Agreement to Buyer by Supplier on or before Final Completion have been delivered to Buyer. 3. The person signing below is authorized to submit this Final Completion Certificate to Buyer for and on behalf of Supplier. SUPPLIER: Vestas – American Wind Technology, Inc., a California corporation By: _______________________ Name: _____________________ Title: ______________________ Date: ______________________ Buyer to cross through one (1) of the following statements: A. Buyer agrees that (i) Final Completion has been achieved or (ii) in the event this Final Completion Certificate is submitted pursuant to Section 4.2.5 of the Agreement, Supplier is entitled to the pro rata portion of the Final Completion payment allocable to the Wind Turbines that have achieved Commissioning Completion.   B. Buyer does not agree that (i) Final Completion has been achieved or (ii) in the event this Final Completion Certificate is submitted pursuant to Section 4.2.5 of the Agreement, Supplier is not entitled to the pro rata portion of the Final Completion payment allocable to the Wind Turbines that have achieved Commissioning Completion, in either case due to the omissions, liens or defects listed below and/or the incomplete nature of the specified portions of the Equipment Supply Obligations listed below: . The person signing below is authorized to submit this form to Supplier for and on behalf Buyer. ACCEPTED BY BUYER: Madison Gas and Electric Company, a Wisconsin corporation By: ____________________________ Name: ____________________________ Title: ____________________________ Date: ____________________________ Exhibit F.3.11 Form of Delayed Final Completion Certificate DATE: 1. Supplier has delivered this completed Delayed Final Completion Certificate to Buyer on the above date.  Capitalized terms used but not defined herein have the meanings set forth in that certain Wind Turbine Supply Agreement, dated as of September 29, 2006 (the “Agreement”), by and between Madison Gas and Electric Company, a Wisconsin corporation (“Buyer”), and Vestas-American Wind Technology, Inc., a California corporation (“Supplier”). 2. Pursuant to Section 4.2.5 of the Agreement, Supplier hereby certifies and represents that Final Completion could not be 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.   3. The person signing below is authorized to submit this Delayed Final Completion Certificate to Buyer for and on behalf of Supplier. Vestas-American Wind Technology, Inc., a California corporation By: Name: Title:   Date:   Exhibit F.3.12 SCADA Substantial Completion Checklist ________________________________________________________________________________ Contents OBJECTIVES SCADA DATA PATH TEST CHECK AND VERIFICATION OF THE SCADA SYSTEM CONFIGURATION Objective Methodology SCADA DATA PATH TEST SUMMARY CHECK OF THE FUNCTIONALITY OF THE FIBRE OPTIC INFRASTRUCTURE Objective Methodology FIBRE OPTIC INFRASTRUCTURE TEST SUMMARY SCADA FUNCTIONALITY TEST Objective and methodology TEST AND COMMISSIONING CERTIFICATE Operational data presentation Operational commands Presentation of instant data from other park units Calculations and presentations based on collected data User management Additional checks Test comments Objectives The SCADA system consists of standard units and equipment combined in a project specific layout and fibre optic infrastructure. All standard units and equipment will be factory tested and inspected prior to delivery and commissioning on site in accordance with Vestas quality assurance system. The site specific supplies, systems and functions that are not tested prior to installation and commissioning is subject to a project specific SCADA test on site. The overall objectives for testing the SCADA system are the following: SCADA Data Path Test: · To demonstrate that the SCADA system configuration as supplied on site is correct · To demonstrate the functionality of the fibre optic infrastructure SCADA Functionality Test: · To demonstrate the functionality of the SCADA system SCADA Data Path Test The SCADA Data Path Test consists of two parts: · Check and verification of the SCADA system configuration · Check of the functionality of the fibre optic infrastructure Check and verification of the SCADA system configuration Objective Correct project specific label and identification (ID) of each unit i.e. turbine, meteorology station, grid station etc. in the SCADA system is checked and verified. Methodology The correct system configuration of the project is demonstrated by simulating an event in a turbine and subsequently check that the event is recorded correctly in the correct unit. Wind turbines · An event is initiated in the turbine in question, e.g.: manual stop/start by e.g. activating the service key · The SCADA error log is checked for correct error identification and turbine identification · A temperature signal such as the tower base temperature is disconnected resulting in an invalid temperature value being entered into the 10-minute database · The invalid temperature is maintained for a complete 10-minute period · In the SCADA 10-minute database the turbine identification in question and the presence of invalid temperature data are checked and verified. Meteorology stations and grid stations · The connection between the unit and the SCADA network or the connection between sensors and the meteorology station controller is interrupted · The disconnection is maintained for a complete 10-minute period · In the SCADA 10-minute database the unit identification and the presence of invalid data are checked and verified. Scope of tests One turbine on each loop and all Meteorology and Grid stations units of the wind power plant must be checked and verified for correct labelling and ID. SCADA data path test summary WTG identifier……………………………… Initiated event…………………………….… Initiated signal………………………….…..   Yes No Correct turbine/error identification in error log     Correct turbine/signal identification in 10-minute database     Met Station identifier……………………………. Initiated signal………………………….…..   Yes No Correct met. Station/signal identification in 10-minute database     Grid Station identifier………………………….. Initiated signal………………………….…..   Yes No Correct grid station identification in 10-minute database     Test results recorded by: Test results approved by: ________________________________ ________________________________ Supplier Customer Date: _____________________ Date: _____________________ Check of the functionality of the fibre optic infrastructure Objective High-quality workmanship when the SCADA installed on site is a prerequisite for a correct and accurate function of the SCADA communication system. When the SCADA system is installed, focus is on correct connection of each turbine, meteorology station, grid station etc. to the SCADA system via the fibre optic communication loops The objective of the fibre optic infrastructure test is to verify the functionality of the signal path from all turbines and other SCADA units supplied by the Supplier, as follows: · Fibre optic connections in each turbine · Fibre optic communication loops · Connections at the SCADA server switch Methodology The fibre optic infrastructure is checked by monitoring each unit in the SCADA Vestas Online Business program. To verify that communication with e.g. a turbine in the wind power plant takes place, the "Park Event Overview" window in Vestas Online Business is started. The turbine is monitored over a period of time enabling values such as wind speed to show variation. Wind speed data should be available and changing for all turbines. In order to verify variation and thus communication to each unit, the wind speed data are chosen as the sample value for wind turbines and meteorology stations. For grid stations, the active power value should be chosen. Fibre optic infrastructure test summary WTG identifier………………………………   Yes No Communication to wind turbine     Met Station identifier…………………………….   Yes No Communication to meteorology station     Grid Station identifier…………………………….   Yes No Communication to grid station     Test results recorded by: Test results approved by: ________________________________ ________________________________ Supplier Customer Date: _____________________ Date: _____________________ SCADA Functionality Test Objective and methodology The objective of the SCADA Site Acceptance Test procedure is to verify the functionalities of the SCADA system when it has been installed and commissioned on site. This includes presentation of online data from a turbine, grid and meteorology station, remote operation of a turbine and presentation of reports based on collected data from the database. The following document is the Test and Commissioning Certificate for the Vestas Online Business Server SCADA system. Each line in the checklists with test-numbers is checked off in the ‘Check’ column after completion of each test. Each sheet is signed by the person who has made the records on the sheet and by a customer representative assisting the test and commissioning of the SCADA system. If there are any comments during the test, these can be listed on the last page with a reference to the test in question. A summary of the test result is written on the cover page - this will indicate if any particular observations or interpretations were made during the test. The commissioning certificate is the output of the test - and is signed by the Supplier and/or his representatives and the Customer and/or his representatives participating in the test. Test and Commissioning Certificate Project: ____________________________ System under Test: Vestas Online Business Server System Date of Test: ____________________________ The undersigned hereby accept being participants in the functionality test of the SCADA system. The main functions of the SCADA were tested according to attached pages, and no deficiencies or malfunctions other than mentioned in the list below were detected or observed. Date Signature Position Company                                 Comments:   Recorded by: Approved by: Date: Date: Operational data presentation The objective is to verify that online operational data are being transferred from different parts of the wind turbine. Select a reference turbine to conduct the reference measurements. Location: Control building and selected reference turbine.  Selected reference turbine   In the “Menu item” columns below, the procedure to access the menu item is described. One person should be in the Control building and another one located in the turbine. Using mobile phones or walkie-talkies, they should verify that the readings from the turbine display in the turbine match the readings in the SCADA system. RCOT = Use the mouse to Right-Click On the selected reference turbine. Test Description Menu item Check   WTG Instant data RCOT ® Present   1-1 Status information ® Status   1-2 Temperatures ® Temperature   1-3 Grid information ® Grid   1-4 Production figures ® Production   1-5 Operation counters ® Counters     WTG Logbooks RCOT ® Logbooks   1-7 Alarm logbook ® Alarm logbook   1-8 Warning logbook * ® Warning logbook   Recorded by: Approved by: Date: Date: *Note: Logbooks do not apply to TAC-II turbines. Operational commands The objective is to verify that commands are being transferred to the wind turbine. Location: Control building Be aware that the following test will interact with the operation of the turbine. Test Description Menu item Check   WTG Commands RCOT ® Commands   2-1 Start turbine ® Start turbine   2-2 Stop turbine ® Stop turbine   2-3 Reset alarm-code in turbine ® Reset alarm in turbine   Recorded by: Approved by: Date: Date: Presentation of instant data from other park units The objective is to verify that communication with grid and meteorology stations is taking place. Location: Control building and at the selected park units.  Selected reference grid station    Selected reference meteorology station   RCOG = Use the mouse to Right-Click On the selected reference Grid station RCOM = Use the mouse to Right-Click On the selected reference meteorology station Test Description Menu item Check   Grid station instant data RCOG ® Present   3-1 Status information ® Analogue     Met station instant data RCOM ® Present   3-2 Status information ® Analogue   Recorded by: Approved by: Date: Date: The above-mentioned park units may not be applicable in all wind power plants. Calculations and presentations based on collected data The objective is to verify different reports generated on the basis of collected data. Location: Control building RCOPC = Use the mouse to Right-Click On the site PC Test Description Menu item Check   Database RCOPC ® Database   4-1 Power curve presentation; - Power curve with no corrections. - Using meteorology station data correction. - Using correction of temperature & pressure. - Using meteorology station data and temperature & pressure. Scatter curve - Scatter curve with 10 min dots from turbine Wind curve presentation - Present turbine wind data - Present Met station wind data ® Power curve / Wind curve   4-2 Wind / Energy rose - Present a wind rose - Present a energy rose ® Wind / Energy rose   4-3 Present 10 min. data - Check that collected 10min data are available from the Vestas Online Business client connected to the Vestas Online Business Server database system. - Verify that data are collected from turbines, met- and grid-stations. ® Collected data viewer     Logbooks RCOPC ® Logbooks   4-4 Park log ® Park log   4-5 Statistics ® Statistics   Recorded by: Approved by: Date: Date: User management The objective is to verify that new users can be created and their rights can be secured. Location: Control building and selected reference turbine. Test Description Menu item Check   User management RCOPC ® Misc   5-1 Create a new user with access level 1 and verify that the user can only access online information (instant values) from the turbines. Verify that the user cannot send commands to the turbines. User management   5-2 Create a new user with access level 3 and verify that the user can access online information (instant values) and send commands to the turbines. User management   Recorded by: Approved by: Date: Date: Additional checks The objective is to verify that the system is running satisfactorily. Location: Control building Test Description Check   UPS (Uninterruptible Power Supply)   6-1 Disconnect the power to the UPS unit - simulating loss of power to the SCADA system. - Check that the power loss is logged in the system log. - Check that the system reboots again and return to normal operation after the power has been re-connected.     Check the data integrity of collected data   6-2 Verify that 10-min data are being collected and that no losses have occurred. The 10-min data can be viewed from the Data Collection Viewer. The data integrity should be verified over a specified period of at least 14 days of normal operation.     Vestas Online Business dial-in verification   6-3 Verify that it is possible to dial in with Vestas Online Business and operate the wind power plant remotely via a regular modem connection.   Recorded by: Approved by: Date: Date: The above tests are subject to changes, as the Vestas Online Business product is developed with further enhancements. Test comments If one or more test needs further explanation (e.g. not possible, not accessible or similar) write down the test number and a description of the issue. Test Description Init     Recorded by: Approved by: Date: Date: Exhibit F.3.13 Form of SCADA Completion Certificate Date of SCADA Completion: ________________ 1. Reference is made to the Wind Turbine Supply Agreement, dated as of September 29, 2006 (the “Agreement”), by and between Madison Gas and Electric Company, a Wisconsin corporation (“Buyer”), and Vestas-American Wind Technology, Inc., a California corporation (“Supplier”).  Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement. 2. The undersigned, Supplier, does hereby certify and represent to Buyer that each item on the SCADA Completion Checklist has been satisfied in accordance with the Agreement. 3. The person signing below is authorized to submit this SCADA Completion Certificate to Buyer for and on behalf of Supplier. SUPPLIER: Vestas–American Wind Technology, Inc., a California corporation By: ______________________________ Name: ___________________________ Title: ____________________________ Date: ____________________________ Buyer to cross through one (1) of the following statements: A. Buyer agrees that SCADA Completion has been achieved.   B. Buyer does not agree that SCADA Completion has been achieved due to the omissions, liens or defects listed below and/or the incomplete nature of the specified portions of the Equipment Supply Obligations listed below: The person signing below is authorized to submit this form to Supplier for and on behalf Buyer. ACCEPTED BY BUYER: Madison Gas and Electric Company, a Wisconsin corporation By: ____________________________ Name: ____________________________ Title: ____________________________ Date: ____________________________  

Exhibit 10.1 EXECUTION VERSION AMENDMENT NO. 1 TO THE SALE AND SERVICING AGREEMENT Amendment No. 1, dated as of October 26, 2006 (the “Amendment”), to the Sale and Servicing Agreement (the “Agreement”) dated as of February 1, 2005, by and among ACCREDITED HOME LENDERS, INC., a California corporation, as sponsor and as servicer (the “Sponsor” or the “Servicer,” as applicable), ACCREDITED MORTGAGE LOAN TRUST 2005-1, a Delaware statutory trust, as issuer (the “Trust”), ACCREDITED MORTGAGE LOAN REIT TRUST, a Maryland real estate investment trust, as seller (the “Seller”), and DEUTSCHE BANK NATIONAL TRUST COMPANY, a national banking association, as indenture trustee (the “Indenture Trustee”). Capitalized terms used and not defined herein shall have the meaning set forth in the Agreement. WHEREAS, the parties hereto have entered into the Agreement; WHEREAS, the parties to the Agreement desire to amend certain provisions of the Agreement as set forth in this Amendment; WHEREAS, Section 10.03(a) of the Agreement permits the amendment thereof by the Trust, the Servicer, the Seller, the Sponsor and the Indenture Trustee and providing an Opinion of Counsel to the Indenture Trustee. NOW, THEREFORE, in consideration of the promises and mutual agreements contained herein, the parties hereto agree to amend the Agreement pursuant to Section 10.03(a) thereof, and restate certain provisions thereof, as follows: 1. The Amendment. The first sentence of Section 5.24(a) is hereby amended by deleting the words “on behalf of the Trust,” after the word “Servicer” so that the first sentence reads as follows: The Servicer is hereby authorized to enter into a facility (such an arrangement, an “Advance Facility”) with any Person which provides that such Person (an “Advancing Person”) may fund Delinquency Advances and/or Servicing Advances under this Agreement, although no such facility shall reduce or otherwise affect the Servicer’s obligation to fund such Delinquency Advances and/or Servicing Advances. 2. Effect of Amendment. This Amendment to the Agreement shall be effective and the Agreement shall be deemed to be modified and amended in accordance herewith upon the occurrence of the receipt by the Indenture Trustee of an Opinion of Counsel that this Amendment does not adversely affect in any material respect the interests of any Noteholder or the Swap Provider and will not prevent the Notes from being characterized as debt for United States federal income tax purposes or cause the -------------------------------------------------------------------------------- Trust to be subject to federal income tax. This Amendment, once effective, shall be effective as of the date first set forth above. The Indenture Trustee shall give prompt written notice to the Rating Agencies of this Amendment pursuant to Section 10.03(a) of the Agreement. The respective rights, limitations, obligations, duties, liabilities and immunities of the Sponsor, the Servicer, the Trust, the Indenture Trustee, each of the Noteholders and the Certificateholder shall hereafter be determined, exercised and enforced subject in all respects to such modifications and amendments, and all the terms and conditions of this Amendment shall be and be deemed to be part of the terms and conditions of the Agreement for any and all purposes. The Agreement, as amended hereby, is hereby ratified and confirmed in all respects. 4. The Agreement in Full Force and Effect as Amended. Except as specifically amended hereby, all the terms and conditions of the Agreement shall remain in full force and effect and, except as expressly provided herein, the effectiveness of this Amendment shall not operate as, or constitute a waiver or modification of, any right, power or remedy of any party to the Agreement. All references to the Agreement in any other document or instrument shall be deemed to mean the Agreement as amended by this Amendment. 5. Counterparts. This Amendment may be executed by the Parties in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. This Amendment shall become effective when counterparts hereof executed on behalf of such Party shall have been received. 6. Governing Law. This Amendment shall be construed in accordance with and governed by the laws of the State of New York applicable to agreements made and to be performed therein. 7. Limitation of Owner Trustee Liability. It is expressly understood and agreed by the parties that (a) this document is executed and delivered by U.S. Bank Trust National Association, not individually or personally, but solely as Owner Trustee, in the exercise of the powers and authority conferred and vested in it, pursuant to the Trust Agreement, (b) each of the representations, undertakings and agreements herein made on the part of the Trust is made and intended not as personal representations, undertakings and agreements by U.S. Bank Trust National Association but is made and intended for the purpose of binding only the Trust, (c) nothing herein contained shall be construed as creating any liability on U.S. Bank Trust National Association, individually or personally, to perform any covenant either expressed or implied 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, and (d) under no circumstances shall U.S. Bank Trust National Association be personally liable for the payment of any indebtedness or expenses of the Trust or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trust under this Amendment or any other related documents.   2 -------------------------------------------------------------------------------- 8. Authorization. The Seller hereby authorizes and directs U.S. Bank Trust National Association as Owner Trustee to execute and deliver this Amendment.   3 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Sponsor, the Trust, the Servicer and the Indenture Trustee, have caused this Amendment to be duly executed by their officers thereunto duly authorized, all as of the day and year first above written.   ACCREDITED HOME LENDERS, INC., as Sponsor and Servicer By:   /s/ Charles O. Ryan   Name:   Charles O. Ryan   Title:   Securitization Coordinator ACCREDITED MORTGAGE LOAN TRUST 2005-1, by: U.S. BANK TRUST NATIONAL ASSOCIATION, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement By:   /s/ Patricia M. Child   Name:   Patricia M. Child   Title:   Vice President DEUTSCHE BANK NATIONAL TRUST COMPANY, as Indenture Trustee By:   /s/ Karlene Benvenuto   Name:   Karlene Benvenuto   Title:   Authorized Signer By:   /s/ Melissa Wilman   Name:   Melissa Wilman   Title:   Vice President ACCREDITED MORTGAGE LOAN REIT TRUST, as Seller By:   /s/ Melissa Dant   Name:   Melissa Dant   Title:   Associate General Counsel - Finance, Ass’t Vice President, and Ass’t Secretary [Signature Page for Amendment No. 1 to the Sale and Servicing Agreement]

Exhibit 10.29 September 9, 2004 Peter Bello 6979 W FM 455 Celina, TX 75009 Dear Peter, I am pleased to confirm your added responsibility of Vice President of US Federal Sales for Entrust, Inc. (“Entrust”) to your current position of President, Cygnacom Solutions, Inc. (“Cygnacom”). In your capacity as Vice President of US Federal Sales you will report directly to me. Your base salary will increase from $192,500.00 to $220,000.00 US, effective August 2, 2004, and you will continue to be paid by Entrust for your services to Entrust and Cygnacom. Your new annual incentive potential is up to 45% of base salary or $99,000.00 US at 100% achievement of individual management objectives and revenue targets, subject to review by the Compensation Committee of the Board of Directors of Entrust. This potential is not a target. This incentive program is in the discretion of Entrust and may be amended or discontinued at any time. As an officer of Cygnacom, you will have an Executive Severance Agreement made available to you, a copy of which is enclosed. You expressly acknowledge and agree that the benefits set out in this letter have been offered to you in partial consideration of your agreement to forego all vacation entitlements in excess of 20 days that you have accrued in the course of your employment with Entrust, Inc. and its related companies including Cygnacom. For greater certainty, as of October 31, 2004 you have twenty (20) days of vacation accrued. Your vacation entitlement will remain at 20 days per year, which will continue to accrue on a per pay period basis; provided, however that you will not accrue any vacation entitlement in excess of twenty (20) days notwithstanding anything to the contrary in Entrust’s Paid Time-Off Policy for North America, as amended from time to time. All other paid time off is subject to Entrust’s Paid Time-Off Policy for North America, as amended from time to time by Entrust. Your benefit plan will also not change as a result of your new position. However, these benefits may be modified, reduced, or discontinued by Entrust at any time. -------------------------------------------------------------------------------- Additionally, you will be granted an award of stock options to purchase 15,000 shares of common stock of Entrust. The strike price for this award will be equal to the fair market value of the common stock at close of business on the August 19, 2004 (the “Grant Date”). The vesting conditions will include the following:   (i) this option will become exercisable as to 25% of the original number of shares on the Grant Date; and   (ii) this option will become exercisable as to an additional 1/36th of the remaining number of shares commencing on September 19, 2005 and each monthly anniversary of such date, for each of the next 35 months thereafter. This grant will be subject to acceleration upon certain acquisition events. As a recipient of an options grant, you will be sent an Entrust Stock Option Agreement from Computershare, Inc., which will provide you with further details regarding the option grant. This grant and such agreement will not come into effect until signed by you and one copy is returned as prescribed. We believe that your abilities and our needs are compatible and that your acceptance of this offer will prove mutually beneficial. However, it is understood and agreed that your employment is terminable at the will of either party and is not an employment agreement for a year or any other specified term. This means that your terms and conditions of employment, including but not limited to termination, demotion, promotion, transfer, compensation, benefits, duties and location of work may be changed with or without cause, for any or no reason, and with or without notice. Your status as an at-will employee cannot be changed by any statement, promise, policy, course of conduct, in writing or manual except through a written agreement signed by Entrust. Your employment and this agreement will be governed by the laws of the State of Virginia. To confirm these terms governing your employment with Entrust and Cygnacom, please sign and return the original of this letter along with the following enclosed agreements together with the Executive Severance Agreement and the Executive Confidentiality, Non-Solicitation, Non-Competition, Intellectual Property Rights, And Code Of Conduct Agreement. Otherwise, if you have any questions or concerns, please contact Laura Owen at to discuss. Accordingly, I look forward to receiving your signed acceptance and am confident that you will enjoy continued success in your new role. -------------------------------------------------------------------------------- Yours sincerely, /s/ Bill Conner Bill Conner Chairman, President and CEO Entrust, Inc. /s/ David J. Wagner David Wagner Treasurer and Director Cygnacom Solutions, Inc. I confirm that I have read and accept the terms upon which this offer of promotion is being made and confirm that I wish to accept the promotion offered above.   /s/ Peter J. Bello     11-11-2004 Peter Bello     Date

EXHIBIT 10.2 THIS INSTRUMENT AND ALL RIGHTS OF THE PARTIES HEREUNDER ARE SUBJECT TO AND GOVERNED BY THE TERMS AND CONDITIONS OF AN AMENDED AND RESTATED SUBORDINATION AGREEMENT DATED AS OF THE DATE HEREOF, BY AND BETWEEN CAPITALSOURCE FINANCE LLC, REFAC, OPTICARE HEALTH SYSTEMS, INC., OPTICARE EYE HEALTH CENTERS, INC. AND PRIMEVISION HEALTH, INC. WITHOUT LIMITATION TO THE FOREGOING, ALL RIGHTS OF PAYMENT, AND ENFORCEMENT RIGHTS OF THE HOLDER OF THIS INSTRUMENT, ARE EXPRESSLY SUBORDINATED AND SUBJECT TO THE RIGHTS OF CAPITALSOURCE FINANCE LLC AND ITS SUCCESSORS AND ASSIGNS AS AND TO THE EXTENT SET FORTH IN SUCH SUBORDINATION AGREEMENT. OPTICARE HEALTH SYSTEMS, INC. PROMISSORY NOTE $1,400,000 JANUARY 25, 2006 WATERBURY, CONNECTICUT OPTICARE HEALTH SYSTEMS, INC., a Delaware corporation and OPTICARE EYE HEALTH CENTERS, INC., a Connecticut corporation (collectively, the "Borrowers" and individually, a "Borrower"), for value received, hereby jointly and severally unconditionally promise to pay to the order of REFAC (the "Holder"), a Delaware corporation on the Maturity Date (as defined herein) the principal amount of One Million Four Hundred Thousand Dollars ($1,400,000), together with interest thereon as provided herein. The Borrowers further agree to pay interest accrued on the unpaid principal amount outstanding hereunder from time to time from the date hereof, in like money, in the manner and at the rates and on the dates specified herein. Interest; Payments. The entire principal balance, together with any accrued but unpaid interest and charges due on any late payments shall be due and payable on January 25, 2007 (the "Maturity Date"). Notwithstanding the foregoing or anything herein to the contrary, if the merger provided for in the Merger Agreement (the "Merger Agreement"), dated August 22, 2005, between Refac, OptiCare Merger Sub, Inc. and OptiCare Health Systems, Inc. ("OHS"), as amended, is not completed on or before April 30, 2006, the Maturity Date shall be June 30, 2006. If the Maturity Date would fall on a day that is not a Business Day (as defined below), the payment due on the Maturity Date will be made on the next succeeding Business Day with the same force and effect as if made on the Maturity Date. "Business Day" means any day which is not a Saturday or Sunday and is not a day on which banking institutions are generally authorized or obligated to close in the city of New York, New York. Until this Promissory Note (the "Note") is paid in full, interest shall accrue on the unpaid principal amount at the Applicable Interest Rate (calculated on the basis of a 360-day year consisting of twelve 30-day months) from the date hereof up to but excluding the Maturity Date. For purposes of this Note, "Applicable Interest Rate" shall mean the greater of (i) 9% or (ii) the Prime Rate plus 3.5%. "Prime Rate" shall have the same meaning as in the Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated March 29, 2004 and amended on August 16, 2004, August 27, 2004 and January 12, 2005, between the Borrowers and CapitalSource Finance LLC ("CapitalSource"), a Delaware limited company. Such agreement, together with the amendments thereto is herein collectively referred to as the "CapitalSource Loan Agreement". Payment of interest on this Note shall be made by wire transfer of immediately available funds on the fifteenth day of each calendar month commencing February 15, 2006 to an account designated by Holder or, if no such account is designated, by certified or official bank check sent to Holder at its address set forth in Section 4(a) hereof or to such other address as Holder may designate for such purpose from time to time by written notice to OHS, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Payment of the principal and accrued interest on the Maturity Date shall be made by wire transfer of immediately available funds to an account designated by Holder or, if no such account is designated, by certified or official bank check sent to Holder at its address set forth in Section 4(a) hereof or to such other address as Holder may designate for such purpose from time to time by written notice to OHS, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. The obligations to make the payments provided for in this Note are absolute and unconditional and not subject to any defense, set-off, counterclaim, rescission, recoupment or adjustment whatsoever. The Borrowers hereby expressly waive demand and presentment for payment, notice of non-payment, notice of dishonor, protest, notice of protest and diligence in taking any action to collect any amount called for hereunder, and shall be directly and primarily liable for the payment of all sums owing and to be owing hereon, regardless of and without any notice, diligence, act or omission with respect to the collection of any amount called for hereunder. If any payment hereunder is not made within ten (10) days from its due date, a late charge of five percent (5%) of each payment so overdue may be charged by Holder for the purpose of defraying the expenses incident to handling such delinquent payment. All agreements herein made are expressly limited so that in no event whatsoever, whether by reason of advancement of proceeds hereof, acceleration of maturity of the unpaid balance hereof or otherwise, shall the amount paid or agreed to be paid to Holder for the use of the money advanced or to be advanced hereunder exceed the maximum rate permitted by law (the "Maximum Rate"). If, for any circumstances whatsoever, the fulfillment of any provision of this Note or any other agreement or instrument now or hereafter evidencing, securing or in any way relating to the debt evidenced hereby shall involve the payment of interest in excess of the Maximum Rate, then, ipso facto, the obligation to pay interest hereunder shall be reduced to the Maximum Rate; and if, for any circumstance whatsoever, Holder shall ever receive interest, the amount of which would exceed the amount collectible at the Maximum Rate, such amount as would be excessive interest shall be applied to the reduction of the principal balance remaining unpaid hereunder and not to the payment of interest. This provision shall control every other provision in any and all other agreements and instruments existing or hereafter arising between the Borrowers and Holder with respect to the debt evidenced hereby. Borrowers may prepay all or part of the unpaid principal balance due hereunder at any time or from time to time without penalty. Events of Default. The occurrence of any of the following events shall constitute an event of default (an "Event of Default"): A default in the payment of the principal or interest on this Note, when and as the same shall become due and payable. A default in the performance, or a breach, of any of the covenants of OHS contained in the Merger Agreement. A default in the performance, or a breach, of any other covenant or agreement of any of the Borrowers in or pursuant to this Note, the Merger Agreement or the CapitalSource Loan Agreement. Any material breach of a representation, warranty or certification made by any of the Borrowers in or pursuant to this Note, the Merger Agreement or the CapitalSource Loan Agreement. A default or event of default which remains uncured following any applicable grace or cure period shall have occurred with respect to the Borrowers' indebtedness to CapitalSource. The entry of a decree or order by a court having jurisdiction adjudging any of the Borrowers as bankrupt or insolvent, or approving a petition seeking reorganization, arrangement, adjustment or composition of or in respect of any of the Borrowers under federal bankruptcy law, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, and the continuance of any such decree or order unstayed and in effect for a period of 60 days; or the commencement by any of the Borrowers of a voluntary case under federal bankruptcy law, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency, or other similar law, or the consent by any of the Borrowers to the institution of bankruptcy or insolvency proceedings against it, or the filing by any of the Borrowers of a petition or answer or consent seeking reorganization or relief under federal bankruptcy law or any other applicable federal or state law, or the consent by any of the Borrowers to the filing of such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator or similar official of such Borrower or of any substantial part of the property of such Borrower, or the making by any of the Borrowers of an assignment for the benefit of creditors, or the admission by any of the Borrowers in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by any such Borrower in furtherance of any such action. Remedies Upon Default. Upon the occurrence of an Event of Default, Holder, by notice in writing given to OHS, may declare the entire principal amount then outstanding of, and the accrued interest on, this Note to be due and payable immediately, and upon any such declaration the same shall become and be due and payable immediately, without presentation, demand, protest or other formalities of any kind, all of which are expressly waived by the Borrowers. Holder may institute such actions or proceedings in law or equity as it shall deem expedient for the protection of its rights and may prosecute and enforce its claims against all assets of the Borrowers, and in connection with any such action or proceeding shall be entitled to receive from the Borrowers payment of the principal amount of this Note, plus accrued interest to the date of payment, plus reasonable expenses of collection, including, without limitation, reasonable attorneys' fees and expenses actually incurred. Miscellaneous. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be sent by registered or certified mail, postage prepaid, overnight courier, confirmed telex or facsimile transmission or otherwise by hand or by messenger, addressed (i) if to the Borrowers, to the attention of OHS, at its offices at 87 Grandview Avenue, Waterbury, Connecticut 06708 to the attention of Chief Executive Officer, or (ii) if to Holder, at its offices at One Bridge Plaza, Fort Lee, New Jersey 07024, to the attention of Chief Executive Officer and (iii) in either case, to such other address as the party shall have furnished to the other party in writing in accordance with the provisions of this Section 4(a). Notice to the estate of any party shall be sufficient if addressed to the party as provided in this Section 4(a). Any notice or other communication given by certified mail shall be deemed given at the time of certification thereof, except for a notice changing a party's address which shall be deemed given at the time of receipt thereof. Any notice given by other means permitted by this Section 4(a) shall be deemed given at the time of receipt thereof. Upon receipt of evidence reasonably satisfactory to OHS, of the loss, theft, destruction or mutilation of this Note (and upon surrender of this Note if mutilated), the Borrowers shall execute and deliver to Holder a new Note of like date, tenor and denomination. No course of dealing and no delay or omission on the part of Holder or the Borrowers in exercising any right or remedy shall operate as a waiver thereof or otherwise prejudice Holder's or the Borrowers' rights, powers or remedies, as the case may be. No right, power or remedy conferred by this Note upon Holder or the Borrowers shall be exclusive of any other right, power or remedy referred to herein or now or hereafter available at law, in equity, by statute or otherwise, and all such remedies may be exercised singly or concurrently. This Note may be amended only by a written instrument executed by the Borrowers (or its successor or permitted assignee, if applicable) and Holder hereof. Any amendment shall be endorsed upon this Note and all future Holders shall be bound thereby. If one or more provisions of this Note are held to be unenforceable under applicable law, such provision shall be excluded from this Note and the balance of this Note shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. This Note shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to principles governing conflicts of law. The Borrowers irrevocably consent to the exclusive jurisdiction of any of the federal and state courts located in the State of New York sitting in New York County, New York in connection with any action or proceeding arising out of or relating to this Note, any document or instrument delivered pursuant to, in connection with or simultaneously with this Note, or a breach of this Note or any such document or instrument. [END OF PAGE] IN WITNESS WHEREOF, intending to be legally bound hereby, each of the Borrowers have executed this Note under seal, intending to be legally bound hereby, the day and year first above written. OPTICARE HEALTH SYSTEMS, INC. By: /s/ DEAN J. YIMOYINES ------------------------------- Name: Dean J. Yimoyines Title: Chief Executive Officer OPTICARE EYE HEALTH CENTERS, INC. By: /s/ DEAN J. YIMOYINES ------------------------------- Name: Dean J. Yimoyines Title: Chief Executive Officer

  EXHIBIT 10.32 FORM OF NON-EMPLOYEE DIRECTOR RESTRICTED STOCK UNIT AGREEMENT      AGREEMENT made as of the [   ] (the “Grant Date”), by and between The Pepsi Bottling Group, Inc., a Delaware corporation having its principal office at One Pepsi Way, Somers, New York 10589 (“PBG”), and [   ] (“you” or the “Grantee”). W I T N E S S E T H:      WHEREAS, the Board of Directors of PBG (the “Board”) (which is authorized to administer the Plan) has approved the PBG Directors’ Stock Plan as Amended and Restated (the “Plan”), for the purposes and subject to the provisions set forth in the Plan; and      WHEREAS, pursuant to the Plan, the Grantee has been granted an award of restricted stock units as described herein pursuant to the Plan (the “Restricted Stock Units”); and      WHEREAS, the Restricted Stock Units are to be evidenced by an Agreement in such form and containing such terms and conditions, as the Board shall determine;      NOW, THEREFORE, it is mutually agreed as follows:      1. Grant. PBG hereby grants to you, on the terms and conditions set forth herein, an aggregate of [   ] Restricted Stock Units subject to, and in accordance with, the terms set forth in this Agreement. The number of Restricted Stock Units granted to you has been calculated by dividing the face amount of the award, as established under the Plan, by the Fair Market Value (as defined in the Plan) of a share of PBG Common Stock on the grant date established under the Plan and rounding the result up (if necessary) to the nearest whole number.      2. Restrictions. Subject to the terms and conditions set forth herein, your Restricted Stock Units shall become fully vested on the Grant Date and shall be payable [on the Grant Date [[or alternatively] one year after the Grant Date], or on such later date as you elect in accordance with the terms of the Plan; provided, however, that in the event of your Total Disability (as defined in Section 10 below), separation from service as a director of PBG, or death, then you, or in the event of your death, your legal representative (or any person to whom the Restricted Stock Units may be transferred by will or the applicable laws of descent and distribution), shall be paid the Restricted Stock Units in accordance with Section 3.      3. Payment. Restricted Stock Units shall be settled in shares of PBG Common Stock [[or alternatively] cash]. You shall receive one share of PBG Common Stock for each vested Restricted Stock Unit. To the extent necessary for reasons of practicability, settlement may occur after the payment date or event that applies under Section 2, but in all cases payment shall be made within such time after the date or event as will qualify as payment on the date or event for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).      4. Book Account. A book account in respect of your Restricted Stock Units shall be maintained by PBG until the shares of PBG Common Stock are paid to you or your estate, subject to your or your executor’s delivery of any documents which the Board or its delegate may require as a condition to the issuance of shares of PBG Common Stock and the delivery of such shares to you or your estate. Shares may be delivered to you or your estate by a stock certificate or certificates registered in your name, or in such manner as you or your estate shall designate, or may be delivered through book entry transfer, where available.   --------------------------------------------------------------------------------        5. Dividend Equivalents. During any deferral period, you shall accumulate dividend equivalents with respect to the Restricted Stock Units, which dividend equivalents shall be paid in shares (rounded up, if necessary, to the nearest share) to you only when any deferral period ends and the Restricted Stock Units become payable. Dividend equivalents shall equal the dividends actually paid with respect to PBG Common Stock during any deferral period.      6. Misconduct. If the Board determines that the Grantee has committed “Misconduct” at any time prior to, or within twelve months after, the payment of any Restricted Stock Units, then the Board may, in its sole discretion cancel any outstanding Restricted Stock Units. Misconduct occurs if a majority of the Board determines that you: (a) engaged in any act which is considered to be contrary to PBG’s best interests, including, but not limited to, recruiting or soliciting employees of PBG; (b) violated PBG’s Code of Conduct or engaged in any other activity which constitutes gross misconduct; (c) engaged in unlawful trading in the securities of PBG or of any other company based on information gained as a result of your service as a Director of PBG; or (d) disclosed to an unauthorized person or misused confidential information or trade secrets of PBG.      7. Adjustment for Change in Common Stock. In the event of (a) any change in the outstanding shares of PBG Common Stock by reason of any split, stock dividend, recapitalization, merger, reorganization, consolidation, combination or exchange of shares, (b) any separation of a corporation (including a spin-off or other distribution of assets of PBG to its shareholders), (c) any partial or complete liquidation, or (d) other similar corporate change, such equitable adjustments shall be made in your Restricted Stock Unit award as the Board determines are necessary and appropriate, including, if necessary, an adjustment in the maximum number or kind of shares subject to the Restricted Stock Unit award (including the conversion of shares subject to the Restricted Stock Unit award from PBG Common Stock to stock of another entity). Such adjustment shall be conclusive and binding for all purposes of the Plan and this Agreement.      8. Registration, Listing and Qualification of Shares. The Restricted Stock Units shall be subject to the requirements that if, at any time, the Board determines that the registration, listing or qualification of shares covered hereby upon any securities exchange or under any foreign, federal, state or local law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in conjunction with, the granting of the Restricted Stock Units, no shares shall be issued until such registration, listing, qualification, consent or approval shall have been effected or obtained free of any condition not acceptable to the Board. The Board may require that you make such representations and agreements and furnish such information as the Board deems appropriate to assure compliance with or exemption from the foregoing or any other applicable legal requirement, and may cause the certificate or certificates issued to you to bear a legend indicating the existence of any restriction resulting from such representations or agreements.      9. Nontransferability. Unless the Board specifically determines otherwise, the Restricted Stock Units are personal to the Grantee and shall not be transferable or assignable, other than by will or the laws of descent and distribution, and any such purported transfer or assignment shall be null and void.      10. Definition. As used in this Agreement, the term “Total Disability” shall mean becoming “disabled” within the meaning of Code section 409A(a)(2)(C).      11. Notices. Any notice to be given to PBG under the terms of this Agreement shall be addressed to PBG’s Executive Compensation Group at One Pepsi Way, Somers, New York 10589, or such other address as PBG may hereafter designate to the Grantee. Any such notice shall be deemed to have been duly given when personally delivered, addressed as aforesaid, or when enclosed in a properly sealed envelope or wrapper, addressed as aforesaid, and deposited, postage prepaid, with the federal postal service. 2 --------------------------------------------------------------------------------        12. Binding Effect.      (a) This Agreement shall be binding upon and inure to the benefit of any assignee or successor in interest to PBG, whether by merger, consolidation or the sale of all or substantially all of PBG’s assets. PBG will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of PBG to expressly assume and agree to perform this Agreement in the same manner and to the same extent that PBG would be required to perform it if no such succession had taken place.      (b) This Agreement shall be binding upon and inure to the benefit of the Grantee or his legal representative and any person to whom the Restricted Stock Unit award may be transferred by will or the applicable laws of descent and distribution.      13. No Rights to Continue as a Director. The Restricted Stock Units granted to you hereunder do not confer on you any right to continue as a Director of PBG or interfere in any way with PBG’s right to determine the terms of your directorship. This Agreement shall survive the termination of the Grantee’s directorship for any reason.      14. Amendment; Waiver. No provision of this Agreement may be materially amended or waived unless agreed to in writing and signed by the Board, and no such amendment or waiver shall cause the Agreement to violate Code section 409A. Any such amendment to this Agreement that is materially adverse to the Grantee shall not be effective unless and until the Grantee consents, in writing, to such amendment (provided that any amendment that is required to comply with Code section 409A shall be effective without consent unless the Grantee expressly denies consent to such amendment in writing). The failure to exercise, or any delay in exercising, any right, power or remedy under this Agreement shall not waive any right, power or remedy which PBG has under this Agreement.      15. Severability or Reform by Court. In the event that any provision of this Agreement is deemed by a court to be broader than permitted by applicable law, then such provision shall be reformed (or otherwise revised or narrowed) so that it is enforceable to the fullest extent permitted by applicable law. If any provision of this Agreement shall be declared by a court to be invalid or unenforceable to any extent, the validity or enforceability of the remaining provisions of this Agreement shall not be affected.      16. Prospectus. You hereby acknowledge that you have received a copy of the Prospectus relating to the Plan. You also consent to receive stockholder information, including copies of any annual report, proxy statement and Form 10-K, from the investor relations section of the PBG website at www.pbg.com. You acknowledge that this consent may be withdrawn only by written notice in accordance with Section 10, which notice may be given at any time, and that written copies of the Plan, Plan Prospectus, other Plan information and stockholder information are available by written request to PBG’s Secretary.      17. Plan Controls. The Restricted Stock Unit award and the terms and conditions set forth herein are subject in all respects to the terms and conditions of the Plan and any operating guidelines or other policies or regulations which govern administration of the Plan (“Plan Guidelines”), which shall be controlling, except to the extent this Agreement is more restrictive than is required under the Plan or Plan Guidelines and except to the extent provided in this Section 17. PBG reserves its rights to amend or terminate the Plan at any time without the consent of the Grantee; provided, however, that the limitations on amending this Restricted Stock Unit award under Section 14 above shall apply to any Plan amendment that would have a material adverse effect on the award, and such amendment or termination shall not cause the Agreement to violate Code section 409A. All interpretations or determinations of the Board or its delegate shall be final, binding and conclusive upon the Grantee (and his legal representatives and any recipient of a transfer of the Restricted Stock Unit award) on any question arising hereunder or under the Plan, the Plan Guidelines or other policies or regulations which govern administration of the Plan. 3 --------------------------------------------------------------------------------        18. Compliance with Law. The Grantee further agrees to seek all necessary approval under, make all required notifications under and comply with all laws, rules and regulations applicable to the ownership of stock options, rights and stock and the payment of the Restricted Stock Units, including, without limitation, currency and exchange laws, rules and regulations.      19. Governing Law and Documents. This Agreement shall be governed by, construed and enforced in accordance with the laws of the state of Delaware, without giving effect to conflict of laws principles.      Please indicate your understanding and acceptance of the foregoing by signing and returning a copy of this Agreement.             The Pepsi Bottling Group, Inc.                 BY:             I confirm my understanding of the foregoing and accept the Restricted Stock Unit award described above subject to the terms and conditions described herein.   4

Exhibit 10.3 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made by and between RBC Life Sciences, Inc. (“Employer”) located at 2301 Crown Court, Irving, Texas 75038 and Dennis N. Windsor (“Employee”), residing at 810 May Trail, McKinney, Texas 75069. The parties to this Agreement declare that: Employer is engaged in, among other businesses, the international distribution of nutritional supplements and personal care products through the network marketing distribution model, and the distribution of wound care and oncology care products. Employee is willing to be employed by Employer, and Employer is willing to employ Employee, on the terms, covenants, and conditions set forth in this Agreement. In consideration of the mutual promises set forth in this Agreement, Employer and Employee agree as follows: Section 48. Effective Date and Purpose. The effective date of this Agreement shall be January 1, 2007 (the “Effective Date”). This Agreement sets forth the terms and conditions of Employee’s employment with Employer and replaces and supersedes any prior employment agreement or understanding between Employee and Employer regarding Employee’s employment with Employer. Section 49. Employment Title and Duties. Employer shall employ Employee in the capacity of Vice President – Marketing and Sales. In this capacity, Employee shall have the responsibility to perform all duties that are customarily performed by one holding that position in other, same, or similar businesses or enterprises as that engaged in by Employer. A diagram of Employee’s functional responsibility is attached as Exhibit A. Employer reserves the right to modify Exhibit A as necessary or appropriate throughout the life of this Agreement. Employee accepts this employment, subject to the general supervision and pursuant to the orders and direction of Employer. Employee shall also render such other and services and duties, consistent with such capacity, as may be assigned from time to time by Employer. Section 50. Compensation of Employee. Employer shall pay Employee, in full payment for Employee’s services and covenants under this Agreement, the following compensation:     a. Monthly Base Salary. During his employment, Employee’s monthly base salary shall be $15,000.00 payable bi-weekly in equal payments.     b. Incentive Bonus. During his employment, Employee shall have a reasonable opportunity to earn a cash incentive bonus as described in Exhibit B. The maximum cash incentive bonus that may be earned by Employee for any calendar year is two times Employee’s annual base salary.     c. Health and Welfare Benefits. During his employment, Employee shall be eligible to participate in the health and welfare benefit plans and programs offered from time to time by Employer for its similarly situated employees, upon the terms and subject to conditions of such plans and programs.     Page 1   -------------------------------------------------------------------------------- Employment Agreement – Dennis N. Windsor     d. Special Compensation Payment. Within ten (10) business days following the Effective Date, and, if this Agreement is renewed following the initial term for one or more terms, within ten (10) days following the first day of each renewal term, Employer will pay Employee a single sum cash payment in the amount of $1,000.00 which is intended to assist Employee in purchasing life insurance coverage under group term insurance programs made available by Employer or in such other manner as deemed appropriate by Employee; provided, however, that Employee is not required to use such special compensation payment for any specific purpose. Section 51. Best Efforts of Employee. Employee agrees to perform all of the duties pursuant to the express and implicit terms of this Agreement to the reasonable satisfaction of Employer. Employee further agrees to perform such duties faithfully and to the best of his ability, talent, and experience. Section 52. Place of Employment. Employee shall render such duties at 2301 Crown Court, Irving, Texas 75038 and at such other places as Employer shall in good faith require or as the interest, needs, business, or opportunity of Employer shall require. Section 53. Non-Competition with Employer during Employment. Employee shall devote all his time, attention, knowledge, and skills solely to the business and interest of Employer, and Employer shall be entitled to all of the benefits and profits arising from the work of Employee. Employee shall not, during his employment under this Agreement, perform services for or be interested directly or indirectly, in any manner, as partner, officer, director, shareholder, advisor, consultant, employee, or in any other capacity in any other business similar to Employer’s business, any allied trade, or any business offering a competing or alternative product or service. However, nothing contained in this section shall prevent or limit Employee from continuing to receive the benefits of relationships previously described to Employer or investing in the capital stock or other securities of any corporation whose stock or securities are publicly owned and traded on any public exchange, nor shall anything contained in this Section 6 prevent or limit Employee from investing in real estate. Section 54. Restrictions on the Use of Trade Secrets and Records. During the term of employment under this Agreement, Employee may have access to various trade secrets and intellectual property consisting of formulas, patterns, devices, inventions, processes, and compilations of information, records and specifications, all of which are owned by Employer and regularly used in the operation of Employer’s business. All files, records, customer lists, documents, drawings, specifications, equipment, and similar records and items relating to the business of Employer, whether they are prepared by Employee or come into Employee’s possession in any other way and whether or not they contain or constitute trade secrets owned by Employer, are and shall remain the exclusive property of Employer and shall not be removed from the premises of Employer under any circumstances whatsoever without the prior written consent of Employer. Employee agrees not to divulge, misappropriate, use, or disclose any of these trade secrets and records directly or indirectly, to any person, firm, corporation, or other entity in any manner whatsoever, either during the term of employment under this Agreement or at any time thereafter, except as required in the course of employment. This Section 7 shall survive Employee’s termination of employment.     Page 2   initials                            -------------------------------------------------------------------------------- Employment Agreement – Dennis N. Windsor Section 55. Term. This Agreement shall be effective for period of one (1) year beginning on January 1, 2007 and ending on December 31, 2007. This Agreement shall be automatically renewed for an additional one-year period upon expiration of its initial term and each anniversary thereafter, unless either Employer or Employee gives written notice to the other party at least thirty (30) days prior to the last day of the then current term of the Agreement. Section 56. Termination of Employment.     a. Non-renewal of Agreement by Employer. If Employer elects not to renew employment under this Agreement pursuant to the terms of Section 8, Employee, unless otherwise requested by Employer, shall continue to render services, and shall be paid compensation as provided in this Agreement, through the last day of the current term of the Agreement. In addition, if Employee executes a general release in the form and at the time requested by Employer, Employee shall continue to be paid his monthly base salary for a period of six (6) months as severance pay following the date of termination and previously accrued, unused personal time off, as determined and limited under the Employer’s personal time off policy (“PTO”). The amounts paid shall be reduced by all amounts withheld and deducted pursuant to Section 16. No benefits, bonuses, PTO, or other forms of compensation, except for the severance payments, will be paid to Employee or accrued for this six-month severance payment period. If Employer offers to continue Employee’s employment on a non-contractual basis following the Employer’s non-renewal of this Agreement and Employee elects to continue his employment on that basis, Employee will not be entitled to the severance pay referred to in this Section 9.a.     b. Non-renewal of Agreement by Employee. If Employee elects to resign prior to the expiration of the then current term of this Agreement pursuant to the terms of Section 8, Employee shall continue to render services, unless otherwise requested by Employer, through the last day of the current term of the Agreement. If he complies with this requirement, he shall be paid his monthly base salary as provided in this Agreement up to the last day of employment plus any accrued, unused PTO and any annual incentive bonus or additional compensation that may have otherwise accrued during the current term of this Agreement.     c. Termination by Employer for Cause. Employer may immediately terminate the employment of Employee under this Agreement for “Cause” (as defined below) at any time by giving written notice of termination to Employee without prejudice to any other remedy to which Employer may be entitled either at law, in equity, or under this Agreement. In this case, Employee will be paid his monthly base salary up to the date of his termination of employment and shall not be entitled to any other compensation or benefits under this Agreement. For purposes of this Agreement, “Cause” shall mean, in each case, as reasonably determined by the Board: (i) conviction of, or entry of a pleading of guilty or no contest by, Employee with respect to a felony or any lesser crime of which fraud or dishonesty is a material element, (ii) Employee’s willful and continued failure to perform his duties with Employer, or a failure to follow the lawful direction of the Board after the Board delivers a written demand for performance and Employee neglects to cure such a failure to the reasonable satisfaction of the     Page 3   initials                            -------------------------------------------------------------------------------- Employment Agreement – Dennis N. Windsor Board within 15 days after receipt of the demand, (iii) Employee’s failure to comply with applicable laws with respect to the execution of Employer’s business operations or his material breach of Sections 6 or 7 of this Agreement, (iv) Employee’s theft, fraud, embezzlement, dishonesty, or similar conduct which has resulted or is reasonably likely to result in material damage to Employer or any of its affiliates or subsidiaries, or (v) Employee’s habitual intoxication or continued abuse of illegal drugs which interferes with Employee’s ability to perform his assigned duties and responsibilities.     d. Termination by Employee for Good Reason. Employee may terminate his employment under this Agreement for “Good Reason” (as defined below) at any time by giving written notice of termination to Employer without prejudice to any other remedy to which Employee may be entitled either at law, in equity, or under this Agreement. In this case, if Employee executes a general release in the form and at the time requested by Employer, Employee shall be paid his monthly base salary for a period of six (6) months as severance pay following the date of termination, plus an amount equal to his accrued, unused PTO. In addition, if at the end of the year in which employee terminates employment, the employee would have received a bonus as described in Exhibit B, employee will be paid a prorata share of the bonus for the full months of actual employment in that year. The amounts paid shall be reduced by all amounts withheld and deducted pursuant to Section 16. No benefits, bonuses, PTO, or other forms of compensation, except for the severance payments, will be paid to Employee or accrued for this six-month severance payment period. For purposes of this Agreement, the term “Good Reason” shall mean: (i) a material breach by Employer of this Agreement which breach is not cured within 30 days after the Board’s receipt of written notice of such non-compliance from Employee; or (ii) the assignment to Employee by Employer of duties materially and adversely inconsistent with Employee’s position, duties, or responsibilities as in effect immediately after the Effective Date of this Agreement, including, but not limited to, any material reduction in such position, duties or responsibilities, or a change in Employee’s title or office, as then in effect, or any removal of Employee from any of such positions, titles, or offices.     e. Termination Following a Change of Control. If during the one-year period following the effective date of a “Change of Control” (as defined below), Employer terminates Employee’s employment under this Agreement for any reason other than Cause or Employee terminates his employment under this Agreement for Good Reason and, in either case, Employee executes a general release in the form and at the time requested by Employer, Employee shall continue to be paid his monthly base salary for a period of twelve (12) months as severance pay following the date of termination and accrued, unused PTO. The amounts paid shall be reduced by all amounts withheld and deducted pursuant to Section 16. No benefits, bonuses, PTO, or other forms of compensation, except for the severance payments, will be paid to Employee or accrued during this twelve-month severance period.     Page 4   initials                            -------------------------------------------------------------------------------- Employment Agreement – Dennis N. Windsor For purposes of this Agreement, the term “Change of Control” shall mean: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than Employer’s current Chief Executive Officer, Clinton H. Howard, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Employer representing fifty percent (50%) or more of the combined voting power of Employer’s then outstanding securities; (ii) as a result of, or in connection with, any tender offer or exchange offer, merger, or other business combination (a “Transaction”), the persons who were directors of Employer immediately before the Transaction (except for any person whose initial election as a director occurs as the result of an actual or threatened election contest, within the meaning of Rule 14a-11 under the Exchange Act, or other actual or threatened solicitation of proxies or contests by or on behalf of a person other than the Board) shall cease to constitute a majority of the Board of Directors (the “Board”) of Employer or any successor to Employer; (iii) Employer is reorganized, merged or consolidated with another corporation and as a result of the reorganization, merger or consolidation less than fifty percent (50%) of the outstanding voting securities of the surviving or resulting corporation shall then be owned in the aggregate by the former stockholders of Employer; or (iv) Employer sells or disposes of all or substantially all of its assets to any person, other corporation, or other legal entity not controlled by Employer, or the shareholders approve a plan of complete liquidation or an agreement for the sale or disposition of Employer in a majority.     f. Death of Employee. This Agreement shall be deemed terminated as of the date of Employee’s death. In this case, Employer shall pay to employee’s estate Employee’s monthly base salary as provided in this Agreement up to the date of termination, plus Employee’s accrued, unused PTO.     g. Disability of Employee. Should Employee be unable to perform his duties under this Agreement by reason of inability to perform the essential functions of the position for a period of six (6) months, Employer shall have the right to terminate this Agreement upon written notice to Employee. During the period that Employee fails to perform his duties as a result of his inability to perform the essential functions of the position, Employer will continue to pay Employee Employee’s monthly base salary, reduced by any disability payments received by Employee from a disability program made available by Employer, for a period of six (6) months after the date on which Employee was determined to be unable to perform the essential functions of the position. On the date of Employee’s termination of employment, Employee shall be paid his accrued, unused PTO. The amounts paid shall be reduced by all amounts withheld and deducted pursuant to Section 16.     h. Early Termination by Employer. Should Employer terminate the employment of Employee prior to the end of the initial term or any renewal term in effect, other than by reason of Cause, death or disability, or during the twelve-month period following a Change of Control, and Employee executes a general release in the Form and at the time requested by Employer, Employee shall be paid the     Page 5   initials                            -------------------------------------------------------------------------------- Employment Agreement – Dennis N. Windsor greater of (i) his monthly base salary through the last day of the initial term or renewal term then in effect, plus an amount equal to his accrued, unused PTO or (ii) his monthly base salary for a period of six (6) months, increased by two weeks for each “Year of Service” (as defined below) performed by Employee prior to his termination date, as severance pay following the date of termination, plus an amount equal to his accrued, unused PTO. In addition, if at the end of the year in which employment is terminated, the employee would have received a bonus as described in Exhibit B, employee will be paid a prorata share for the full months of actual employment in that year. The amounts paid shall be reduced by all amounts withheld and deducted pursuant to Section 16. No benefits, bonuses, PTO, or other forms of compensation, except for the severance payments, will be paid to Employee or accrued for any time beyond the last day of the initial term or renewal term of this Agreement. For purposes of this Agreement, the term “Year of Service” shall mean each full year Employee is employed by Employer prior to his last day of actual employment under this Agreement. In determining an Employee’s Years of Service, all fractions of a year worked shall be aggregated to determine whether an additional Year of Service will be credited.     i. Early Termination by Employee. Should Employee terminate his employment prior to the end of the initial term or any renewal term in effect, other than for Good Reason, death or disability, Employee shall be paid his monthly base salary and unused, accrued PTO up to the last day of employment, and shall not be entitled to any other compensation or benefits under this Agreement, including any incentive bonus. Section 57. Deferred Payments for Certain Key Employees. Notwithstanding any other provisions contained in this Agreement to the contrary, no payments that are considered to be “deferred compensation” under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) may be made to Employee as a result of Employee’s separation from the service of Employer until the date that is six months after the date of the separation from service (or, if earlier, the death of Employee) if Employee is a “specified employee” as described in Section 409A(a)(2)(B)(i) of the Code at the time the payment otherwise would have been made. Section 58. Indemnity. Employer shall indemnify Employee and hold Employee harmless for any acts or decisions made by Employee in good faith and that were reasonably believed to be in the best interest of Employer while performing services for Employer. Employer will use its reasonable best efforts, to maintain Director and Officer insurance coverage in the amount of $1,000,000 for Employee under an insurance policy covering the officers and directors of Employer against lawsuits. Employer shall pay all reasonable expenses, including attorney’s fees, actually and necessarily incurred by Employee in connection with any appeal thereon, including the cost of court settlements. Notwithstanding the preceding sentence, (i) the obligations of Employer shall be subject to the condition that the Board shall not have determined based on advice from its legal counsel that Employee would not be permitted to be indemnified under applicable law, and (ii) the obligation of Employer to make an expense or fee advance pursuant to this Section 10 shall be subject to the condition that, if, when and to the extent that the Board determines that Employee would not be permitted to be so indemnified under applicable law, Employer shall be entitled to be reimbursed by Employee (who hereby agrees to reimburse Employer) for all such amounts theretofore paid (it being understood and agreed that the foregoing agreement by Employee shall be deemed to satisfy any requirement that Employee     Page 6   initials                            -------------------------------------------------------------------------------- Employment Agreement – Dennis N. Windsor provide Employer with an undertaking to repay any advancement of fees or expenses if it is ultimately determined that Employee is not entitled to indemnification under applicable law); provided, however, that if Employee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Employee should be indemnified under applicable law, any determination made by the Board that Employee would not be permitted to be indemnified under applicable law shall not be binding and Employee shall not be required to reimburse Employer for any expense advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or have lapsed). This undertaking by Employee to repay such expense advance shall be unsecured and interest-free. Section 59. Effect of Partial Invalidity. The invalidity of any portion of this Agreement shall not affect the validity of any other provision. In the event that any provision of this Agreement is held to be invalid, the parties agree that the remaining provisions shall remain in full force and effect. Section 60. Entire Agreement. This Agreement contains the complete Agreement between the parties and shall supersede all other agreements, either oral or written, between the parties. The parties stipulate that neither of them has made any representations except as are specifically set forth in this Agreement and each of the parties acknowledges that they have relied on their own judgment in entering into this Agreement. Section 61. Successors and Assigns; Survival of Rights and Obligations.     a. Binding Agreement; Employee’s Personal Agreement. This Agreement shall be binding upon and inure to the benefit of Employee’s and his heirs and legal representatives and Employer and its successors and assigns. Employee’s rights and obligations under this Agreement are personal and may not be assigned or transferred in whole or in part by Employee (except that his rights may be transferred upon his death by will, trust, or the laws of intestacy).     b. Employer’s Successor. Employer will require any successor to all or substantially all of the business and assets of Employer (whether direct or indirect, by purchase, merger, consolidation or otherwise) to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Employer would be required to perform it if no such succession had taken place; except that no such assumption and agreement will be required if the successor is bound by operation of law to perform this Agreement. In this Agreement, “Employer” shall include any successor to Employer’s business and assets that assumes and agrees to perform this Agreement (either by agreement or by operation of law).     c. Survival. The respective rights and obligations of Employer and Employee under this Agreement (including Sections 7, 9, 10, 11 and 16) shall survive the expiration or termination of the Agreement to the extent necessary to give full effect to those rights and obligations. Section 62. Notices. All notices, requests, demands, and other communications shall be in writing and shall be given by registered or certified mail, postage prepaid, to the addresses shown on the first page of this Agreement, or to such subsequent addresses as the parties shall so designate in writing.     Page 7   initials                            -------------------------------------------------------------------------------- Employment Agreement – Dennis N. Windsor Section 63. Dispute Resolution.     a. Arbitration. The exclusive remedy or method of resolving all disputes or questions arising out of or relating to this Agreement (including its expiration or termination) or the expiration or termination of Employee’s employment hereunder (“Disputes”) shall be arbitration held in Dallas, Texas. Nevertheless, although disputes or questions arising out of or relating to Sections 6 and 7 shall be subject to arbitration, Employer shall not be precluded from also seeking and obtaining injunctive relief from any court of proper jurisdiction to enforce or protect its rights under Sections 6 and 7. Any arbitration may be requested or initiated by a party to the Dispute by written notice to the other party or parties to the Dispute specifying the subject of the requested arbitration and appointing the notifying Party’s arbitrator (“Arbitration Notice”).     b. Arbitrators. Arbitration shall be before three arbitrators, one to be appointed by Employer, a second to be appointed by Employee, and a third to be appointed by the two arbitrators chosen by Employer and Employee. The third arbitrator shall act as chairman. If (i) the non-initiating party to the Dispute fails to appoint an arbitrator by written notice to the initiating party to the Dispute within ten days after the Arbitration Notice is given, or (ii) the two arbitrators appointed by the parties to the Dispute fail to appoint a third arbitrator within ten days after the date of the appointment of the second arbitrator, then the American Arbitration Association in Dallas, Texas, upon application of a party to the Dispute, shall appoint an arbitrator to fill that position.     c. Award and Costs. The arbitration proceeding shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association. A determination or award made or approved by at least two of the arbitrators shall be the valid and binding action of the arbitrators. The costs of arbitration (exclusive of the expense of a party to the Dispute in obtaining and presenting evidence and attending the arbitration and of the fees and expenses of legal counsel to a party to the dispute, all of which shall be borne by that party to the Dispute) shall be borne by Employer if Employee receives substantially the relief sought by him in the arbitration, whether by settlement, award, or judgment; otherwise, the costs shall be borne one-half by Employer and one-half by Employee. The arbitration determination or award shall be final and conclusive on the parties to the Dispute, and judgment upon such award may be entered and enforced in any court of competent jurisdiction. Section 64. Tax Withholding. Employer shall be entitled to deduct and withhold from payments made under this Agreement all amounts required to satisfy its withholding obligations with respect to income, employment and any other applicable taxes. Section 65. Attorney’s Fees. If any arbitration proceeding or any action for injunctive or declaratory relief is brought to enforce or interpret the provisions of this Agreement, attorney’s fees shall be borne by Employer if Employee is the prevailing party (or receives substantially the relief sought by Employee), otherwise each party will be responsible for its own attorney’s fees.     Page 8   initials                            -------------------------------------------------------------------------------- Employment Agreement – Dennis N. Windsor Section 66. Additional Obligations. During and after the term of this Agreement, Employee shall, upon reasonable notice from Employer, furnish Employer with such information as may be in Employee’s possession, and cooperate with Employer as may reasonably be requested by Employer, in connection with any legal or governmental proceedings in which Employer or any of its affiliates is or may become a party. The Company shall reimburse Employee for his reasonable expenses in fulfilling his obligations under this Section 19. Section 67. Amendment. Any modification, amendment or change of this Agreement will be effective only if it is in a writing signed by both parties. Section 68. Governing Law. This Agreement, and all transactions contemplated by this Agreement, shall be governed by, construed, and enforced in accordance with the laws of the State of Texas. Section 69. Headings. The titles to the Sections and the paragraphs of this Agreement are solely for the convenience of the parties and shall not affect in any way the meaning or interpretation of this Agreement. Section 70. MANAGEMENT ORGANIZATION. EMPLOYER, ACTING THROUGH ITS CHIEF EXECUTIVE OFFICER WITH THE CONCURRENCE OF THE INDEPENDENT MEMBERS OF EMPLOYER’S BOARD OF DIRECTORS, RESERVES THE RIGHT UNILATERALLY TO REVISE THE ORGANIZATION OF ANY AND ALL OF THE MANAGEMENT FUNCTIONS AND RELATED REPORTING RELATIONSHIPS AT ITS SOLE DISCRETION. THE CONTENTS OF THE DIAGRAM ATTACHED AS EXHIBIT A SHALL BE SUBORDINATE TO THE AUTHORITY OF EMPLOYER TO REVISE MANAGEMENT ORGANIZATION AND RELATED REPORTING RELATIONSHIPS AS PROVIDED IN THIS SECTION. IN WITNESS WHEREOF, the parties have executed this Agreement on this 18th day of December, 2007.   EMPLOYEE:     EMPLOYER:     RBC Life Sciences /s/ Dennis N. Windsor     By:   /s/ Clinton H. Howard (Signature)       (Signature) (Dennis N. Windsor)       Clinton H. Howard       Chief Executive Officer     Page 9   initials                            -------------------------------------------------------------------------------- EXHIBIT A LOGO [g52036image1.jpg] -------------------------------------------------------------------------------- EXHIBIT B CASH INCENTIVE BONUS In 2007, if Employer’s Pre-tax Income exceeds two hundred fifty thousand dollars ($250,000) as the “Base Income”, Employee shall be awarded a bonus for 2007 in an amount equal to 2% of that part of the Pre-tax Income of Employer that exceeds the Base Income. The amount of Employee’s cash incentive bonus for 2007 may not exceed two (2) times Employee’s annual base salary for 2007. Employee must be employed on December 31, 2007 in order to receive the bonus, unless otherwise provided under Section 9. The bonus will be paid on or before March 15, 2008 or, if later, within two weeks following the determination of Employer’s Pre-Tax Income for 2007. Example: If the Pre-tax Income of Employer for 2007 is one million dollars ($1,000,000), Employee will be paid 2% of seven hundred fifty thousand dollars ($750,000) or fifteen thousand dollars ($15,000) provided Employer remained employed by Employer on December 31, 2007. Employee shall be eligible for additional bonuses at the discretion of Employer’s Board, and will participate in an annual bonus plan that will be adopted in advance each year. For purposes of this Exhibit B, “Pre-tax Income” means earnings (loss) from continuing operations before income taxes, as reported in Employer’s audited financial statements prepared in accordance with generally accepted accounting principles.

EXHIBIT 10.11 ITLA CAPITAL CORPORATION 2005 RE-DESIGNATED, AMENDED AND RESTATED EMPLOYEE STOCK INCENTIVE PLAN (as amended as of February 1, 2006) Section 1 Establishment, Purpose, and Effective Date of Plan          1.1         Purpose. The purpose of the Employee Stock Incentive Plan ("Plan") is to advance the interests of the Company, by encouraging and providing for the acquisition of an equity interest in the success of the Company by Participants, by providing additional incentives and motivation toward superior performance of the Company, and by enabling the Company to attract and retain the services of Participants, upon whose judgment, interest, and special effort and successful conduct of its operations is largely dependent.          1.2         Effective Date. The Plan was originally adopted on October 18, 1995 and amended effective July 31, 2001. This 2005 Re-Designated Amended and Restated Employee Stock Incentive Plan was approved by the Company's stockholders at the annual meeting of the Company's stockholders on July 27, 2005 (the "Effective Date"). This Plan shall be treated as a new plan for purposes of Section 422 of the Code, so that an Option granted hereunder on a date that is more than ten years after the original effective date of the Plan, and that is intended to qualify as an Incentive Stock Option under Section 422 of the Code, complies with the requirements of Code Section 422(b)(2) and the applicable regulations thereunder.          1.3         Nonapplicability of Section 409A of the Code. No benefit provided under this Plan is intended to constitute deferred compensation, within the meaning of Section 409A (as herein defined). Accordingly, the Plan shall be administered and interpreted consistent with this intent, with respect to any benefits provided hereunder after December 31, 2004, or any benefits provided hereunder prior to January 1, 2005 that are materially modified (within the meaning of Section 409A) after October 3, 2004. Section 2 Definitions          2.1         Definitions. Whenever used herein, the following terms shall have their respective meanings set forth below:          2.1.1         "Affiliate" means any corporation or limited liability company, a majority of the voting stock or membership interests of which is directly or indirectly owned by the Company, and any partnership or joint venture designated by the Committee in which any such corporation or limited liability company is a partner or joint venturer.          2.1.2         "Agreement" means a written agreement (including any amendment or supplement thereto) between the Company and a Participant specifying the terms and conditions of an Award granted to such Participant.          2.1.3         "Award" means any arrangement, security or benefit that, by its terms, involves the issuance of Stock or provides a benefit that derives its value from Stock granted under this Plan, including, without limitation, Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units.          2.1.4         "Beneficiary" means the person or persons determined in accordance with Section 11.          2.1.5         "Board" means the Board of Directors of the Company.          2.1.6         "Code" means the Internal Code of 1986, as amended from time to time, and the rulings and regulations issued thereunder. 1NEXT PAGE          2.1.7         "Committee" means the Compensation Committee of the Board or such other committee selected by the Board, comprised of at least two Directors, each of whom is a Non-Employee Director.          2.1.8         "Company" means ITLA Capital Corporation, a Delaware corporation, or any successor thereto.          2.1.9         "Consultant" means any individual, other than an Employee or Director, who renders services to the Company and who qualifies as a consultant under the general instructions to the Form S-8 Registration Statement under the Securities Act of 1933, as amended, or any successor form.          2.1.10         "Director" means any member of the Board.          2.1.11          "Disability" means a condition of total and permanent disability whereby one is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, as defined by Section 22(e) of the Code.          2.1.12         "Employee" means any full-time or part-time employee of the Company or an Affiliate (including any officer or director who is also an employee) who was not hired for a specific job of limited duration, or for a position slotted for students.          2.1.13         "Exchange Act" means the Securities Exchange Act of 1934, as amended.          2.1.14         "Fair Market Value" means with respect to the Stock the closing sales price of the Stock, as reported on the Nasdaq Stock Market or, if not so reported, the closing sales price as reported by any other appropriate reporting system of general circulation, on the date for which the value is to be determined, or if there is no closing sales price on such date, then on the last day for which transactions in Stock were so reported prior to the date on which the value is to be determined.          2.1.15         "Incentive Stock Option" means any Option intended to be and designated as an "Incentive Stock Option" within the meaning of Section 422 of the Code.          2.1.16         "Non-Employee Director" means a Director who qualifies as (i) a "Non-Employee Director" under Rule 16b-3 under the Exchange Act (or any successor provision) and (ii) an "Outside Director" under Section 162(m) of the Code (or any successor provision) and the regulations promulgated thereunder.          2.1.17         "Non-Qualified Stock Option" means any Option that is not an Incentive Stock Option.          2.1.18         "Option" means the right to purchase Stock at a stated price for a specified period of time. For purposes of the Plan an Option may be either (i) an Incentive Stock Option, (ii) a Non-Qualified Stock Option, or (iii) any other type of option encompassed by the Code.          2.1.19         "Participant" means an Employee of the Company or one of its Affiliates, including an Employee who is a Director, or a Consultant, and who is selected by the Committee to receive an Award.          2.1.20         "Performance Period," stated with reference to Performance Shares or Performance Units, means the time period during which the performance goals must be met, as determined by the Committee.          2.1.21         "Performance Share" means the right to receive payment equal to the value of a Performance Share as determined by the Committee.          2.1.22         "Performance Unit" means the right to receive payment equal to the value of a Performance Unit as determined by the Committee.          2.1.23         "Period of Restriction" means the period during which shares of Restricted Stock or Restricted Stock Units are subject to restrictions pursuant to Section 9 of the Plan. 2NEXT PAGE          2.1.24         "Related" means (i) in the case of an SAR, an SAR which is granted in connection with, and to the extent exercisable, in whole or in part, in lieu of, an Option and (ii) in the case of an Option, an Option with respect to which and to the extent an SAR or other right is exercisable, in whole or in part, in lieu thereof.          2.1.25         "Restricted Stock" means shares of Stock granted to a Participant which are subject to a Period of Restriction under Section 9 of the Plan.          2.1.26         "Restricted Stock Unit" means the right to receive a share of Stock, which right is subject to a Period of Restriction under Section 9 of the Plan.          2.1.27         "Retirement" (including "Early Retirement" and "Normal Retirement") means termination of employment on or after such Employee's early, normal or late retirement date or age as applicable under the terms of the Company's 401(k) Plan.          2.1.28         "Section 409A" means Section 409A of the Code and any regulations or guidance of general applicability thereunder          2.1.29         "Stock" means the Common Stock, par value $.01 per share, of the Company.          2.1.30         "Stock Appreciation Right" and "SAR" mean the right to receive a payment from the Company equal to the excess of the Fair Market Value of the share of Stock at the date of exercise over a specified price fixed by the Committee, which shall not be less than 100% of the Fair Market Value of the Stock on the date of grant. In the case of a Stock Appreciation Right which is granted in conjunction with an Option, the specified price shall be the Option exercise price.          2.2         Gender and Number. Except when otherwise indicated by the context, words in the masculine gender when used in the Plan shall include the feminine gender, the singular shall include the plural, and the plural shall include the singular. Section 3 Eligibility and Participation          All Employees (including Employee-Directors, but excluding Directors who are not Employees) and Consultants are eligible to participate in the Plan and to receive Awards. The Committee shall select and determine, in its sole discretion, those Employees and Consultants who will participate in the Plan and the extent of their participation. Notwithstanding the foregoing, Consultants shall not be eligible to receive Incentive Stock Options. Section 4 Administration          4.1         Administration of the Plan. The Committee shall be responsible for the administration of the Plan. Any power of the Committee may also be exercised by the Board, except to the extent that the grant or exercise of such authority would cause any Award or transaction to become subject to (or lose an exemption under) the short-swing profit recovery provisions of Section 16 of the Exchange Act or cause an Award not to qualify for treatment as "performance based compensation" under Section 162(m) of the Code. To the extent that any permitted action taken by the Board conflicts with action taken by the Committee, the Board action shall control. The Committee may delegate any or all aspects of the day-to-day administration of the Plan to one or more officers or employees of the Company or any Affiliate, and/or to one or more agents.          4.2         Powers of the Committee. The Committee, by majority action thereof, is authorized to interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to the Plan, to provide for conditions and assurances deemed necessary or advisable to protect the interests of the Company, and 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. The Committee shall have the authority, in its discretion, to determine the Participants to whom Awards shall be granted, the times when such Awards shall be granted, the number of Awards, 3NEXT PAGE the purchase price or exercise price, the period(s) during which such Awards shall be exercisable (whether in whole or in part), the restrictions applicable to Awards, and the other terms and provisions thereof (which need not be identical). The Committee shall have the authority to modify existing Awards, subject to Section 14.1.           4.3         Determinations by the Committee. All decisions, determinations and interpretations by the Committee regarding the Plan, any rules and regulations under the Plan, and the terms and conditions of or operation of any Award granted hereunder, shall be final and binding on all Participants, Beneficiaries, heirs, assigns or other persons holding or claiming rights under the Plan or any Award. The Committee shall consider such factors as it deems relevant, in its sole and absolute discretion, to making such decisions, determinations and interpretations including, without limitation, the recommendations or advice of any officer or other employee of the Company and such attorneys, consultants and accountants as it may select. Section 5 Stock Subject to Plan          5.1         Number. Subject to increases and adjustments as provided in this Section 5, the maximum number of shares of Stock subject to Awards under the Plan may not exceed 1,561,000 (the "Limit"), provided that with respect to Awards of SARs, only the net number of shares issued to settle the SARs upon their exercise shall be counted against the Limit, and provided further that each share issued pursuant to Awards of SARs, Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units shall be counted against the Limit as two (2) shares. The shares of Stock to be delivered under the Plan may consist, in whole or in part, of authorized but unissued shares or treasury shares, not reserved for any other purpose. The maximum aggregate number of shares of Stock with respect to which Options or SARs may be granted during any calendar year to any Employee is 1,561,000, subject to adjustment as provided in Section 5.4.          5.2         Incentive Stock Options. The maximum aggregate number of shares of Stock that may be issued pursuant to the exercise of Options that are Incentive Stock Options granted under this Plan is 1,561,000, subject to adjustment as provided in Section 5.4.          5.3         Lapsed Awards. Subject to the express provisions of the Plan, if and to the extent any Award granted under the Plan terminates, expires or lapses for any reason, any Stock subject to such Award again shall be Stock available for the grant of an Award. Shares of Stock used to pay the exercise price of an Option and shares of Stock used to satisfy tax withholding obligations are not available for future Awards under the Plan.          5.4         Adjustment in Capitalization. In the event of any change in the outstanding shares of the Stock by reason of a stock dividend or split, recapitalization, merger, consolidation, combination, exchange of shares, or other similar corporate change, the aggregate number of shares of Stock available under the Plan and subject to each outstanding Award, as well as the annual share limits for Award types set forth in Section 5 and the stated exercise price of or the basis upon which the Award is measured, shall be adjusted appropriately by the Committee, whose determination shall be conclusive; provided, however, that fractional shares shall be rounded to the nearest whole share. Any adjustment to an Incentive Stock Option shall be made consistent with the requirements of Section 424(b) of the Code. Notice of any adjustment shall be given by the Company to each Participant, and such adjustment (whether or not notice is given) shall be effective and binding for all purposes of the Plan. Section 6 Duration of Plan          The Plan shall remain in effect, subject to the Board's right to earlier terminate the Plan pursuant to Section 14.1 hereof, until all Awards hereunder shall have expired or terminated or shall have been exercised or fully vested, and any Stock subject thereto shall have been purchased or acquired pursuant to the provisions thereof. Notwithstanding the foregoing, no Award may be granted under the Plan after the tenth (10th) anniversary of the Effective Date. 4NEXT PAGE Section 7 Stock Options          7.1         Grant of Options. Subject to the provisions of Sections 5 and 6, Options may be granted to Participants at any time and from time to time as shall be determined by the Committee. The Committee shall have complete discretion in determining the number of Options granted to each Participant. The Committee may grant any type of Option to purchase Stock that is permitted by law at the time of grant. To the extent the aggregate Fair Market Value (determined at the time the Option is granted) of the Stock with respect to which Incentive Stock Options are exercisable for the first time by a Participant in any calendar year (under this Plan and any other plans of the Company) exceeds $100,000, such Options shall not be deemed Incentive Stock Options. In determining which Options may be treated as Non-Qualified Options under the preceding sentence, Options will be taken into account in the order of their dates of grant. Nothing in this Section 7 shall be deemed to prevent the grant of Non-Qualified Stock Options in amounts which exceed the maximum established by Section 422 of the Code.          7.2         Option Agreement. Each Option shall be evidenced by an Agreement that shall specify the type of Option granted, the Option exercise price, the duration of the Option, the number of shares of Stock to which the Option pertains, and such other provisions as the Committee shall determine.          7.3         Exercise Price. No Option shall be granted pursuant to the Plan at an exercise price that is less than the Fair Market Value of the Stock on the date the Option is granted, and no Option shall be granted to any person who owns Stock possessing more than 10% of the total combined voting power of the Stock at an exercise price which is less than 110% of the Fair Market Value on the date of the grant.          7.4         Duration of Options. Each Option shall expire at such time or times as the Committee shall determine at the time it is granted; provided, however, that no Option shall be exercisable later than ten years from the date of its grant.          7.5         Exercise of Options. Options granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for all Participants; provided, however, that Options granted pursuant to the Plan shall not vest at a rate of less than 20% per year.          7.6         Payment. The exercise price of any Option shall be paid in full either (i) in cash, (ii) in Stock valued at its Fair Market Value on the date of exercise, or (iii) by a combination of (i) and (ii). The Committee in its sole discretion may also permit payment of the exercise price upon exercise of any Option to be made by (i) having shares withheld from the total number of shares of Stock to be delivered upon exercise or (ii) delivering a properly executed notice together with irrevocable instructions to a broker to promptly deliver to the Company the amount of sale or loan proceeds to pay the exercise price. The proceeds from the exercise of Options shall be added to the general funds of the Company and shall be used for general corporate purposes.          7.7         Restrictions on Stock Transferability. The Committee may impose such restrictions on any shares of Stock acquired pursuant to the exercise of an Option under the Plan as it may deem advisable, including, without limitation, restrictions under applicable federal securities law, under the requirements of any stock exchange upon which such shares of Stock are then listed and under any blue sky or state securities laws applicable to such shares.          7.8         Early Termination of Options on Termination of Employment Due to Death, Disability, or Retirement. If a Participant holds any outstanding Option upon a termination of employment due to death, Disability or Retirement, such Option shall remain exercisable and shall continue to vest following such termination of employment in accordance with its terms until the earlier of (i) the expiration date of the term of the Option, or (ii) the last date on which such Option is exercisable as specified below, after which date such Option shall terminate.                   7.8.1         Death or Disability. Unless the Committee provides otherwise in the terms of the Agreement evidencing the Option, if the termination of employment is due to the Participant's death or Disability, 5NEXT PAGE any outstanding Option then held by such Participant shall continue to be exercisable until one (1) year following the Participant's termination of employment.                   7.8.2         Retirement. If the Participant's termination of employment is due to Retirement, any outstanding Option then held by such Participant shall continue to be exercisable (subject to Section 7.8.3 below) for six (6) months after such Participant's termination of employment.                   7.8.3         Incentive Stock Option Limit. Notwithstanding the foregoing, in the case of an Incentive Stock Option, the favorable tax treatment described in Section 422 of the Code shall not be available if such Option is exercised after three (3) months following a termination of employment due to Retirement.          7.9         Early Termination of Options on Termination of Employment Other than for Death, Disability, or Retirement. If a Participant holds any outstanding Option upon termination of employment due to a reason other than death, Disability or Retirement, such Option shall remain exercisable and shall continue to vest following such termination of employment until the earlier of (i) the expiration of the term of the Option, or (ii) the last date on which such Option is exercisable as specified below, after which date such Option shall terminate.                   7.9.1         Resignation, Layoff and Other Events. If the Participant's termination of employment is due to any reason other than the Participant's death, Disability, Retirement or the action of the Company for cause, as determined (either before or after such event) by the Committee in its sole discretion, any outstanding Option then held by such Participant shall continue to be exercisable for three (3) months following such Participant's termination of employment.                   7.9.2         Termination by the Company for Cause. If the Participant's employment is terminated by action of the Company for cause, as determined (either before or after such event) by the Committee in its sole discretion, any outstanding Option held by such Participant shall terminate immediately upon such Participant's termination of employment. Termination for cause is defined as termination for conduct that would be punishable as a felony if such conduct occurred outside the workplace, or conduct that could be damaging to either the Company's reputation or financial status. The Committee has the authority to make the final determination as to whether a termination is for cause for purposes of the Plan.          7.10         Non-Transferability of Options. No Option granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules thereunder, except that a Non-Qualified Stock Option may be transferred by gift to any member of the Participant's immediate family (defined as the Participant's spouse, children and grandchildren) if the Committee so specifies in the Agreement evidencing the Option. Further, all Incentive Stock Options granted to a Participant under the Plan shall be exercisable only by such Participant during his or her lifetime.          7.11         No Repricing. Other than in connection with a change in the Company's capitalization (as described in Section 5.4), an Option may not be repriced without stockholder approval (including canceling previously awarded Options and regranting them with a lower exercise price). Section 8 Stock Appreciation Rights          8.1         Grant of Stock Appreciation Rights. Subject to the provisions of Sections 5 and 6, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee. An Award of SARs shall be pursuant to an Agreement. An SAR may be Related to an Option or may be granted independently of any Option as the Committee shall from time to time in each case determine. In the case of a Related Option, such Related Option shall cease to be exercisable to the extent of the shares of Stock with respect to which the Related SAR was exercised. Upon the exercise or termination of a Related Option, any Related SAR shall terminate to the extent of the shares of Stock with respect to which the Related Option was exercised or terminated. SARs shall only be granted while the Stock is traded on the Nasdaq Stock Market or an established securities exchange. 6NEXT PAGE          8.2         Payment of SAR Amount. Upon exercise of the SAR, the holder shall be entitled to receive payment of an amount determined by multiplying: (a) The difference between the Fair Market Value of a share of Stock at the date of exercise over the price fixed by the Committee at the date of grant (which price shall not be less than the Fair Market Value of the underlying Stock on the date the SAR is granted), by (b) The number of shares with respect to which the SAR is exercised.          8.3         Form and Timing of Payment. Payment for SARs shall be made in Stock, as soon as reasonably practicable after the Participant's exercise of the SAR. Fractional share interests shall be rounded up to the nearest whole share.          8.4         Term of SAR. The term of an SAR under the Plan shall not exceed ten years.          8.5         Termination of Employment. In the event the employment of a Participant is terminated by reason of death, Disability, Retirement, or any other reason, any SARs outstanding shall terminate in the same manner as specified for Options under Sections 7.8 and 7.9 herein.          8.6         Non-Transferability of SARS. No SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of ERISA, or the rules thereunder except that an SAR that is not Related to an Incentive Stock Option may be transferred by gift to any member of the Participant's immediate family (defined as the Participant's spouse, children and grandchildren) if the Committee so specifies in the Agreement evidencing the SAR. Further, all SARs Related to Incentive Stock Options granted to a Participant shall be exercisable only by such Participant during his lifetime.          8.7         No Repricing. Other than in connection with a change in the Company's capitalization (as described in Section 5.4), a Stock Appreciation Right may not be repriced without stockholder approval (including canceling previously awarded Stock Appreciation Rights and regranting them with a lower exercise price). No repricing shall occur that would cause any SAR (whether currently outstanding or newly granted) to be subject to Section 409A. Section 9 Restricted Stock and Restricted Stock Units          9.1         Grant of Restricted Stock and Restricted Stock Units. Subject to the provisions of Sections 5 and 6, the Committee, at any time and from time to time, may grant shares of Restricted Stock and Restricted Stock Units under the Plan to such Participants and in such amounts as it shall determine. Each Award of Restricted Stock and Restricted Stock Units shall be pursuant to an Agreement.          9.2         Restrictions of Transferability. Except as provided in Sections 9.6 and 9.7 hereof, or pursuant to a qualified domestic relations order as defined by the Code or Title I of ERISA, or the rules thereunder, the shares of Restricted Stock and Restricted Stock Units granted hereunder may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated for such period of time as shall be determined by the Committee and as specified in the Agreement evidencing the Award of Restricted Stock or Restricted Stock Units, or upon earlier satisfaction of other conditions as specified by the Committee in its sole discretion and set forth in the Agreement evidencing the Award of Restricted Stock or Restricted Stock Units.          9.3         Other Restrictions. The grant, issuance, retention, vesting and/or settlement of Restricted Stock and Restricted Stock Units shall occur at such time and in such installments as determined by the Committee or under criteria established by the Committee, provided that Restricted Stock Units may not be settled later than the later of (a) the date that is 2 ½ months following the end of the Company's first taxable year in which the Restricted Stock Units have vested or (b) the date that is 2 ½ months following the end of the Participant's first taxable year in which the Restricted Stock Units have vested. The Committee shall have the right to make the timing of the grant and/or the issuance, ability to retain and vesting of Restricted Stock and Restricted Stock Units subject to continued 7NEXT PAGE employment, passage of time and/or such performance criteria as deemed appropriate by the Committee; the Committee shall impose such other restrictions on any shares of Restricted Stock and Restricted Stock Units granted pursuant to the Plan as it may deem advisable including, without limitation, restrictions under applicable Federal or state securities law, and may legend the certificates representing Restricted Stock to give appropriate notice of such restrictions. For Restricted Stock and Restricted Stock Units granted on or after January 1, 2005, the restrictions placed on the ability to retain, or vest in, such Restricted Stock and Restricted Stock Units shall at least constitute a substantial risk of forfeiture under Section 83 of the Code.          9.4         Voting Rights. Participants holding shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those shares during the Period of Restriction. Participants shall have no voting rights with respect to shares of Stock underlying Restricted Stock Units unless and until such shares of Stock are reflected as issued and outstanding shares of Stock on the Company's stock ledger.          9.5         Dividends and Other Distributions. During the Period of Restriction, Participants holding shares of Restricted Stock granted hereunder shall be entitled to receive all dividends and other distributions paid with respect to those shares while they are so held. If any such dividends or distributions are paid in shares of Stock, the shares shall be subject to the same restrictions on transferability as the shares of Restricted Stock with respect to which they were paid. Shares underlying Restricted Stock Units shall be entitled to dividends or dividend equivalents only to the extent provided by the Committee.          9.6         Termination of Employment Due to Retirement. In the event that a Participant attains normal Retirement age under the Company's 401(k) Plan, the Period of Restriction applicable to the Restricted Stock or Restricted Stock Units pursuant to Subsection 9.2 hereof shall automatically terminate and, except as otherwise provided in Subsection 9.3, the shares of Restricted Stock shall thereby be free of restrictions and freely transferable or the shares underlying the Restricted Stock Units shall be delivered to the Participant, free of restrictions and freely transferable. In the event that a Participant terminates his employment with the Company because of Early Retirement under the Company's 401(k) Plan, any shares of Restricted Stock or Restricted Stock Units still subject to restrictions shall be forfeited and returned to the Company; provided, however, that the Committee in its sole discretion may waive the restrictions remaining on any or all shares of Restricted Stock or Restricted Stock Units or add such new restrictions to those shares of Restricted Stock or Restricted Stock Units as it deems appropriate.          9.7         Termination of Employment Due to Death or Disability. In the event a Participant terminates his employment with the Company because of death or Disability during the Period of Restriction, the restrictions applicable to the shares of Restricted Stock or Restricted Stock Units pursuant to Section 9.2 hereof shall terminate automatically with respect to that number of shares (rounded to the nearest whole number) equal to the number of shares of Restricted Stock granted to such Participant or the number of shares underlying Restricted Stock Units granted to the Participant multiplied by the number of full months which have elapsed since the date of grant divided by the maximum number of full months of the Period of Restriction. All remaining shares of Restricted Stock or Restricted Stock Units still subject to restrictions shall be forfeited and returned to the Company; provided, however, that the Committee in its sole discretion, may waive the restrictions remaining on any or all such remaining shares or Restricted Stock Units.          9.8         Termination of Employment for Reasons Other than Death, Disability, or Retirement. In the event that a Participant terminates his employment with the Company for any reason other than those set forth in Sections 9.6 and 9.7 hereof during the Period of Restriction, then any shares of Restricted Stock or Restricted Stock Units still subject to restrictions at the date of such termination automatically shall be forfeited and returned to the Company; provided, however, that, in the event of an involuntary termination of the employment of a Participant by the Company, the Committee in its sole discretion may waive the automatic forfeiture of any or all such shares of Restricted Stock or Restricted Stock Units and/or may add such new restrictions to such shares of Restricted Stock or Restricted Stock Units as it deems appropriate. Section 10 Performance Shares and Performance Units           10.1         Grant of Performance Shares and Performance Units. Subject to the provisions of Sections 5 and 6, Performance Shares and Performance Units shall be based on performance goals established by the 8NEXT PAGE Committee prior to the start of a Performance Period with respect to which such an Award is made. For Performance Shares or Performance Units made on or after January 1, 2005, the failure to satisfy the performance criteria applicable thereto must at least be considered a substantial risk of forfeiture within the meaning of Section 409A. After the start of a Performance Period, the Committee may not increase the compensation payable under an Award that is otherwise due upon attainment of a performance goal.          10.2          Value of Performance Shares and Performance Units. Each Performance Share and each Performance Unit shall have a value determined by the Committee at the time of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the ultimate value of the Performance Share or Performance Unit to the Participant.           10.3         Performance Goals. Performance goals shall be established by the Committee as the Committee in its sole discretion deems appropriate, and may be based upon any one or more of the following performance criteria, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years' results or to a designated comparison group, in each case as specified by the Committee: (i) Company or Affiliate EBITDA (earnings before interest, taxes, depreciation and amortization); (ii) Company or Affiliate earnings or earnings per share; (iii) market prices of Stock; or (iv) division level operating income (operating income less general and administrative expenses and extraordinary expenses). Such performance goals may be (but need not be) different for each performance period. The Committee may set different (or the same) goals for different Participants and for different Awards, and performance goals may include standards for minimum attainment, target attainment, and maximum attainment. In all cases, however, performance goals shall include a minimum performance standard below which no part of the relevant Award will be earned. Each Performance Share shall have a value determined by the Committee at the time of grant.          10.4         Form and Timing of Payment. Payment shall be made in Stock. Payment may be made in a lump sum or installments as prescribed by the Committee. If any payment is to be made on a deferred basis, the Committee may provide for the payment of dividend equivalents or interest during the deferral period. Only Performance Shares and Performance Units granted on or prior to October 3, 2004, which have not been materially modified (within the meaning of Section 409A, which includes the deferral of payment of Performance Shares and Performance Units which have previously met the applicable performance criteria) after October 3, 2004, may be paid on a deferred basis. Performance Shares and Performance Units granted after October 3, 2004, may not be paid later than the later of the (a) the date that is 2 ½ months following the end of the Company's first taxable year in which the performance criteria pertaining to the Performance Shares and Performance Units have been satisfied, or (b) the date that is 2 ½ months following the end of the Participant's first taxable year in which the performance criteria pertaining to the Performance Shares and Performance Units have been satisfied.           10.5         Termination of Employment Due to Death, Disability or Retirement. In the case of death, Disability, or Retirement, the holder of a Performance Share (or his Beneficiary in the event of death) shall receive pro rata payment based on the number of months' service during the Performance Period but based on the achievement of performance goals during the entire Performance Period. Payment shall be made at the time payments are made to Participants who did not terminate service during the Performance Period, subject to Section 10.4 of the Plan.           10.6         Termination of Employment for Reasons Other than Death, Disability or Retirement. In the event that a Participant terminates employment with the Company for any reason other than death, Disability or Retirement, all Performance Shares shall be forfeited; provided, however, that in the event of an involuntary termination of the employment of the Participant by the Company, the Committee in its sole discretion may waive the automatic forfeiture provisions and pay out on a pro rata basis as set forth in Section 10.5.           10.7         Non-Transferability. No Performance Shares or Performance Units granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of ERISA, or the rules thereunder, until the termination of the applicable Performance Period. All rights with respect to Performance Shares granted to a Participant under the Plan shall be exercisable only by such Participant during his lifetime. 9NEXT PAGE Section 11 Beneficiary Designation           Each Participant under the Plan may name, from time to time, any Beneficiary or Beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Committee during his lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to his or her estate. Section 12 Rights of Employees           12.1         Employment. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company.           12.2         Participant. No Employee shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. Section 13 Change in Control           13.1         In General. In the event of a change in control of the Company as defined in Section 13.2 below, all Awards under the Plan shall vest 100%. All Performance Shares and Performance Units shall be paid out based upon the extent to which performance goals during the Performance Period have been met up to the date of the change in control, or at target, whichever is higher. Restrictions on Restricted Stock and Restricted Stock Units shall lapse. Options and SARs shall be immediately exercisable by the holder.           13.2         Definition. For purposes of the Plan, a "change in control" shall mean any of the following events:                    (a) the Company receives a report on Schedule 13D filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Exchange Act disclosing that any person, group, corporation or other entity is the beneficial owner directly or indirectly of 30% or more of the outstanding Stock;                    (b) any person (as such term is defined in Section 13(d) of the Exchange Act), group, corporation or other entity other than the Company or a wholly-owned Subsidiary or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock in the Company, purchases shares pursuant to a tender offer or exchange offer to acquire any Stock of the Company, (or securities convertible into Stock) for cash, securities or any other consideration, provided that after consummation of the offer, the person, group, corporation or other entity in question is the beneficial owner (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 30% or more of the outstanding Stock of the Company (calculated as provided in paragraph (d) of Rule 13d-3 under the Exchange Act in the case of rights to acquire Stock);                    (c) the stockholders of the Company approve (a) any consolidation or merger of the Company in which the Company, or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock in the Company, is not the continuing or surviving corporation or pursuant to which shares of Stock would be converted into cash, securities or other property, or (b) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company; or 10NEXT PAGE                   (d) there shall have been a change in a majority of the members of the Board of Directors of the Company within a 12 month period unless the election or nomination for election by the Company's stockholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the 12 month period. Section 14 Amendment, Modification, and Termination of Plan          14.1         Amendment, Modification, and Termination of Plan. The Board may amend, alter, or discontinue the Plan, but no amendment, alteration or discontinuation shall be made (i) which would impair the rights of any Participant with respect to an Award theretofore granted without the Participant's consent, (ii) which would cause Section 409A to apply to the Plan, unless the benefit affected thereby is subject to Section 409A or is intended to be subject to Section 409A or (iii) which, without the approval of the Company's stockholders, would:           (a) the except as expressly provided in this Plan, increase the total number of shares of Stock reserved for the purpose of the Plan as provided in Section 5 of the Plan;          (b) change the exercise price of any Option or SAR granted hereunder, other than in connection with a change in the Company's capitalization as described in Section 5.4 of the Plan;          (c) change the Participants eligible to participate in the Plan;          (d) extend the maximum option period under Section 7.4 of the Plan;          (e) extend the duration of the Plan; or          (f) otherwise amend the Plan in any manner requiring stockholder approval by law or regulation or under the listing requirements of the Nasdaq Stock Market or any other exchange on which the Stock is then listed.          14.2         Effect on Awards. The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but, subject to Section 14.1 above, no such amendment shall impair the rights of any holder without the holder's consent.          14.3         Broad Authority. Subject to the above provisions, the Committee shall have broad authority to amend the Plan to take into account changes in applicable securities and tax laws and accounting rules, as well as other developments. Section 15 Tax Withholding          15.1         Tax Withholding. The Company shall have the power to withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, and local withholding tax requirements on any Award under the Plan. In addition, the Company may reasonably delay the issuance or delivery of shares pursuant to an Award as it determines appropriate to address tax withholding and other administrative matters.          15.2         Payment of Withholding Obligation. To the extent permissible under applicable tax, securities, and other laws, the Company may, in its sole discretion, permit the Participant to satisfy a tax withholding requirement by (i) using already owned shares; (ii) through a cashless transaction; or (iii) directing the Company to apply shares of stock to which the Participant is entitled as a result of the exercise of an option or the lapse of a Period of Restriction (including, for this purpose, the filing of an election under Section 83(b) of the Code), to satisfy such requirement.          15.3         Disposition of Shares. In the event that a Participant shall dispose (whether by sale, exchange, gift, the use of a qualified domestic relations order as defined by the Code or Title I of ERISA, or the rules thereunder, or any like transfer) of any shares of Stock (to the extent such shares are deemed to be purchased pursuant to an Incentive Stock Option) acquired by such Participant within two years of the date of grant of the 11NEXT PAGE related Option or within one year after the acquisition of such shares, the Participant will notify the secretary of the Company no later than 15 days from the date of such disposition of the date or dates and the number of shares disposed of by the Participant and the consideration received, if any, and, upon notification from the Company, promptly forward to the secretary of the Company any amount requested by the Company for the purpose of satisfying its liability, if any, to withhold federal, state or local income or earnings tax or any other applicable tax or assessment (plus interest or penalties thereon, if any, caused by delay in making such payment) incurred by reason of such disposition. Section 16 Indemnification          Each person who is or shall have been a member of the Committee or of the Board shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. Section 17 Requirements of Law          17.1         Compliance with Laws; Listing and Registration of Shares. All Awards granted under the Plan (and all issuances of Stock or other securities under the Plan) shall be subject to all applicable laws, rules and regulations, and to the requirement that if at any time the Committee shall determine that the listing, registration or qualification of the Stock covered thereby upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the grant of such Award or the issue or purchase of Stock thereunder, such Award may not be exercised in whole or in part, or the restrictions on such Award shall not lapse, unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.          17.2          Conditions and Restrictions Upon Securities Subject to Awards. The Committee may provide that the shares of Stock issued upon exercise of an Option or Stock Appreciation Right or otherwise subject to or issued under an Award shall be subject to such further agreements, restrictions, conditions or limitations as the Committee in its discretion may specify prior to the exercise of such Option or Stock Appreciation Right or the grant, vesting or settlement of an Award, including without limitation, conditions on vesting or transferability, forfeiture or repurchase provisions and method of payment for the Stock issued upon exercise, vesting or settlement of such Award (including the actual or constructive surrender of Shares already owned by the Participant) or payment of taxes arising in connection with an Award. Without limiting the foregoing, such restrictions may address the timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any Stock issued under an Award, including without limitation (a) restrictions under an insider trading policy or pursuant to applicable law, (b) restrictions designed to delay and/or coordinate the timing and manner of sales by Participant and holders of other Company equity compensation arrangements, and (c) restrictions as to the use of a specified brokerage firm for such resales or other transfers.          17.3         Governing Law. The Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Delaware. 12NEXT PAGE Section 18 Funding          Except in the case of Awards of Restricted Stock, the Plan shall be unfunded. The Company shall not be required to segregate any of its assets to assure the payment of any Award under the Plan. Neither the Participant nor any other persons shall have any interest in any fund or in any specific asset or assets of the Company or any other entity by reason of any Award, except to the extent expressly provided hereunder. The interests of each Participant and former Participant hereunder are unsecured and shall be subject to the general creditors of the Company. Section 19 No Liability of Company           The Company and any Affiliate which is in existence or hereafter comes into existence shall not be liable to a Participant, Beneficiary or any other person as to: (a) the non-issuance or sale of Stock as to which the Company has been unable to obtain, from any regulatory body having jurisdiction over the matter, the authority deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Stock hereunder; (b) any tax consequence to any Participant, Beneficiary or other person due to the receipt, exercise or settlement of any Award granted hereunder; or (c) any provision of law or legal restriction that prohibits or restricts the transfer of Stock issued pursuant to any Award. 13NEXT PAGE

Exhibit 10.64 AMENDMENT TO SMARTSHARE AWARD AGREEMENTS BETWEEN SMART & FINAL INC. AND ANDRE DELOLMO This will serve as an amendment to those certain SmartShare (restricted stock) award agreements identified herein (“the equity awards”) between Smart & Final Inc. (“the Company”) and Mr. Andre Delolmo (“Delolmo”)     1. The Company has awarded, through the Compensation Committee of its Board of Directors, certain equity awards to Delolmo as part of his compensation for service as an executive of the Company. Those equity awards are governed by the Company’s Long-Term Equity Compensation Plan (“the Plan”). The equity awards are identified herein as follows:   Award Number   Award Date   Type   # of Shares   Grant Price   Vested   Unvested 2219   2/15/2005   Restricted   5,000   15.200   —     5,000 2402   2/21/2006   Restricted   6,500   14.390   —     6,500 2436   5/16/2006   Restricted   7,500   16.640   —     7,500                   TOTALS       19,000     —     19,000                       2. Mr. Delolmo has resigned his position with the Company effective October 31, 2006. Under the terms of the equity awards and/or the Plan, those grants would not vest and would be forfeited to the Company.     3. In recognition of his years of service, the Compensation Committee of the Board in its meeting of September 20, 2006 amended the terms of Delolmo’s equity awards, effective upon his resignation, as follows:   Award Number   Award Date   Type   # of Shares   Grant Price   Vested   Shares vested on 10/31/06* 2219   2/15/2005   Restricted   5,000   15.200   —     5,000 2402   2/21/2006   Restricted   6,500   14.390   —     6,500 2436   5/16/2006   Restricted   7,500   16.640   —     7,500                   TOTALS       19,000     —     19,000                   -------------------------------------------------------------------------------- * Unvested shares at time of termination were vested     4. This Amendment will serve to amend and modify the equity awards as set forth herein. Nothing contained herein shall amend or otherwise modify the equity grants or the Plan except as set forth herein.   /s/ Jeff D. Whynot Smart & Final Inc.   /s/ Andre Delolmo Andre Delolmo

EXHIBIT 10.1 EMPLOYMENT AGREEMENT      THIS AGREEMENT is entered into effective as of June 12, 2006 by and between Limited Brands, Inc. (the ‘Company) and Kenneth T. Stevens (the “Executive”) (hereinafter collectively referred to as ‘the parties”).      WHEREAS, the Executive will be employed as the Executive Vice President and Chief Financial Officer of the Company and is experienced in various phases of the Company’s business and possesses an intimate knowledge of the business and affairs of the Company and its policies, procedures, methods, and personnel; and      WHEREAS, the Company has determined that it is essential and in its best interests to retain the services of key management personnel and to ensure their continued dedication and efforts; and      WHEREAS, this Agreement supersedes in its entirety the Employment Agreement, as amended, that the parties entered into effective February 4, 2002; provided, however nothing in this Agreement shall cancel or modify any previous grant of stock options or restricted stock which was previously granted to the Executive or any rights to repurchase shares represented by such grants; and      WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company to secure the services and employment of the Executive, and the Executive is willing to render such services on the terms and conditions set forth herein.      NOW, THEREFORE, in consideration of the foregoing and the respective agreements of the parties contained herein, the parties hereby agree as follows:      1. Term. The initial term of employment under this Agreement shall be for the period commencing on the effective hereof (the “Commencement Date”) and ending on the sixth anniversary of the Commencement Date (the “Initial Term”); provided, however, that thereafter this Agreement shall be automatically renewed from year to year, unless either the Company or the Executive shall have given written notice to the other at least ninety (90) days prior thereto that the term of this Agreement shall not be so renewed. 2. Employment. >      (a) Position. The Executive shall be employed as the Executive Vice > President and Chief Financial Officer of the Company or such other position of > reasonably comparable or greater status and responsibilities, as may be > determined by the Board. The Executive shall perform the duties, undertake the > responsibilities, and exercise the authority customarily performed, > undertaken, and exercised by persons employed in a similar executive capacity. > In addition, the Executive shall be a member of the Company’s Executive > Committee. The Executive shall report to the Executive Vice President, Chief > Administrative Officer of the Company. > >      (b) Obligations. The Executive agrees to devote his full business time > and attention to the business and affairs or the Company. The foregoing, > however, shall not preclude the Executive from serving on corporate, civic, or > charitable boards or committees or managing personal investments, so long as > such activities do not interfere with the performance of the Executive’s > responsibilities hereunder.      3. Base Salary. The Company agrees to pay or cause to be paid to the Executive an annual base salary at the rate of $900,000, less applicable withholding. This base salary will be subject to annual review and may be increased from time to time considering factors such as the Executive’s -------------------------------------------------------------------------------- responsibilities, compensation of similar executives within the Company and in other companies, performance of the Executive, and other pertinent factors (hereinafter referred to as the “Base Salary”). Such Base Salary shall be payable in accordance with the Company’s customary practices applicable to its executives. 4. Equity Compensation. The Company shall use its best efforts to have the Compensation Committee grant to the Executive, on or about its next regularly scheduled meeting, options to acquire 15,000 shares of the Company’s common stock. Such grant shall be subject to the terms and conditions set forth in the Company’s Stock Option and Performance Incentive Plan (“Plan”) and in the Company’s normal form of stock option agreements. In addition, pursuant to the Plan, the Company shall use its best efforts to have the Compensation Committee grant to the Executive, on or about its next regularly scheduled meeting, 20,000 restricted shares of the Company’s common stock, which shall thereafter 100% vest on the third year anniversary from the date of approval by the Compensation Committee. The Executive shall also be eligible for such other additional future equity-based awards (if any) as may be commensurate with his position and performance, if, when, and as determined by the Compensation Committee in its discretion.      5. Employee Benefits. The Executive shall be entitled to participate in all employee benefit plans, practices, and programs maintained by the Company and made available to senior executives generally and as may be in effect from time to time. The Executive’s participation in such plans, practices and programs shall be on the same basis and terms as are applicable to senior executives of the Company generally.      6. Bonus. The Executive shall be entitled to participate in the Company’s applicable incentive compensation plan at a target level of 110% of the Executive’s Base Salary on such terms and conditions as may be determined from time to time by the Board. In addition, for Spring Season 2006 the Executive’s incentive compensation payout will be based on the higher of the profit results between the Center and Express. 7. Other Benefits. >      (a) Benefits. The Executive shall be entitled to all of the other > benefits established by the Board for similarly situated executives. > >      (b) Expenses. Subject to applicable Company policies, the Executive shall > be entitled to receive prompt reimbursement of all expenses reasonably > incurred by him in connection with the performance of his duties hereunder or > for promoting, pursuing, or otherwise furthering the business or interests of > the Company. > >      (c) Office and Facilities. The Executive shall be provided with > appropriate offices and with such secretarial and other support facilities as > are commensurate with the Executive’s status with the Company and adequate for > the performance of his duties hereunder.      8. Paid Time Off (PTO) Program. The Executive shall be entitled to paid time off in accordance with the policies as periodically established by the Board for similarly situated executives of the Company.      9. Termination. The Executive’s employment hereunder is subject to the following terms and conditions: >      (a) Disability. The Company shall be entitled to terminate the > Executive’s employment after having established the Executive’s Disability. > For purposes of this Agreement, “Disability” means a physical or mental > infirmity which impairs the Executive’s ability to substantially perform his > duties under this Agreement for a period of at least six months in any > twelve-month calendar period as determined in accordance with Limited Brands, > Inc. Long-Term Disability Plan. 6 -------------------------------------------------------------------------------- >      (b) Cause. The Company shall be entitled to terminate the Executive’s > employment for “Cause” without prior written notice. For purposes of this > Agreement, “Cause” shall mean that the Executive (1) willfully failed to > perform his duties with the Company (other than a failure resulting from the > Executive’s incapacity due to physical or mental illness); or (2) has plead > “guilty” or “no contest” to or has been convicted of an act which is defined > as a felony under federal or state law; or (3) engaged in willful misconduct > in bad faith which could reasonably be expected to materially harm the > Company’s business or its reputation.      The Executive shall be given prompt written notice by the Company of termination for Cause, such notice to state in detail the particular act or acts or failure or failures to act that constitute the grounds on which the proposed termination for Cause is based. The Executive shall be entitled to a hearing before the Board or a committee thereof established for such purpose and to be accompanied by legal counsel. Such hearing shall be held within 15 days of notice to the Company by the Executive, provided the Executive requests such hearing within 30 days of the written notice from the Company of the termination for Cause. >      (c) Termination by the Executive. The Executive may terminate employment > hereunder for “Good Reason” by delivering to the Company (1) a Preliminary > Notice of Good Reason (as defined below), and (2) not earlier than thirty (30) > days from the delivery of such Preliminary Notice, a Notice of Termination. > For purposes of this Agreement, “Good Reason” means (i) the failure to > continue the Executive in a capacity contemplated by Section 2 hereof; (ii) > the assignment to the Executive of any duties materially inconsistent with the > Executive’s positions, duties, authority, responsibilities or reporting > requirements as set forth in Section 2 hereof; (iii) a reduction in or a > material delay in payment of the Executive’s total cash compensation and > benefits from those required to be provided in accordance with the provisions > of this Agreement; (iv) the Company, the Board or any person controlling the > Company requires the Executive to be based outside of the United States, other > than on travel reasonably required to carry out the Executive’s obligations > under the Agreement; or (v) the failure of the Company to obtain the > assumption in writing of its obligation to perform this Agreement by any > successor to all or substantially all of the assets of the Company within 15 > days after a merger, consolidation, sale, or similar transaction; provided, > however, that “Good Reason” shall not include (A) acts not taken in bad faith > which are cured by the Company in all respects not later than thirty (30) days > from the date of receipt by the Company of a written notice from the Executive > identifying in reasonable detail the act or acts constituting “Good Reason” (a > “Preliminary Notice of Good Reason”) or (B) acts taken by the Company by > reason of the Executive’s physical or mental infirmity which impairs the > Executive’s ability to substantially perform his duties under this Agreement. > A Preliminary Notice of Good Reason shall not, by itself, constitute a Notice > of Termination. > >      (d) Notice of Termination. Any purported termination for Cause by the > Company or for Good Reason by the Executive shall be communicated by a written > Notice of Termination to the other two weeks prior to the Termination Date (as > defined below). For purposes of this Agreement, a “Notice of Termination” > shall mean a notice which indicates the specific termination provision in this > Agreement relied upon and shall set forth in reasonable detail the facts and > circumstances claimed to provide a basis for termination of the Executive’s > employment under the provision so indicated. Any termination by the Company > other than for Cause or by the Executive without Good Reason shall be > communicated by a written Notice of Termination to the other party two (2) > weeks prior to the Termination Date. However, the Company may elect to pay the > Executive in lieu of two (2) weeks written notice. For purposes of this > Agreement, no such purported termination of employment shall be effective > without such Notice of Termination. > >      (e) Termination Date, Etc. “Termination Date” shall mean in the case of > the Executive’s death, the date of death, or in all other cases, the date > specified in the Notice of Termination; provided, however, that if the > Executive’s employment is terminated by the Company due to Disability, the > date specified in the Notice of Termination shall be at least thirty (30) days > from the date the Notice of Termination is given to the Executive. 7 -------------------------------------------------------------------------------- 10. Compensation Upon Certain Terminations by the Company not Following a Change in Control. >      (a) If during the term of the Agreement (including any extensions > thereof), whether or not following a Change in Control (as defined below), the > Executive’s employment is terminated by the Company for Cause or by reason of > the Executive’s death, or if the Executive gives written notice not to extend > the term of this Agreement, the Company’s sole obligations hereunder shall be > to pay the Executive the following amounts earned hereunder but not paid as of > the Termination Date: (i) Base Salary, (ii) reimbursement for any and all > monies advanced or expenses incurred pursuant to Section 7(b) through the > Termination Date, and (iii) any earned compensation which the Executive had > previously deferred (including any interest earned or credited thereon) > (collectively, “Accrued Compensation”). The Executive’s entitlement to any > other benefits shall be determined in accordance with the Company’s employee > benefit plans then in effect. > >      (b) If the Executive’s employment is terminated by the Company other than > for Cause or by the Executive for Good Reason, in each case other than during > the 24-month period immediately following a Change in Control, the Company’s > sole obligations hereunder shall be as follows: > > >      (i) the Company shall pay the Executive the Accrued Compensation; > > > >      (ii) the Company shall continue to pay the Executive the Base Salary > > for a period of one (1) year following the Termination Date; > > > >      (iii) in consideration of the Executive signing a General Release, the > > Company shall (A) pay the Executive any incentive compensation under the > > plan described in Section 6 that the Executive would have received if he had > > remained employed with the Company for a period of one (1) year after the > > Termination Date; (B) pay the Executive his Base Salary for one additional > > year after payments have ended under Section 10(b) (H); and > > > >      (iv) provided, however, that in the event Executive becomes entitled to > > any payments under Section 10(g), the Company’s obligations to Executive > > under Section 10 shall thereafter be determined solely under Section 10 (g). > >      (c) If the Executive’s employment is terminated by the Company by reason > of the Executive’s Disability, the Company’s sole obligations hereunder shall > be as follows: > > >      (i) the Company shall pay the Executive the Accrued Compensation; and > > > >      (ii) the Executive shall be entitled to receive any salary continuation > > and other benefits available under the Company’s Executive Long Term > > Disability Plan. > >      (d) If the Executive’s employment is terminated by reason of the > Company’s written notice to the Executive of its decision not to extend the > Employment Agreement pursuant to Section 1 hereof, the Company’s sole > obligation hereunder shall be as follows: > > >      (i) the Company shall pay the Executive the Accrued Compensation; > > > >      (ii) the Company shall continue to pay the Executive the Base Salary > > for a period of one (1) year following the expiration of such term; and > > > >      (iii) in consideration of the Executive signing a General Release, the > > Company shall (A) pay the Executive any incentive compensation under the > > plan described in Section 6 that the Executive would have received if he had > > remained 8 -------------------------------------------------------------------------------- > > employed with the Company for a period of one (1) year after the Termination > > Date; and (B) pay the Executive his Base Salary for one additional year > > after payments have ended under Section 10(d)(ii); and > >      (e) For up to eighteen (18) months during the period the Executive is > receiving salary continuation pursuant to Section 10(b)(ii), 10(c)(ii) or > 10(d)(ii) hereof, the Company shall, at its expense, provide to the Executive > and the Executive’s beneficiaries medical and dental benefits substantially > similar in the aggregate to the those provided to the Executive immediately > prior to the date of the Executive’s termination of employment; provided, > however, that the Company’s obligation to provide such benefits shall cease > upon the earlier of Executive’s becoming employed or the expiration of > Executive’s rights to continue such medical and dental benefits under COBRA. > >      (f) Executive shall not be required to mitigate the amount of any payment > provided for in this Section 10 by seeking other employment or otherwise and > no such payment or benefit shall be eliminated, offset or reduced by the > amount of any compensation provided to the Executive in any subsequent > employment, except as provided in Section 10(e). > >      (g) In the event that (x) the Company enters into a binding agreement > that, if consummated, would constitute a Change in Control, (y) Executive’s > employment is terminated under the circumstances set forth in Section 10(b) > and (z) within six months after the execution of such agreement a Change in > Control of the Company occurs involving one or more of the other parties to > such agreement, then the Company’s sole obligations hereunder shall be as > follows: > > >      (i) the Company shall pay to Executive a lump sum payment in cash no > > later than 10 business days after the Change in Control an amount equal to > > the sum of (A) and (B), where (A) is the difference between (x) the > > Severance Amount (as defined in Section 14(a)(ii)) and (y) the sum of the > > payments made to the Executive prior to the change in Control pursuant to > > Section 10(b)(ii) and (B) is the difference between (x) the Bonus Amount (as > > defined in the Section 14(a)(iii)) and (y) the payments, if any, made to > > Executive prior to the Change in Control pursuant to Section 10(b)(iii)(A); > > > >      (ii) the Company shall reimburse Executive for any documented legal > > fees and expenses to the extent set forth in Section 14(a)(iv); > > > >      (iii) The Company shall make available to Executive and Executive’s > > beneficiaries medical and dental benefits to the extent provided in Section > > 14(a)(v); and > > > >      (iv) each of the Company and Executive shall have and be subject to, > > the rights, duties, and obligations set forth in Sections 13(c) and (d). 11. Employee Covenants. >      (a) For the purposes of this Section 11, the term “Company” shall include > Limited Brands, Inc. and all of its subsidiaries and affiliates thereof. > >      (b) Confidentiality. The Executive shall not, during the term of this > Agreement and thereafter, make any Unauthorized Disclosure. For purposes of > this Agreement, “Unauthorized Disclosure” shall mean use by the Executive for > his own benefit or disclosure by the Executive to any person other than a > person to whom disclosure is reasonably necessary or appropriate in connection > with the performance by the Executive of duties as an executive of the Company > or as may be legally required, of any confidential information relating to the > business or prospects of the Company (including, but not limited to, any > information and materials pertaining to any Intellectual Property as defined > below; provided, however, that such term shall not include the use or > disclosure by the Executive, without consent, of any publicly available > information (other than information available as a result of disclosure by the > Executive in violation of this Section 9 -------------------------------------------------------------------------------- 11(b)). This confidentiality covenant has no temporal, geographical or territorial restriction; however, the parties acknowledge that unless the confidential information constitutes a trade secret of the Company such confidential information as a general rule ceases to be confidential after five years. >      (c) Non-Competition. During the Non-Competition Period described below, > the Executive shall not, directly or indirectly, without the prior written > consent of the Company, own, manage, operate, join, control, be employed by, > consult with or participate in the ownership, management, operation or control > of, or be connected with (as a stockholder, partner, or otherwise), any > business, individual, partner, firm, corporation, or other entity that > competes or plans to compete, directly or indirectly, with the Company, or any > of its products; provided, however, that the “beneficial ownership” by the > Executive after termination of employment with the Company, either > individually or as a member of a “group,” as such terms are used In Rule 13d > of the General Rules and Regulations under the Securities Exchange Act of > 1934, as amended (the “Exchange Act”), of not more than two percent (2%) of > the voting stock of any publicly held corporation shall not be a violation of > Section 11 of this Agreement.      The “Non-Competition Period” means the period the Executive is employed by the Company plus one (1) year from the Termination Date if the Executive’s employment is terminated (i) by the Company for any reason, or (ii) by the Executive for any reason. >      (d) Non-Solicitation. During the No-Raid Period described below, the > Executive shall not directly or indirectly solicit, induce or attempt to > influence any employee to leave the employment of the Company, nor assist > anyone else in doing so. Further, during the No-Raid Period, the Executive > shall not, either directly or indirectly, alone or in conjunction with another > party, interfere with or harm, or attempt to interfere with or harm, the > relationship of the Company with any person who at any time was an employee, > customer or supplier of the Company or otherwise had a business relationship > with the Company.      The “No-Raid Period” means the period the Executive is employed by the Company plus one (1) year from the Termination Date if the Executive’s employment is terminated (i) by the Company for any reason, or (ii) by the Executive for any reason. >      (e) Intellectual Property. The Executive agrees that all inventions, > designs and ideas conceived, produced, created, or reduced to practice, either > solely or jointly with others, during his employment with the Company, > including those developed on his own time, which relate to or are useful in > the Company’s business (“Intellectual Property”) shall be owned solely by the > Company. The Executive understands that whether in preliminary or final form, > such Intellectual Property includes, for example, all ideas, inventions, > discoveries, designs, innovations, improvements, trade secrets, and other > intellectual property. All Intellectual Property is either work made for hire > for the Company within the meaning of the United States Copyright Act, or, if > such Intellectual Property is determined not to be work made for hire, then > the Executive irrevocably assigns all rights, titles and interests in and to > the Intellectual Property to the Company, including all copyrights, patents, > and/or trademarks. The Executive agrees that he will, without any additional > consideration, execute all documents and take all other actions needed to > convey his complete ownership of the Intellectual Property to the Company so > that the Company may own and protect such Intellectual Property and obtain > patent, copyright and trademark registrations for it. The Executive also > agrees that the Company may alter or modify the Intellectual Property at the > Company’s sole discretion, and the Executive waives all right to claim or > disclaim authorship. The Executive represents and warrants that any > Intellectual Property that he assigns to the Company, except as otherwise > disclosed in writing at the time of assignment, will be his sole exclusive > original work. The Executive also represents that he has not previously > invented any Intellectual Property or has advised the Company in writing of > any prior inventions or ideas. 10 -------------------------------------------------------------------------------- >      (f) Remedies. The Executive agrees that any breach of the terms of this > Section 11 would result in irreparable injury and damage to the Company for > which the Company would have no adequate remedy at law; the Executive > therefore also agrees that in the event of said breach or any threat of > breach, the Company shall be entitled to an immediate injunction and > restraining order to prevent such breach and/or threatened breach and/or > continued breach by the Executive and/or any and all persons and/or entities > acting for and/or with the Executive, without having to prove damages. The > terms of this paragraph shall not prevent the Company from pursuing any other > available remedies for any breach or threatened breach hereof, including but > not limited to the recovery of damages from the Executive. The Executive and > the Company further agree that the provisions of the covenants not to compete > and solicit are reasonable and that the Company would not have entered into > this Agreement but for the inclusion of such covenants herein. The parties > agree that the prevailing party shall be entitled to all costs and expenses, > including reasonable attorneys’ fees and costs, in addition to any other > remedies to which either may be entitled at law or in equity. Should a court > determine, however, that any provision of the covenants is unreasonable, > either in period of time, geographical area, or otherwise, the parties hereto > agree that the covenant should be interpreted and enforced to the maximum > extent which such court deems reasonable.      The provisions of this Section 11 shall survive any termination of this Agreement, and the existence of any claim or cause of action by the Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements of this Section 11; provided, however, that this paragraph shall not, in and of itself, preclude the Executive from defending himself against the enforceability of the covenants and agreements of this Section 11.      12. Employee Representation. The Executive expressly represents and warrants to the Company that the Executive is not a party to any contract or agreement and is not otherwise obligated in any way, and is not subject to any rules or regulations, whether governmentally imposed or otherwise, which will or may restrict in any way the Executive’s ability to fully perform the Executive’s duties and responsibilities under this Agreement.      13. Change in Control. >      (a) For purposes of this Section 13, “Company” shall mean Limited Brands, > Inc., a Delaware corporation. > >      (b) For purposes of this Agreement, “Change in Control” means and shall > be deemed to have occurred upon the first to occur of any of the following > events: > > >      (i) Any Person (other than an Excluded Person) becomes, together with > > all “affiliates” and “associates” (each as defined under Rule 12b-2 of the > > Exchange Act), “beneficial owner” (as defined under Rule 13d-3 of the > > Exchange Act) of securities representing 33% or more of the combined voting > > power of the Voting Stock then outstanding, unless such Person becomes > > “beneficial owner” of 33% or more of the combined voting power of the Voting > > Stock then outstanding solely as a result of an acquisition of Voting Stock > > by the Company which, by reducing the Voting Stock outstanding, increases > > the proportionate Voting Stock beneficially owned by such Person (together > > with all “affiliates” and “associates” of such Person) to 33% or more of the > > combined voting power of the Voting Stock then outstanding; provided, that > > if a Person shall become the “beneficial owner” of 33% or more of the > > combined voting power of the Voting Stock then outstanding by reason of such > > Voting Stock acquisition by the Company and shall thereafter become the > > “beneficial owner” of any additional Voting Stock which causes the > > proportionate voting power of Voting Stock beneficially owned by such Person > > to increase to 33% or more of the combined voting power of the Voting Stock > > then outstanding, such Person shall, upon becoming the “beneficial owner” of > > such additional Voting Stock, be deemed to have become the “beneficial > > owner” of 11 -------------------------------------------------------------------------------- > > 33% or more of the combined voting power of the Voting Stock then > > outstanding other than solely as a result of such Voting Stock acquisition > > by the Company; > > > >      (ii) During any period of 24 consecutive months, individuals who at the > > beginning of such period constitute the Board (and any new Director, whose > > election by the Board or nomination for election by the Company’s > > stockholders was approved by a vote of at least two-thirds of the Directors > > then still in office who either were Directors at the beginning of the > > period or whose election or nomination for election was so approved), cease > > for any reason to constitute a majority of Directors then constituting the > > Board; > > > >      (iii) A reorganization, merger or consolidation of the Company is > > consummated, in each case, unless, immediately following such > > reorganization, merger or consolidation, (i) more than 50% of, respectively, > > the then outstanding shares of common stock of the corporation resulting > > from such reorganization, merger or consolidation and the combined voting > > power of the then outstanding voting securities of such corporation entitled > > to vote generally in the election of directors is then beneficially owned, > > directly or indirectly, by all or substantially all of the individuals and > > entities who were the “beneficial owners” of the Voting Stock outstanding > > immediately prior to such reorganization, merger or consolidation, (ii) no > > Person (but excluding for this purpose any Excluded Person and any Person > > beneficially owning, immediately prior to such reorganization, merger or > > consolidation, directly or indirectly, 33% or more of the voting power of > > the outstanding Voting Stock) beneficially owns, directly or indirectly, 33% > > or more of, respectively, the then outstanding shares of common stock of the > > corporation resulting from such reorganization, merger or consolidation or > > the combined voting power of the then outstanding voting securities of such > > corporation entitled to vote generally in the election of directors and > > (iii) at least a majority of the members of the board of directors of the > > corporation resulting from such reorganization, merger or consolidation were > > members of the Board at the time of the execution of the initial agreement > > providing for such reorganization, merger or consolidation; > > > >      (iv) The consummation of (i) a complete liquidation or dissolution of > > the Company or (ii) the sale or other disposition of all or substantially > > all of the assets of the Company, other than to any corporation with respect > > to which, immediately following such sale or other disposition, (A) more > > than 50% of, respectively, the then outstanding shares of common stock of > > such corporation and the combined voting power of the then outstanding > > voting securities of such corporation entitled to vote generally in the > > election of directors is then beneficially owned, directly or indirectly, by > > all or substantially all of the individuals and entities who were the > > “beneficial owners” of the Voting Stock outstanding immediately prior to > > such sale or other disposition of assets, (B) no Person (but excluding for > > this purpose any Excluded Person and any Person beneficially owning, > > immediately prior to such sale or other disposition, directly or indirectly, > > 33% or more of the voting power of the outstanding Voting Stock) > > beneficially owns, directly or indirectly, 33% or more of, respectively, the > > then outstanding shares of common stock of such corporation or the combined > > voting power of the then outstanding voting securities of such corporation > > entitled to vote generally in the election of directors and (C) at least a > > majority of the members of the board of directors of such corporation were > > members of the Board at the time of the execution of the initial agreement > > or action of the Board providing for such sale or other disposition of > > assets of the Company; or > > > >      (v) The occurrence of any transaction or event that the Board, in its > > sole discretion, designates a “Change in Control”.      Notwithstanding the foregoing, in no event shall a “Change in Control” be deemed to have occurred (i) as a result of the formation of a Holding Company, or (ii) with respect to an Executive, if Executive is part of a “group,” within the meaning of Section 13(d)(3) of the Exchange Act as in effect on 12 -------------------------------------------------------------------------------- the Effective Date, which consummates the Change in Control transaction. In addition, for purposes of the definition of “Change in Control” a Person engaged in business as an underwriter of securities shall not be deemed to be the “beneficial owner” of, or to “beneficially own,” any securities acquired through such Person’s participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. “Excluded Person” shall mean (i) the Company; (ii) any of the Company’s Subsidiaries; (iii) any Holding Company; (iv) any employee benefit plan of the Company, any of its Subsidiaries or a Holding Company; or (v) any Person organized, appointed or established by the Company, any of its Subsidiaries or a Holding Company for or pursuant to the terms of any plan described in clause (iv). “Person” shall mean any individual, corporation, partnership, limited liability company, association, trust or other entity or organization. “Holding Company” shall mean an entity that becomes a holding company for the Company or its businesses as a part of any reorganization, merger, consolidation or other transaction, provided that the outstanding shares of common stock of such entity and the combined voting power of the then outstanding voting securities of such entity entitled to vote generally in the election of directors is, immediately after such reorganization, merger, consolidation or other transaction, beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the “beneficial owners”, respectively, of the Voting Stock outstanding immediately prior to such reorganization, merger, consolidation or other transaction in substantially the same proportions as their ownership, immediately prior to such reorganization, merger, consolidation or other transaction, of such outstanding Voting Stock. “Voting Stock” shall mean securities of the Company entitled to vote generally in the election of members of the Company’s Board of Directors. >      (c) Gross-Up Payment. In the event it shall be determined that any > payment or distribution of any type to or for the benefit of the Executive by > the Company, any of its affiliates, any Person who acquires ownership or > effective control of the Company or ownership of a substantial portion of the > Company’s assets (within the meaning of Section 280G of the Internal Revenue > Code of 1986, as amended (the “Code”), and the regulations thereunder) or any > affiliate of such Person, whether paid or payable or distributed or > distributable pursuant to the terms of this Agreement or otherwise (the “Total > Payments”) would be subject to the excise tax imposed by Section 4999 of the > Code or any interest or penalties with respect to such excise tax (such excise > tax, together with any such interest and penalties, are collectively referred > to as the “Excise Tax”), then the Executive shall be entitled to receive an > additional payment (a “Gross-Up Payment”) in an amount such that after payment > by the Executive of all taxes (including any interest or penalties imposed > with respect to such taxes), including any Excise Tax, imposed upon the > Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment > equal to the Excise Tax imposed upon the Total Payments. > >      (d) All determinations as to whether any of the Total Payments are > “parachute payments” (within the meaning of Section 280G of the Code), whether > a Gross-Up Payment is required, the amount of such Gross-Up Payment and any > amounts relevant to the last sentence of Subsection 13(c) shall be made by an > independent accounting firm selected by the Company from among the largest > four accounting firms in the United States (the “Accounting Firm”). The > Accounting Firm shall provide its determination (the “Determination”), > together with detailed supporting calculations regarding the amount of any > Gross-Up Payment and any other relevant matter, both to the Company and the > Executive within five (5) days of the Termination Date, if applicable, or such > earlier time as is requested by the Company or the Executive (if the Executive > reasonably believes that any of the Total Payments may be subject to the > Excise Tax). Any determination by the Accounting Firm shall be binding upon > the Company and the Executive. As a result of 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 the Company should have made > Gross-Up Payments (“Underpayment”), or that Gross-Up Payments will have been > made by the Company which should not have been made (“Overpayment”). In either > such event, the Accounting Firm shall determine the amount of the Underpayment > or Overpayment that has occurred. In the case of an Underpayment, the amount > of such Underpayment shall be promptly paid by the Company to or for the > benefit of the Executive. In the case of an Overpayment, the Executive shall, > at the direction and expense of the Company, take such steps as are reasonably > necessary (including the filing of returns and claims for refund), follow > reasonable instructions 13 -------------------------------------------------------------------------------- > from, and procedures established by, the Company, and otherwise reasonably > cooperate with the Company to correct such Overpayment.      14. Compensation Upon Certain Terminations During the 24-Month Period Following a Change in Control.      (a) If the Executive’s employment is terminated by the Company other than for Cause or by the Executive for Good Reason, in each case during the 24 consecutive month period immediately following a Change in Control, the Company’s sole obligations hereunder, subject to the Executive’s execution of a General Release, shall be as follows: > >      (i) the Company shall pay the Executive the Accrued Compensation; > > > >      (ii) the Company shall pay the Executive a lump sum payment in cash no > > later than ten (10) business days after the Termination Date in an amount > > equal to two times Executive’s Base Salary (the “Severance Amount”); > > > >      (iii) the Company shall pay the Executive a lump sum payment in cash no > > later than ten (10) business days after the date of termination in an amount > > equal to the sum of the last four (4) bonus payments the Executive received > > under the Company’s Incentive compensation plan described in Section 6 and a > > pro-rata amount for the season in which the Executive’s employment is > > terminated based on the average of the prior four (4) bonus payments and the > > number of days the Executive is employed during such season (the “Bonus > > Amount”); > > > >      (iv) the Company shall reimburse the Executive for all documented legal > > fees and expenses reasonably incurred by the Executive in seeking to obtain > > or enforce any right or benefit provided by this Section 14; and > > > >      (v) the Company shall provide the Executive and Executive’s > > beneficiaries medical and dental benefits substantially similar to those > > which the Executive was receiving immediately prior to the date of > > termination for a period of eighteen (18) months after the Termination Date; > > provided however, that the Company’s obligation with respect to the > > foregoing medical and dental benefits shall cease in the event Executive > > becomes employed. > >      (b) Except as provided in Section 14(a)(v), the Executive shall not be > required to mitigate the amount of any payment provided for in this Section 14 > by seeking other employment or otherwise, nor shall the amount of any payment > or benefit provided for in this Section 14 be reduced by any compensation > earned by the Executive as the result of employment by another employer, by > retirement benefits, by offset against any amount claimed to be owed by the > Executive to the Company, or otherwise.      15. Successors and Assigns. >      (a) This Agreement shall be binding upon and shall inure to the benefit > of the Company, its successors and assigns, and the Company shall require any > successor or assign to expressly assume and agree to perform this Agreement in > the same manner and to the same extent that the Company would be required to > perform it if no such succession or assignment had taken place. The term “the > Company” as used herein shall include any such successors and assigns to the > Company’s business and/or assets. The term “successors and assigns” as used > herein shall mean a corporation or other entity acquiring or otherwise > succeeding to, directly or indirectly, all or substantially all the assets and > business of the Company (including this Agreement) whether by operation of law > or otherwise. 14 -------------------------------------------------------------------------------- >      (b) Neither this Agreement nor any right or interest hereunder shall be > assignable or transferable by the Executive, the Executive’s beneficiaries or > legal representatives, except by will or by the laws of descent and > distribution. This Agreement shall inure to the benefit of and be enforceable > by the Executive’s legal personal representative.      16. Arbitration. Except with respect to the remedies set forth in Section 11(f) hereof, any controversy or claim between the Company or any of its affiliates and the Executive arising out of or relating to this Agreement or its termination shall be settled and determined by a single arbitrator whose award shall be accepted as final and binding upon the parties. The American Arbitration Association, under its Employment Arbitration Rules, shall administer the binding arbitration. The arbitration shall take place in Columbus, Ohio. The Company and the Executive each waive any right to a jury trial or to a petition for stay in any action or proceeding of any kind arising out of or relating to this Agreement or its termination and agree that the arbitrator shall have the authority to award costs and attorneys fees to the prevailing party.      17. Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement (including the Notice of Termination) shall be in writing and shall be deemed to have been duly given when personally delivered or sent by registered or certified mail, return receipt requested, postage prepaid, or upon receipt if overnight delivery service or facsimile is used, addressed as follows: > To the Executive: > Kenneth T. Stevens > 7309 Lambton Park Road > New Albany, Ohio 43054 > > To the Company: > Limited Brands, Inc. > Three Limited Parkway > Columbus, Ohio 43230 > Attn: Secretary      18. Settlement of Claims. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or others.      19. Miscellaneous. No provision of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.      20. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Ohio without giving effect to the conflict of law principles thereof.      21. 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.      22. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, if any, 15 -------------------------------------------------------------------------------- understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof.      IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the day and year first above written. LIMITED BRANDS, INC.         By: /s/ Leonard Schlesinger   5/19/06 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Name: Leonard Schlesinger   Date Title: Vice Chairman and   Chief Operating Officer   /s/ Kenneth T. Stevens   5/12/06 --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Kenneth T. Stevens   Date 16 --------------------------------------------------------------------------------

Exhibit 10.1 Mercury Computer Systems, Inc. Compensation Policy for Non-Employee Directors Objective It is the objective of Mercury to compensate non-employee directors in a manner which will enable recruitment and retention of highly qualified directors and fairly compensate them for their services as a director. Cash Compensation (effective October 1, 2006)   Annual retainer for non-employee directors:    $55,000 per annum, paid quarterly Additional annual retainers:    (a) Lead Director:    $15,000 per annum, paid quarterly (b) Chairman of the Audit Committee:    $15,000 per annum, paid quarterly (c) Chairman of the Compensation Committee:    $12,000 per annum, paid quarterly (d) Chairman of the Nominating and Governance Committee:    $6,000 per annum, paid quarterly Directors are entitled to be reimbursed for their reasonable expenses incurred in connection with attendance at Board and committee meetings. Quarterly retainer payments shall be paid in arrears within 30 days following the end of each quarter, with the first payments under this policy to be made in January 2007 with respect to service during the quarter ended December 31, 2006. Equity Compensation New non-employee directors will be granted stock options to purchase 30,000 shares of common stock in connection with their first election to the Board. These awards will vest as to 50% of the covered shares on each of the first two anniversaries of the date of grant, and will expire on the tenth anniversary of the date of grant. Non-employee directors may also receive annual stock option awards at the discretion of the Compensation Committee. Beginning with fiscal year 2007, non-employee directors will receive annual stock option awards covering 16,000 shares. These awards will vest as to 50% of the covered shares on the date of grant and as to the remaining covered shares on the first anniversary of the date of grant, and will expire on the tenth anniversary of the date of grant. Non-employee directors will not be eligible to receive the annual stock option award for the fiscal year in which they are first elected. Non-employee directors who are first elected to the Board during the first half of Company’s fiscal year will be eligible to receive the annual stock option award for the next fiscal year; otherwise, non-employee directors will not be eligible to receive their first annual stock option award until the second fiscal year following the fiscal year in which they are first elected to the Board. Approved by the Board of Directors: September 29, 2006

Exhibit 10.1   SECOND LOAN MODIFICATION AGREEMENT   This Second Loan Modification Agreement (this “Agreement”) is effective as of the 30th day of December, 2005, by and between 1-800 CONTACTS, INC. (“Borrower”) and ZIONS FIRST NATIONAL BANK (“Lender”).   Recitals   A.                                   Borrower executed and delivered to Lender that certain Promissory Note (Reducing Revolving Line of Credit) dated February 27, 2004 in the original principal amount of $28,000,000.00 (the “Note”).   B.                                     In connection with the Note, Borrower executed and delivered to Lender a Restated Loan Agreement dated February 27, 2004, as modified by that certain Loan Modification Agreement dated June 25, 2004 (the “Loan Agreement”).   C.                                     Borrower has requested that Lender increase the amount of the Note and modify certain terms and conditions contained in the Loan Agreement and Lender has agreed to such increase and modifications provided, among other things, Borrower executes and delivers this Agreement to Lender.   NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Loan Agreement is hereby modified as follows:   1.                                       Except as otherwise expressly provided herein, terms assigned defined meanings in the Loan Agreement shall have the same defined meanings in this Agreement.   2.                                       The definition for “EBITDA” contained in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:   “EBITDA” means net income (excluding extraordinary gains and losses realized other than in the ordinary course of business up to a maximum of $2,500,000.00) before interest, taxes, depreciation, and amortization, and other non-cash charges, including stock-based compensation expenses and foreign currency translation gains or losses, determined in accordance with generally accepted accounting principles consistent with the financial statements of Borrower delivered to Lender.   3.                                       The definition for “LIBOR Rate Applicable Margin” contained in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:   “LIBOR Rate Applicable Margin” means two percent (2.00%) until the rate changes pursuant to the terms of the Promissory Note, and thereafter:   a.                                       If the Maximum Leverage Ratio is greater than or equal to two (2.0) but less than two and five-tenths (2.5), two and twenty-five hundredths percent (2.25%).   b.                                      If the Maximum Leverage Ratio is greater than or equal to one (1.0) but less than two (2.0), two percent (2.00%).   --------------------------------------------------------------------------------   c.                                       If the Maximum Leverage Ratio is less than one (1.0), one and seventy-five hundredths percent (1.75%).   4.                                       The definition for “Maximum Available Advance Amount” contained in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:   “Maximum Available Advance Amount” means (1) $30,000,000.00 at all times that Borrower’s Minimum Fixed Charge Coverage Ratio is equal to or greater than one and five-tenths (1.50) but less than two (2.0); (2) $35,000,000.00 at all times that Borrower’s Minimum Fixed Charge Coverage Ratio is equal to or greater than two (2.0) but less than two and five-tenths (2.5); or (3) $40,000,000.00 at all times that Borrower’s Minimum Fixed Charge Coverage Ratio is equal to or greater than two and five-tenths (2.5).   5.                                       The definition for “Prime Rate Applicable Margin” contained in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:   “Prime Rate Applicable Margin” means zero percent (0.00%) until the rate changes pursuant to the terms of the Promissory Note, and thereafter:   a.                                       If the Maximum Leverage Ratio is greater than or equal to two (2.0) but less than two and five-tenths (2.5), twenty-five hundredths percent (0.25%).   b.                                      If the Maximum Leverage Ratio is greater than or equal to one (1.0) but less than two (2.0), zero percent (0.00%).   c.                                       If the Maximum Leverage Ratio is less than one (1.0), minus twenty-five hundredths percent (-0.25%).   6.                                       The definition for “Promissory Note” contained in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:   “Promissory Note” means the Replacement Promissory Note (Revolving Line of Credit) to be executed by Borrower pursuant to Section 2.3 Promissory Note in the form of Exhibit A hereto, which is incorporated herein by reference, and any and all renewals, extensions, modifications, and replacements thereof.   7.                                       The definition for “Unused Facility Fee Applicable Margin” contained in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:   “Unused Facility Fee Applicable Margin” means three hundred seventy-five hundredths percent (0.375%) until the fee changes pursuant to the terms of the Loan Agreement, and thereafter:   a.                                       If the Maximum Leverage Ratio is greater than or equal to one (1.0) but less than two and five-tenths (2.5), three hundred seventy-five hundredths percent (0.375%).   2 --------------------------------------------------------------------------------   b.                                      If the Maximum Leverage Ratio is less than one (1.0), twenty-five hundredths percent (0.25%).   8.                                       Section 2.1 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:   2.1                                 Amount of Loan   Upon fulfillment of all conditions precedent set forth in Section 4 Conditions to Loan Disbursements, and so long as no Event of Default exists, Lender agrees to loan Borrower up to forty million dollars ($40,000,000.00) as a revolving line of credit.   9.                                       The first paragraph of Section 2.2 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:   2.2                                 Nature and Duration of Loan   The Loan shall be a revolving loan payable in full upon the dates and upon the terms and conditions provided in the Promissory Note.  Lender and Borrower intend the Loan to be in the nature of a line of credit under which Borrower may repeatedly draw and repay funds on a revolving basis in accordance with the terms and conditions of this Loan Agreement and the Promissory Note.  The right of Borrower to draw funds and the obligation of Lender to advance funds shall not accrue until all of the conditions set forth in Section 4, Conditions to Loan Disbursements, have been fully satisfied, and shall terminate:  (i) upon occurrence of an Event of Default or (ii) upon maturity of the Promissory Note, unless the Promissory Note is renewed or extended by Lender, in which case such termination shall occur upon the maturity of the final renewal or extension of the Promissory Note.  Upon such termination, any and all amounts owing to Lender pursuant to the Promissory Note shall thereupon be due and payable in full.   10.                                 Section 2.5 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:   2.5                                 Limitations on Advances   Notwithstanding anything to the contrary in the Loan Documents, no advance shall be made on the Promissory Note if, after making the requested advance, the total principal amount of all advances outstanding, together with the amount of all outstanding letters of credit issued against the Promissory Note pursuant to Section 2.2, Nature and Duration of Loan, will exceed the Maximum Available Advance Amount.   If at any time the aggregate, principal amount of all advances outstanding and unpaid on, together with the amount of all outstanding letters of credit issued against, the Promissory Note exceeds the amount allowable under the Maximum Available Advance Amount, Borrower shall immediately make payment to Lender in a sufficient amount to bring the amount of such advances and letters of credit issued back into compliance with the Maximum Available Advance Amount.  If the foregoing covenant requires prepayment of an advance based on the LIBOR Rate (as defined in the Promissory Note), such prepayment shall be subject to a prepayment fee as provided in the Promissory Note.   3 --------------------------------------------------------------------------------   11.                                 Section 2.7 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:   2.7                                 Non-Use Fee   Borrower shall pay to Lender a non-use fee for the Loan for so long as this Loan Agreement is in effect.  The non-use fee shall be an amount equal to the Unused Facility Fee Applicable Margin per annum of the unused portion of the Maximum Available Advance Amount, calculated on the average unused portion of the Loan for each calendar quarter or portion thereof.  The fee shall be payable quarterly, in arrears, and shall be due no later than the fifth Banking Business Day after the first day of the month following each calendar quarter.  Changes in the Unused Facility Fee Applicable Margin shall take effect on the later of (i) the first day of the month following forty-five (45) days after the end of each fiscal quarter of Borrower, or (ii) provided no Event of Default exists, the first day of the month following receipt by Lender of the monthly financial statements for the quarter or quarterly financial statements provided in Section 6.8, Financial Statements and Reports.   12.                                 Subsection b. of Section 6.8, Financial Statements and Reports, is hereby deleted in its entirety and replaced with the following:   b.                                      Borrower shall provide quarterly unaudited financial statements of Borrower and all Subsidiaries for each fiscal quarter.  The quarterly unaudited financial statements shall be in a form reasonably acceptable to Lender.  The unaudited financial statements shall be delivered to Lender within forty-five (45) days of the end of each applicable fiscal quarter.  The quarterly unaudited financial statements may be those submitted by Borrower to the SEC in connection with its 10Q report or, if not, shall include a certification by the chief financial officers or chief executive officers of Borrower and the Subsidiaries that the quarterly financial statements fully and fairly represent Borrower’s and the Subsidiaries’ financial condition as of the date thereof and the results of operations for the period covered thereby and are consistent with other financial statements previously delivered to Lender.   13.                                 Subsection a. of Section 6.9 of the Loan Agreement is hereby deleted in its entirety.   14.                                 Subsection b. of Section 6.9 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:   b.                                      Capital Expenditures.  Borrower will not make any expenditures for tangible fixed or capital assets if, after giving effect thereto, the aggregate of all such expenditures made by Borrower would exceed twenty million dollars ($20,000,000.00) for each fiscal year of Borrower.  Amounts not expended in any fiscal year may be carried over to the next fiscal year for purposes of this calculation.   15.                                 Subsection d. of Section 6.9 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:   d.                                      Minimum Fixed Charge Coverage Ratio.  Borrower will at all times, and on a Trailing Twelve Month basis, maintain a ratio of (i) EBITDA less the sum   4 --------------------------------------------------------------------------------   of Replacement Capital Expenditures, income taxes paid in cash, and dividends or other equity distributions paid by Borrower to (ii) Net Cash Interest Expense plus scheduled principal payments made on long term debt (excluding the principal balance outstanding and due under the Promissory Note at maturity and excluding scheduled principal payments made on the VisionTec Acquisition Debt) of not less than one and five-tenths (1.5).   Replacement Capital Expenditures means two million dollars ($2,000,000.00) for Borrower’s fiscal year 2005 and each of Borrower’s fiscal years thereafter.   Cash Taxes means expenditures paid for foreign, federal, and state income taxes.   Net Cash Interest Expense means interest expenses paid minus interest income received.   16.                                 Subsection e. of Section 6.9 of the Loan Agreement is hereby deleted in its entirety.   17.                                 The third paragraph of Section 6.18 is hereby deleted in its entirety and replaced with the following:   6.18                           Mergers, Consolidations, and Purchase and Sale of Assets   Permitted Acquisition Baskets means any merger involving Borrower or any of the Subsidiaries or any acquisitions by Borrower or any of the Subsidiaries of all or substantially all of the assets or business of any person or entity in which (i) if a merger, Borrower or the Subsidiary is the surviving entity; (ii) the acquired company operates or the assets are used in the same business lines as Borrower or any Subsidiaries; (iii) the value (whether cash or other consideration) paid by Borrower or the Subsidiary does not exceed five million dollars ($5,000,000.00); and (iv) the aggregate value (whether cash or other consideration) paid by Borrower and all Subsidiaries for all acquired companies and assets during the Trailing Twelve Month period does not exceed ten million dollars ($10,000,000.00).   18.                                 Section 6.19 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:   6.19                           Dividends   Borrower shall not (a) (i) declare or pay any cash dividends, (ii) purchase, redeem, retire or otherwise acquire for value any of its capital stock now or hereafter outstanding, (iii)          make any distribution of assets to its stockholders, investors, or equity holders, whether in cash, assets, or in obligations of Borrower, (iv) allocate or otherwise set apart any sum for the payment of any dividend or distribution on, or for the purchase, redemption, or retirement of any shares of its capital stock or equity interest, or (v) make any other distribution by reduction of capital or otherwise in respect of any shares of its capital stock or equity interests, (b) (i) at any time if an Event of Default has occurred which has not been waived or cured, (ii) if an Event of Default would result by such payment or action or exist after such payment or action, and (iii) if the aggregate amount or value of all such payments, distributions, and allocations would exceed fifteen million dollars ($15,000,000.00) in any fiscal year of Borrower.   5 --------------------------------------------------------------------------------   19.                                 The first paragraph of Section 6.20 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:   6.20                           Loans and Investments   Borrower shall not make any loans to, or make any investments in, or pay any advances of any nature whatsoever to any person or entity, in an aggregate, outstanding amount greater than five million dollars ($5,000,000.00), except (i) advances in the ordinary course of business to vendors, suppliers, and contractors; (ii) Permitted Subsidiary Loans; and (iii) investments in ClearLab and VisionTec and/or Shayna.   20.                                 Borrower shall pay Lender a facility fee of $72,000.00 concurrent with the execution of this Agreement.   21.                                 Except as expressly modified by this Agreement, all other terms and conditions of the Loan Agreement shall remain in full force and effect.   Dated this 13 day of January, 2006.                   1-800 CONTACTS, INC.             By:  /s/ Robert G. Hunter           Title:  VP Finance & Treasurer                 ZIONS FIRST NATIONAL BANK             By:  /s/ Jim C. Stanchfield           Title:  Vice President     6 --------------------------------------------------------------------------------   REPLACEMENT PROMISSORY NOTE (Revolving Line of Credit)   December 30, 2005   Borrower: 1-800 CONTACTS, INC.     Lender: Zions First National Bank     Amount: $40,000,000.00     Maturity: February 27, 2007   For value received, Borrower promises to pay to the order of Lender at its Commercial Banking Division, 10 East South Temple, Suite 1500, UT KC15 0321, Salt Lake City, Utah, 84133, the sum of forty million dollars ($40,000,000.00) or such other principal balance as may be outstanding hereunder in lawful money of the United States with interest thereon calculated and payable as provided herein.   Definitions   Terms used in the singular shall have the same meaning when used in the plural and vice versa. As used in this Replacement Promissory Note (this “Promissory Note”), the term:   “Banking Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in the State of Utah are authorized or required to close and, when used in reference to an Interest Period, a day on which dealings in dollar deposits are also carried on in the London Interbank market and banks are open for business in London.   “Dollars” and the sign “$” mean lawful money of the United States.   “Event of Default” shall have the meaning set forth in the Loan Agreement   “Interest Period” means, with respect to any advance or balance for which interest is based on the LIBOR Rate, the period commencing on the date such advance is made or, as to an existing balance, the date selected by Borrower and ending, as Borrower may select, on the numerically corresponding day in the first, second, third or sixth calendar month thereafter, except that each such Interest Period that commences on the last Banking Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Banking Business Day of the appropriate subsequent calendar month;. provided that all of the foregoing provisions relating to Interest Periods are subject to the following:   a.                                       No Interest Period may extend beyond the termination of the Loan Agreement;   b.                                      No Interest Period may extend beyond the aforesaid Maturity Date or such later date to which it is extended; and   c.                                       If an Interest Period would end on a day that is not a Banking Business Day, such Interest Period shall be extended to the next Banking Business Day unless such Banking Business Day would fall in the next calendar month, in which event such Interest Period shall end on the immediately preceding Banking Business Day.   --------------------------------------------------------------------------------   “LIBOR Rate” applicable to any Interest Period means the rate per annum quoted by Lender as its LIBOR Rate, rounded to the nearest thousandth. The LIBOR Rate shall be related to quotes for the London Interbank Offered Rate from the British Bankers Association Interest Settlement Rates, Lasser Marshall Inc., or other comparable services for the applicable Interest Period. This definition of LIBOR Rate is to be strictly interpreted and is not intended to serve any purpose other than providing an index to determine the interest rate used herein. The LIBOR Rate of Lender may not necessarily be the same as the quoted London Interbank Offered Rate quoted by any particular institution or service applicable to any Interest Period.   “Loan Agreement” means the Restated Loan Agreement dated February 27, 2004, between Lender and Borrower, together with any exhibits, amendments, addenda, and modifications.   “Prime Rate” means an index which is determined daily by the published commercial loan variable rate index held by any two of the following banks: J. P. Morgan Chase & Co., Wells Fargo Bank, National Association, and Bank of America, N.A. In the event no two of the above banks have the same published rate, the bank having the median rate will establish the Prime Rate. If, for any reason beyond the control of Lender, any of the aforementioned banks becomes unacceptable as a reference for the purpose of determining the Prime Rate used herein, Lender may, five days after posting notice in Lender’s bank offices, substitute another comparable bank for the one determined unacceptable. As used in this paragraph, “comparable bank” shall mean one of the ten largest commercial banks headquartered in the United States of America. This definition of Prime Rate is to be strictly interpreted and is not intended to serve any purpose other than providing an index to determine the variable interest rate used herein. It is not the lowest rate at which Lender may make loans to any of its customers, either now or in the future.   Revolving Line of Credit   This Promissory Note shall be a revolving line of credit under which Borrower may repeatedly draw and repay funds, so long as no default has occurred hereunder or under the Loan Agreement.  All disbursements under this Promissory Note shall be made in accordance with the Loan Agreement and the amount available for disbursement shall be as provided in the Loan Agreement.   This Promissory Note succeeds and replaces that certain Promissory Note dated February 27, 2004 executed by Borrower in favor of Lender in the original principal amount of twenty-eight million dollars ($28,000,000.00).   Principal and interest shall be payable as follows: Interest accrued is to be paid monthly commencing January 1, 2006, and on the same day of each month thereafter.  All principal and unpaid interest shall be paid in full on February 27, 2007.   All payments shall be applied first to fees, then accrued interest, and the remainder, if any, to principal.   Interest shall accrue from the date of disbursement of the principal amount or portion thereof until paid, both before and after judgment, in accordance with the terms set forth herein.   Prime Rate or LIBOR Rate Election   Each advance under this Promissory Note shall initially bear interest based on the Prime Rate.   2 --------------------------------------------------------------------------------   Provided no Event of Default has occurred, Borrower may elect at any time and from time to time to convert the interest rate on all or any portion of the outstanding principal balance from the Prime Rate based interest rate to the LIBOR Rate based interest rate by giving Lender two (2) Banking Business Days written notice of such election, specifying the amount of the outstanding principal balance to be converted and the Interest Period.  The amount for which such election is exercised must be two hundred fifty thousand dollars ($250,000.00) or multiples thereof.  An election to convert to the LIBOR Rate based interest rate may not be changed to the Prime Rate based interest rate without consent of Lender until expiration of the selected Interest Period.   Interest Based on Prime Rate   Interest based on the Prime Rate shall be at a variable rate computed on the basis of a three hundred sixty (360) day year as follows: the Prime Rate Applicable Margin (as defined in the Loan Agreement) per annum above the Prime Rate from time to time in effect, adjusted as of the date of any change in the Prime Rate.   Interest Based on LIBOR Rate   Interest based on the LIBOR Rate shall be calculated as follows:   1.                                       Interest shall be at a rate computed on the basis of a three hundred sixty (360) day year at a rate equal to the LIBOR Rate for the applicable Interest Period plus the LIBOR Rate Applicable Margin (as defined in the Loan Agreement) per annum. .   2.                                        Notwithstanding any other provision in this Promissory Note, if the adoption of any applicable law, rule, or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by Lender with any request or directive (whether or not having the force of law) of any such authority, central bank, or comparable agency, shall make it unlawful or impossible for Lender to maintain balances based on the LIBOR Rate, then upon notice to Borrower by Lender the outstanding principal amount of the balances based on the LIBOR Rate, together with interest accrued thereon, shall be repaid immediately upon demand of Lender if such change or compliance with such request, in the reasonable judgment of Lender, requires immediate repayment or, if such repayment is not required, at the election of Borrower shall be converted to a balance based on Prime Rate or repaid at the expiration of the last Interest Period to expire before the effective date of any such change or request.   3.                                       Notwithstanding anything to the contrary herein, if Lender reasonably determines (which determination shall be conclusive) that (a) quotations of interest rates are not being provided for purposes of determining the LIBOR Rate, or (b) the LIBOR Rate does not accurately cover the cost to Lender of making or maintaining advances based on the LIBOR Rate, then Lender may give notice thereof to Borrower, whereupon until Lender notifies Borrower that the circumstances giving rise to such suspension no longer exist, then (1) the right of Borrower to request interest pricing based on the LIBOR Rate shall be suspended; and (2) Borrower shall repay in full the then outstanding principal amount based on LIBOR Rate together with accrued interest thereon, on the last day of the then current Interest Period applicable to such balance, or, at Borrower’s option, convert the outstanding principal balances based on LIBOR Rate to balances based on Prime Rate on the last day of the then current Interest Period applicable to such balances.   3 --------------------------------------------------------------------------------   General   Borrower may prepay all or any portion of all Prime Rate based balances at any time without penalty. Any prepayment, in full or in part, of any LIBOR Rate based balances shall be subject to a prepayment fee if the Original LIBOR Rate (hereinafter defined) is greater than the Current LIBOR Rate (hereinafter defined) on the prepayment date. The prepayment fee shall be an amount equal to the net present value (using the Original LIBOR Rate plus one and five-tenths percent (1.5%) as the discount rate) of the prepaid principal amount over the remaining term of the respective Interest Period, times the difference between (i) the Current LIBOR Rate and (ii) the Original LIBOR Rate times the number of years and fractional years remaining until the end of the respective Interest Period. “Original LIBOR Rate” means the LIBOR Rate in effect as of the first day of the Interest Period applicable to any balances subject to the LIBOR Rate. “Current LIBOR Rate” means the LIBOR Rate on the date a prepayment of any balances subject to the LIBOR Rate is made for the Interest Period which most closely matches the period from the date the prepayment is received until the end of the Interest Period applicable to the balance prepaid.   Any prepayment received by Lender after 2:00 p.m. mountain standard or daylight time (whichever is in effect on the date the prepayment is received) shall be deemed received on the following Banking Business Day.   Upon default in payment of any principal or interest when due, whether due at stated maturity, by acceleration, or otherwise, all outstanding principal shall bear interest at a default rate from the date when due until paid, both before and after judgment, which default rate shall be 4 percent (4%) per annum above the foregoing rates and upon maturity of the applicable Interest Periods all balances bearing interest based on the LIBOR Rate shall be converted to balances bearing interest based on the Prime Rate.   Changes in the Prime Rate Applicable Margin and the LIBOR Rate Applicable Margin shall take effect, provided no Event of Default exists, on the first day of the month following receipt by Lender of the quarterly or annual financial statements as provided in Section 6.8, Financial Statements and Reports, of the Loan Agreement.   If, at any time prior to the maturity of this Promissory Note, this Promissory Note shall have a zero balance owing, this Promissory Note shall not be deemed satisfied or terminated but shall remain in full force and effect for future draws unless terminated upon other grounds.   This Promissory Note is made in accordance with the Loan Agreement and is secured by the collateral identified in and contemplated by the Loan Agreement.   If an Event of Default occurs, time being the essence hereof, then the entire unpaid balance, with interest as aforesaid, shall, at the election of the holder hereof and without notice of such election, become immediately due and payable in full.   If an Event of Default occurs, Borrower agrees to pay to the holder hereof all collection costs, including reasonable attorney fees and legal expenses, in addition to all other sums due hereunder.   This Promissory Note shall be governed by and construed in accordance with the laws of the State of Utah.   Borrower acknowledges that by execution and delivery of this Promissory Note, Borrower has transacted business in the State of Utah and Borrower voluntarily submits to, consents to, and waives any   4 --------------------------------------------------------------------------------   defense to the jurisdiction of courts located in the State of Utah as to all matters relating to or arising from this Promissory Note. EXCEPT AS EXPRESSLY AGREED IN WRITING BY LENDER AND EXCEPT AS PROVIDED IN THE ARBITRATION PROVISIONS IN THE LOAN AGREEMENT, THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF UTAH SHALL HAVE SOLE AND EXCLUSIVE JURISDICTION OF ANY AND ALL CLAIMS, DISPUTES, AND CONTROVERSIES, ARISING UNDER OR RELATING TO THIS PROMISSORY NOTE. NO LAWSUIT, PROCEEDING, OR ANY OTHER ACTION RELATING TO OR ARISING UNDER THIS PROMISSORY NOTE MAY BE COMMENCED OR PROSECUTED IN ANY OTHER FORUM EXCEPT AS EXPRESSLY AGREED IN WRITING BY LENDER.   Borrower hereby waives presentment for payment, demand, protest, notice of protest, notice of protest and of non-payment and of dishonor, and consent to extensions of time, renewal, waivers or modifications without notice and further consent to the release of any collateral or any part thereof with or without substitution.     Borrower:       1-800 CONTACTS, INC.           By:  /s/ Robert G. Hunter           Title:  VP Finance & Treasurer     5 --------------------------------------------------------------------------------

-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- KIRBY CORPORATION THE BANKS NAMED HEREIN, and   JPMORGAN CHASE BANK, N.A., as Funds Administrator, Issuer and Administrative Agent --------------------------------------------------------------------------------   $250,000,000 Amended and Restated Credit Agreement --------------------------------------------------------------------------------   June 14, 2006 --------------------------------------------------------------------------------   WELLS FARGO BANK, N.A. and BANK OF AMERICA, N.A., as Syndication Agents   THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. and DnB NOR BANK ASA, as Documentation Agents   J.P. MORGAN SECURITIES, INC. and BANC OF AMERICA SECURITIES LLC, as Co-Lead Arrangers and Joint Bookrunners   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TABLE OF CONTENTS   ARTICLE I. DEFINITIONS, ETC. 1       SECTION 1.01 CERTAIN DEFINED TERMS 1 SECTION 1.02 ACCOUNTING TERMS 2 SECTION 1.03 COMPUTATION OF TIME PERIODS 2 SECTION 1.04 REFERENCES, ETC 2       ARTICLE II. COMMITMENTS AND TERMS OF CREDIT 2       SECTION 2.01 COMMITMENTS; LOANS AND BORROWINGS 2 SECTION 2.02 REVOLVING BORROWING PROCEDURES; CONVERSIONS 3 SECTION 2.03 SWINGLINE LOANS 4 SECTION 2.04 THE NOTES 5 SECTION 2.05 REDUCTION OF THE COMMITMENTS 5 SECTION 2.06 REPAYMENT OF LOANS 6 SECTION 2.07 INTEREST ACCRUAL, PAYMENTS, ETC 6 SECTION 2.08 PREPAYMENTS 8 SECTION 2.09 PAYMENTS AND COMPUTATIONS 9 SECTION 2.10 FEES 10 SECTION 2.11 SETOFF, COUNTERCLAIMS AND TAXES 11 SECTION 2.12 FUNDING LOSSES 13 SECTION 2.13 CHANGE OF LAW 13 SECTION 2.14 INCREASED COSTS 14 SECTION 2.15 SUBSTITUTION OF BANKS 15 SECTION 2.16 LETTERS OF CREDIT. 16 SECTION 2.17 INCREASE OF COMMITMENTS. 18       ARTICLE III. CONDITIONS OF CREDIT 19       SECTION 3.01 CONDITIONS PRECEDENT TO THE INITIAL BORROWING 19 SECTION 3.02 CONDITIONS PRECEDENT TO ALL BORROWINGS 21       ARTICLE IV. REPRESENTATIONS AND WARRANTIES 21       SECTION 4.01 CORPORATE EXISTENCE; ETC 21 SECTION 4.02 CORPORATE AUTHORITY; BINDING OBLIGATIONS 22 SECTION 4.03 NO CONFLICT 22 SECTION 4.04 NO CONSENT 22 SECTION 4.05 NO DEFAULTS OR VIOLATIONS OF LAW 22 SECTION 4.06 FINANCIAL POSITION 23 SECTION 4.07 LITIGATION 23 SECTION 4.08 USE OF PROCEEDS 23 SECTION 4.09 GOVERNMENTAL REGULATION 24 SECTION 4.10 DISCLOSURE 24 SECTION 4.11 ERISA 24 SECTION 4.12 PAYMENT OF TAXES 24 SECTION 4.13 PROPERTIES; TITLE AND LIENS 24 SECTION 4.14 PARI PASSU RANKING 24 SECTION 4.15 ENVIRONMENTAL MATTERS 25 SECTION 4.16 NO UNDISCLOSED LIABILITIES 25 SECTION 4.17 LABOR MATTERS 25       ARTICLE V. AFFIRMATIVE COVENANTS 26       SECTION 5.01 REPORTING REQUIREMENTS 26 SECTION 5.02 TAXES; CLAIMS 28 -i- -------------------------------------------------------------------------------- SECTION 5.03 COMPLIANCE WITH LAWS AND AGREEMENTS 28 SECTION 5.04 INSURANCE 28 SECTION 5.05 CORPORATE EXISTENCE; ETC 29 SECTION 5.06 INSPECTIONS; ETC 29 SECTION 5.07 MAINTENANCE OF PROPERTIES 29 SECTION 5.08 ACCOUNTING SYSTEMS; ETC 29 SECTION 5.09 USE OF LOAN PROCEEDS 29 SECTION 5.10 FURTHER ASSURANCES IN GENERAL 29       ARTICLE VI. NEGATIVE COVENANTS 30       SECTION 6.01 FINANCIAL COVENANTS 30 SECTION 6.02 RESTRICTIONS ON DEBT 30 SECTION 6.03 RESTRICTION ON LIENS 31 SECTION 6.04 CONSOLIDATED SUBSIDIARY DISPOSITIONS 32 SECTION 6.05 RESTRICTIONS ON CONSOLIDATED SUBSIDIARY DISTRIBUTIONS 32 SECTION 6.06 MERGERS AND ACQUISITIONS 32 SECTION 6.07 RESTRICTED INVESTMENTS 33 SECTION 6.08 LINES OF BUSINESS 33 SECTION 6.09 TRANSACTIONS WITH AFFILIATES 33 SECTION 6.10 RESTRICTED PAYMENTS 33       ARTICLE VII. DEFAULT 34       SECTION 7.01 EVENTS OF DEFAULT 34 SECTION 7.02 SETOFF IN EVENT OF DEFAULT 36 SECTION 7.03 NO WAIVER; REMEDIES 36 SECTION 7.04 NO PRESERVATION OF SECURITY FOR UNMATURED REIMBURSEMENT OBLIGATIONS 36       ARTICLE VIII. THE AGENTS AND THE FUNDS ADMINISTRATOR 37       SECTION 8.01 AUTHORIZATION AND ACTION 37 SECTION 8.02 RELIANCE, ETC 37 SECTION 8.03 CHASE AND AFFILIATES 38 SECTION 8.04 BANK CREDIT DECISION 39 SECTION 8.05 INDEMNIFICATION 39 SECTION 8.06 EMPLOYEES OF THE AGENT, ETC 40 SECTION 8.07 SUCCESSOR AGENT 40 SECTION 8.08 SUCCESSOR FUNDS ADMINISTRATOR 40 SECTION 8.09 NOTICE OF DEFAULT 41 SECTION 8.10 EXECUTION OF LOAN DOCUMENTS 41 SECTION 8.11 DUTIES OF SYNDICATION AGENT AND DOCUMENTATION AGENT 41       ARTICLE IX. MISCELLANEOUS 41       SECTION 9.01 AMENDMENTS, ETC 41 SECTION 9.02 PARTICIPATION AGREEMENTS AND ASSIGNMENTS 42 SECTION 9.03 NOTICES 45 SECTION 9.04 COSTS AND EXPENSES 46 SECTION 9.05 SUCCESSORS AND ASSIGNS 46 SECTION 9.06 INDEPENDENCE OF COVENANTS 46 SECTION 9.07 SURVIVAL OF REPRESENTATIONS AND WARRANTIES 46 SECTION 9.08 SEPARABILITY 47 SECTION 9.09 CAPTIONS 47 SECTION 9.10 LIMITATION BY LAW 47 SECTION 9.11 COUNTERPARTS 47 SECTION 9.12 GOVERNING LAW 47 SECTION 9.13 LIMITATION ON INTEREST 47 SECTION 9.14 INDEMNIFICATION 48 SECTION 9.15 SUBMISSION TO JURISDICTION 49   -ii- --------------------------------------------------------------------------------   SECTION 9.16 WAIVER OF JURY TRIAL 49 SECTION 9.17 FINAL AGREEMENT OF THE PARTIES 49 SECTION 9.18 PATRIOT ACT 49       EXHIBIT 2.02(A) FORM OF BORROWING REQUEST   EXHIBIT 2.02(C) FORM OF CONVERSION NOTICE   EXHIBIT 2.04 FORM OF NOTE   EXHIBIT 2.17(A) FORM OF COMMITMENT INCREASE AGREEMENT   EXHIBIT 2.17(B) FORM OF NEW BANK AGREEMENT   EXHIBIT 9.02 FORM OF ASSIGNMENT AND ACCEPTANCE         SCHEDULE 2.01 ALLOCATION AND BANK NAMES   SCHEDULE 4.01 CONSOLIDATED SUBSIDIARIES (PART A) AND EXCLUDED AFFILIATES (PART B)   SCHEDULE 4.16 LIABILITIES     -iii- -------------------------------------------------------------------------------- AMENDED AND RESTATED CREDIT AGREEMENT   THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 14, 2006 (this “Agreement”), is among KIRBY CORPORATION, a Nevada corporation (the “Borrower”), the banks named on the signature pages hereto (together with their respective successors and assigns in such capacity, the “Banks”), JPMORGAN CHASE BANK, N.A., as Funds Administrator (the “Funds Administrator”) and as Administrative Agent (the “Agent”), WELLS FARGO BANK, N.A. and BANK OF AMERICA, N.A., each as a Syndication Agent and THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. and DNB NOR BANK ASA, each as a Documentation Agent. Unless otherwise defined herein, all capitalized terms used herein and defined in Article I are used herein as so defined.   PRELIMINARY STATEMENT   Pursuant to that certain Credit Agreement dated as of September 19, 1997 (the “Existing Credit Agreement”), among the Borrower, the banks named therein, the Agent as the Funds Administrator and the Agent, the parties named therein as Banks made a revolving credit facility available to the Borrower upon the terms and conditions set forth therein. Said Existing Credit Agreement was amended by that certain First Amendment to Credit Agreement dated as of January 30, 1998, that certain Second Amendment to Credit Agreement dated November 30, 1998, that certain Third Amendment to Credit Agreement dated November 5, 2001, that certain Fourth Amendment to Credit Agreement dated January 31, 2003 and that certain Fifth Amendment to Credit Agreement dated as of December 9, 2003, all of said Amendments among the Borrower, the Banks named therein, the Agent, the Funds Administrator and the other parties named therein as syndication agent or documentation agent (said parties, in such capacities, together with the Agent, the “Agents”).   The Borrower now requests that the Banks amend and restate the Existing Credit Agreement and provide the Borrower with a credit facility pursuant to which the Banks will commit to make Revolving Loans in a principal amount of up to $250,000,000 outstanding at any time. The proceeds of the Revolving Loans shall be used to refinance indebtedness, to finance working capital needs of the Borrower and its Subsidiaries and for their general corporate purposes, including permitted acquisitions.   In connection therewith, the Agent has agreed to serve in such capacity for the Banks and the Agent and the Banks are agreeable to the Borrower’s request, subject to the terms of this Agreement.   Accordingly, in consideration of the foregoing and the mutual covenants set forth herein, the parties hereto agree as follows:   ARTICLE I. DEFINITIONS, ETC.   Section 1.01 Certain Defined Terms. Capitalized terms used in this Agreement and not otherwise defined herein shall have the respective meanings set forth in Annex A hereto (such meanings to be equally applicable to both singular and plural forms of the terms defined).   -1- -------------------------------------------------------------------------------- Section 1.02 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the consolidated financial statements referred to in Section 4.06.   Section 1.03 Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, unless otherwise indicated, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding.”   Section 1.04 References, Etc. 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. All references herein to Sections, Annexes, Exhibits and Schedules shall, unless the context requires a different construction, be deemed to be references to the Sections of this Agreement and the Annexes, Exhibits and Schedules attached hereto and made a part hereof. In this Agreement, unless a clear contrary intention appears, the word “including” (and with correlative meaning “include”) means including, without limiting the generality of any description preceding such term. No provision of this Agreement shall be interpreted or construed against any Person solely because that Person or its legal representative drafted such provision.   ARTICLE II. COMMITMENTS AND TERMS OF CREDIT   Section 2.01 Commitments; Loans and Borrowings. (a) Each Bank severally agrees, on the terms and conditions hereinafter set forth, to make Revolving Loans to the Borrower from time to time on any Business Day during the period from the Effective Date up to, but excluding, the Termination Date in an aggregate principal amount that will not result in such Bank’s Revolving Credit Exposure exceeding at any time such Bank’s Commitment as set forth in Schedule 2.01. Subject to the terms and conditions of this Agreement, the Borrower may borrow, repay pursuant to Section 2.06 or prepay pursuant to Section 2.08 and reborrow under this Section 2.01(a) the Revolving Loans.   (b)  Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving Loans made by the Banks ratably in accordance with their respective Commitments. The failure of any Bank to make any Loan required to be made by it shall not relieve any other Bank of its obligations hereunder; provided that the Commitments of the Banks are several and no Bank shall be responsible for any other Bank’s failure to make Loans as required.   (c)  Each Borrowing of a Revolving Loan shall be comprised entirely of Prime Rate Loans or Fixed Rate Loans as the Borrower may request in accordance herewith. Prime Rate Borrowing shall consist of Prime Rate Loans made on the same day by the Banks ratably according to their respective Commitment Percentages, and Prime Rate Borrowings may be in any amount. Each Fixed Rate Borrowing shall be in an aggregate amount not less than $1,000,000 or an integral multiple of $100,000 in excess thereof, and shall consist of Fixed Rate Loans of the same Type made on the same day by the Banks ratably according to their respective Commitment Percentages. Each Swingline Loan shall be in an amount that is an integral multiple of $1,000 and not less than $100,000 and shall accrue interest at a rate equal to the Federal Funds Rate plus the Applicable Margin for Eurodollar Rate Loans. Borrowings of more than one Type may be outstanding at the same time, but the Borrower shall not be entitled to request any Borrowing or to Convert Loans comprising any Borrowing into Revolving Loans of another Type, if after giving effect to such Borrowing or Conversion, as the case may be, any Bank would have outstanding at any one time more than six (6) different Types of Loans.   -2- --------------------------------------------------------------------------------   (d)  Notwithstanding any other term or provision hereof no Loan shall be made if after giving effect thereto the aggregate principal amount of Loans outstanding would exceed the Total Commitment.   Section 2.02 Revolving Borrowing Procedures; Conversions. ii) Each Borrowing of a Revolving Loan shall be made upon the written, telecopied or facsimile transmitted request of the Borrower, given to the Funds Administrator not later than 11:00 a.m. (Houston time) on (i) the third Business Day prior to the proposed Borrowing Date in the case of a Eurodollar Rate Borrowing, (ii) the second Business Day prior to the proposed Borrowing Date in the case of an Adjusted CD Rate Borrowing or (iii) the Business Day immediately preceding the proposed Borrowing Date in the case of a Prime Rate Borrowing, and upon receipt the Funds Administrator shall give each other member of the Bank Group prompt notice of such request by telecopier, telex or cable. Each request for a Borrowing (a “Borrowing Request”) made by the Borrower shall be in substantially the form of Exhibit 2.02(a), specifying therein (A) the Borrowing Date for such Borrowing, (B) the Type of Loans comprising such Borrowing, (C) the aggregate amount of such Borrowing, and (D) in the case of a Fixed Rate Borrowing, the Interest Period for the Loans comprising such Borrowing. Each Bank shall, before 11:30 a.m. (Houston time) on the date of such Borrowing, make available for the account of its Applicable Lending Office to the Funds Administrator at its address referred to in Section 9.03, in same day funds, such Bank’s ratable portion of such Borrowing. After the Funds Administrator’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Funds Administrator will make such funds available to the Borrower at the Funds Administrator’s aforesaid address. Each Borrowing Request shall be irrevocable and binding on the Borrower.   (b)  Unless the Funds Administrator shall have received notice from a Bank prior to any Borrowing Date that such Bank will not make available to the Funds Administrator such Bank’s ratable portion of such Borrowing, the Funds Administrator may assume that such Bank has made such portion available to the Funds Administrator on such Borrowing Date in accordance with Section 2.02(a) and the Funds Administrator may, in reliance upon such assumption, make available to the Borrower on such Borrowing Date a corresponding amount. If and to the extent that such Bank shall not have so made such ratable portion available to the Funds Administrator, such Bank and the Borrower severally agree to repay to the Funds Administrator forthwith on demand such corresponding amount, together with interest thereon for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Funds Administrator at (i) in the case of the Borrower, the interest rate applicable at the time to the Revolving Loans comprising such Borrowing and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Funds Administrator such corresponding amount, such amount so repaid shall constitute such Bank’s Loan as part of such Borrowing for purposes of this Agreement. -3- --------------------------------------------------------------------------------   (c)  The Borrower may, subject to the terms of this Agreement, on any Business Day, upon written, telecopied or facsimile transmitted notice to the Funds Administrator, given not later than 11:00 a.m. (Houston time) on (i) the third Business Day prior to the proposed Conversion Date in the case of a Conversion of Loans into Eurodollar Rate Loans, (ii) the second Business Day prior to the proposed Conversion Date in the case of a Conversion of Loans into Adjusted CD Rate Loans or (iii) the Business Day immediately preceding the proposed Conversion Date in the case of a Conversion of Loans into Prime Rate Loans, Convert all Loans comprising one or more Borrowings into Loans of another Type comprising a single Borrowing, and the Funds Administrator shall promptly transmit the contents of such notice to each other member of the Bank Group by telecopier, telex or cable. Each notice of a Conversion (a “Conversion Notice”) given by the Borrower shall be in substantially the form of Exhibit 2.02(c), specifying therein (A) the Conversion Date for such Conversion, (B) the Loans to be Converted, (C) the Type of Loans to which such Loans are to be Converted and (D) in the case of a Conversion into Fixed Rate Loans, the Interest Period for such Converted Loans. Notwithstanding any other term or provision hereof, after giving effect to any such Conversion, the size of all Borrowings outstanding hereunder and the number of different Types of Loans outstanding hereunder shall conform to the requirements of Section 2.01. In the event of any Conversion of Fixed Rate Loans on any day other than the last day of the Interest Period applicable thereto, the Borrower shall be obligated to reimburse the Banks in respect thereof pursuant to Section 2.12. If the Borrower shall fail to give a timely Conversion Notice conforming to the requirements of this Agreement with respect to any Fixed Rate Loans prior to the expiration of the Interest Period applicable thereto, such Fixed Rate Loans shall, automatically on the last day of such Interest Period, be Converted into Prime Rate Loans.   Section 2.03 Swingline Loans. iii) Subject to the terms and conditions set forth herein, the Swingline Bank agrees to make Swingline Loans to the Borrower on any Business Day during the period from the Effective Date up to, but excluding, the Termination Date, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding $25,000,000 or (ii) the sum of the total Revolving Credit Exposure exceeding the Total Commitment; provided that the Swingline Bank shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans.   (b)  To request a Swingline Loan, the Borrower shall notify the Funds Administrator of such request by telephone (confirmed by telecopy), not later than 2:00 p.m. (Houston time), on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Loan. The Funds Administrator will promptly advise the Swingline Bank of any such notice received from the Borrower. The Swingline Bank shall make each Swingline Loan available to the Borrower by means of a credit to the general deposit account of the Borrower with the Swingline Bank (or, in the case of a Swingline Loan made to finance the reimbursement of a drawing under a Letter of Credit as provided in Section 2.16(b)(iv), by remittance to the Issuing Bank) by 2:00 p.m. (Houston time) on the requested date of such Swingline Loan.   -4- -------------------------------------------------------------------------------- (c)  The Swingline Bank may by written notice given to the Administrative Agent not later than 9:00 a.m. (Houston time) on any Business Day require the Bank Group to acquire participations on such Business Day in all or a portion of the Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Bank Group will participate. Promptly upon receipt of such notice, the Funds Administrator will give notice thereof to each Bank, specifying in such notice such Bank's Commitment Percentage of such Swingline Loan or Loans. Each Bank hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Funds Administrator, for the account of the Swingline Bank, such Bank's Commitment Percentage of such Swingline Loan or Loans. Each Bank acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Bank shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.02 with respect to Loans made by such Bank (and Section 2.02 shall apply, mutatis mutandis, to the payment obligations of the Bank Group), and the Funds Administrator shall promptly pay to the Swingline Bank the amounts so received by it from the Bank Group. The Funds Administrator shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Funds Administrator and not to the Swingline Bank. Any amounts received by the Swingline Bank from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan after receipt by the Swingline Bank of the proceeds of a sale of participations therein shall be promptly remitted to the Funds Administrator; any such amounts received by the Funds Administrator shall be promptly remitted by the Funds Administrator to the Bank Group that shall have made their payments pursuant to this paragraph and to the Swingline Bank, as their interests may appear; provided that any such payment so remitted shall be repaid to the Swingline Bank or to the Funds Administrator, 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 2.04 The Notes. The Loans made by each Bank shall be evidenced by a single Note issued to such Bank by the Borrower (a) dated the date of this Agreement (or such other date as may be specified in Section 9.02), (b) payable to the order of such Bank in a principal amount equal to such Bank’s Commitment and (c) otherwise duly completed, substantially in the form of Exhibit 2.04. Each Loan made by a Bank to the Borrower and all payments made on account of the principal amount thereof shall be entered by such Bank in its records or on the schedule (or a continuation thereof) attached to the Note of such Bank, provided, however, that prior to any transfer of any such Note, such Bank shall endorse the amount and maturity of any outstanding Loans on the schedule (or a continuation thereof) attached to such Note.   Section 2.05 Reduction of the Commitments. The Borrower shall have the right, upon at least three Business Days’ notice to the Funds Administrator to terminate in whole or reduce ratably in part the unused portions of the respective Commitments of the Banks, provided, that each partial reduction shall be in the aggregate amount of $1,000,000 or an integral multiple of $1,000,000 in excess thereof.   -5- -------------------------------------------------------------------------------- Section 2.06 Repayment of Loans. The Borrower hereby unconditionally promises to pay (i) to the Funds Administrator for the account of each Bank the then unpaid principal amount of each Revolving Loan on the Termination Date, together with any unpaid interest accrued thereon and (ii) to the Swingline Bank the then unpaid principal amount of each Swingline Loan on the earlier of the Termination Date and the first date after such Swingline Loan is made that is the last day of the calendar month and is at least two (2) Business Days after such Swingline Loan is made; provided that on each date that a Borrowing of a Revolving Loan is made, the Borrower shall repay all Swingline Loans then outstanding.   Section 2.07 Interest Accrual, Payments, Etc. (a) Subject to the provisions of Section 9.13, the Borrower shall pay interest on the unpaid principal amount of each Loan made by each Bank from the date of such Loan until such principal amount shall be paid in full, on the dates and at the rates per annum specified as follows:   (i)  if such Loan is a Prime Rate Loan, a rate per annum equal to the lesser of (A) the Highest Lawful Rate and (B) the Prime Rate in effect from time to time plus or minus, as applicable, the Applicable Margin in effect from time to time, and unpaid accrued interest on such Loans shall be payable on each Quarterly Payment Date and on the date such Prime Rate Loan shall be paid in full;   (ii)     if such Loan is an Adjusted CD Rate Loan, a rate per annum equal at all times during the Interest Period for such Loan to the lesser of (A) the Highest Lawful Rate and (B) the sum of the Adjusted CD Rate for such Interest Period plus the Applicable Margin in effect as of the first day of such Interest Period, and unpaid accrued interest on such Loans shall be payable on each Quarterly Payment Date and on the last day of such Interest Period;   (iii)    if such Loan is a Eurodollar Rate Loan, a rate per annum equal at all times during the Interest Period for such Loan to the lesser of (A) the Highest Lawful Rate and (B) the sum of the Eurodollar Rate for such Interest Period plus the Applicable Margin in effect as of the first day of such Interest Period, and unpaid accrued interest on such Loans shall be payable on each Quarterly Payment Date and on the last day of such Interest Period; or   (iv)    if such Loan is a Swingline Loan, a rate per annum equal to the Federal Funds Rate plus the Applicable Margin for Eurodollar Rate Loans.   Any amount of principal or, to the extent permitted by applicable law, interest which is not paid when due (whether at stated maturity, by acceleration or otherwise) shall bear interest from the date on which such amount is due until such amount is paid in full, at a rate per annum (the “Default Rate”) equal at all times to the lesser of (A) the Highest Lawful Rate and (B) the Prime Rate in effect from time to time during the applicable period plus or minus, as applicable, the Applicable Margin in effect from time to time during such period plus two percent (2%), payable on demand.   (b)  The Borrower shall pay to each Bank additional interest on the unpaid principal amount of each Eurodollar Rate Loan of such Bank, from the date of such Loan until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the Eurodollar Rate for the Interest Period for such Loan from (ii) the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of such Bank for such Interest Period, payable on each date on which interest is payable on such Loan. Such additional interest shall be calculated by such Bank and notified to the Borrower (together with a copy of such Bank’s calculations) through the Funds Administrator.   -6- -------------------------------------------------------------------------------- (c)  (i) The Agent shall give prompt notice to the Borrower and each other member of the Bank Group of the applicable interest rate determined by the Agent hereunder for each Borrowing. Each determination by the Agent (or, in the case of Section 2.07(b), by a Bank) of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error.   (ii)  If one or more Banks holding aggregate Commitment Percentages of at least fifty percent (50%) shall, at least one Business Day before the date of any requested Eurodollar Rate Borrowing, notify the Agent and the Funds Administrator that the Eurodollar Rate applicable to such Borrowing will not adequately reflect the cost to such Banks of making, funding or maintaining their respective Eurodollar Rate Loans for such Borrowing, the right of the Borrower to select Eurodollar Rate Loans for such Borrowing or any subsequent Borrowing shall be suspended until the Agent shall notify the Borrower and each other member of the Bank Group that the circumstances causing such suspension no longer exist, and each Loan comprising such Borrowing shall be made as, or Converted into, as applicable, a Prime Rate Loan.   (iii)  If the Agent is unable to determine the Adjusted CD Rate in accordance with the definition thereof for any Adjusted CD Rate Borrowing or the Eurodollar Rate in accordance with the definition thereof for any Eurodollar Rate Borrowing, (A) the Agent shall forthwith notify the Borrower and each other member of the Bank Group that the interest rate cannot be determined for such Adjusted CD Rate Borrowing or Eurodollar Rate Borrowing, as the case may be, (B) each Adjusted CD Rate Borrowing or Eurodollar Rate Borrowing, as the case may be, previously requested but not yet funded or Converted, as applicable, will automatically be made as or Converted into, as applicable, a Prime Rate Borrowing, and (C) the obligation of the Banks to make Adjusted CD Rate Loans or Eurodollar Rate Loans, as the case may be, shall be suspended until the Agent shall notify the Borrower and each other member of the Bank Group that the circumstances causing such suspension no longer exist.   (d)  As used in this Agreement and the other Loan Documents, “Applicable Margin” means, as to Loans consisting of a single Borrowing, a rate per annum determined pursuant to the table set forth below by reference to the Borrower’s S&P Rating, Moody’s Rating or Fitch Rating (individually, a “Rating” and collectively, the “Ratings”) and the Type of Loans comprising such Borrowing, whereby (i) if either Moody’s or S&P shall not have in effect a Rating (other than by reason of the circumstances referred to in the last sentence of this Section 2.07(d)), then such rating agency shall be deemed to have established a rating in the lowest of the categories set forth in the table below; (ii) if the Moody’s Rating and the S&P Rating shall differ by one level, the higher Rating shall apply; (iii) if the Moody’s Rating and the S&P Rating differ by more than one level and the Fitch Rating is equal to the higher of the Moody’s Rating and the S&P Rating, the higher Rating shall apply; (iv) if the Moody’s Rating, the S&P Rating and the Fitch Rating each differ by one level, and the Moody’s Rating and the S&P Rating differ by more than one level, the rating which is the middle rating shall apply; (v) if the Moody’s Rating and the S&P Rating differ by more than one level, and the Fitch rating is equal to the lower of the Moody’s and S&P Rating, the rating which is one level above the two lower Ratings shall apply; (vi) if the Moody’s Rating and the S&P Rating differ by more than one level, and the Borrower does not have a Fitch rating, the rating which is one level below the higher of the Moody’s Rating or the S&P Rating Ratings shall apply; and (vii) if the Moody’s Rating and the S&P Rating are the same, that Rating shall apply. Each change in the Applicable Margin shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody’s, S&P, or Fitch shall change, or if any such rating agency shall cease to be in the business of rating corporate debt obligations, the Borrower and the Banks shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Margin shall be determined by reference to the rating most recently in effect prior to such change or cessation.   -7- -------------------------------------------------------------------------------- Pricing Grid S&P/Fitch/ Moody’s Rating   Eurodollar Rate   Prime Rate   Commitment Fee   Utilization Fee                       Greater than or equal to BBB+/Baa1     0.300 %   0.000 %   0.008 %   0.100 % Greater than or equal to BBB/Baa2     0.400 %   0.000 %   0.100 %   0.100 % Greater than or equal to BBB-/Baa3     0.525 %   0.000 %   0.125 %   0.100 % Greater than or equal to BB+/Ba1     0.775 %   0.000 %   0.175 %   0.100 % Less than BB+/Ba1     0.900 %   0.000 %   0.225 %   0.100 % Section 2.08 Prepayments. (a) The Borrower may, from time to time on any Business Day, upon at least one Business Day’s notice to the Funds Administrator stating the proposed date and aggregate principal amount thereof, and if such notice is given, the Borrower shall, prepay the outstanding principal amount of the Prime Rate Loans (including any Swingline Loan) comprising part of the same Borrowing in whole or ratably in part; provided, that any partial prepayment of such Prime Rate Loans shall be in an aggregate principal amount of not less than $100,000. The Borrower may from time to time upon at least three Business Days’ notice to the Funds Administrator stating the proposed date and the aggregate principal amount thereof, and if such notice is given, the Borrower shall, prepay the outstanding principal amount of the Fixed Rate Loans comprising part of the same Borrowing in whole or ratably in part; provided, that any partial prepayment of such Fixed Rate Loans shall be in an aggregate principal amount of not less than $2,000,000 or an integral multiple of $1,000,000 in excess thereof. Subject to the preceding two sentences, Borrower may apply any optional prepayment of the Loans to such portions of the Loans as the Borrower may elect.   (b)  The Borrower shall from time to time prepay the Loans comprising part of the same Borrowing in such amounts as shall be necessary so that at all times the aggregate amount of Loans outstanding shall not be in excess of the Total Commitment. Any prepayment required by this Section 2.08(b) shall be due on the date such prepayment accrues pursuant to the preceding sentence.   -8- -------------------------------------------------------------------------------- (c)  Each prepayment of Fixed Rate Loans shall be accompanied by a prepayment of accrued interest to the date of such prepayment on the principal amount prepaid. In the event of any prepayment of a Fixed Rate Loan, the Borrower shall be obligated to reimburse the Banks in respect thereof pursuant to Section 2.12. Unless otherwise specified by the Borrower, all mandatory prepayments of the Loans shall first be applied to Prime Rate Borrowings, and second to such Fixed Rate Borrowings as the Funds Administrator may select.   Section 2.09 Payments and Computations. (a) All payments of principal, interest, commitment fees and other amounts payable to the Banks under the Loan Documents shall be made in Dollars to the Funds Administrator at its address specified in Section 9.03 for the account of each of the Banks, in immediately available funds not later than 12:00 Noon (Houston time) on the date when due. Upon receipt of such payments, the Funds Administrator will promptly cause to be distributed like funds relating to the payment of principal or interest or commitment fees ratably (other than amounts payable pursuant to Section 2.07(b), Section 2.11, Section 2.12, Section 2.13 or Section 2.14) to the Banks for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Bank to such Bank for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. In the event the Funds Administrator receives any such payment in immediately available funds not later than 12:00 Noon (Houston time) on any Business Day, but fails to distribute to any Bank entitled thereto like funds relating to such payment by the close of business on such Business Day, then the Funds Administrator shall pay such Bank interest thereon at the Federal Funds Rate for each day from the date such amount is received by the Funds Administrator until the date distributed to such Bank.   (b)  Unless the Funds Administrator shall have received notice from the Borrower prior to the date on which any payment is due to the Banks under the Loan Documents that the Borrower will not make such payment in full, the Funds Administrator may assume that the Borrower has made such payment in full to the Funds Administrator on such date and the Funds Administrator may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent the Borrower shall not have made such payment in full to the Funds Administrator each Bank shall repay to the Funds Administrator forthwith on demand such amount distributed to such Bank, together with interest thereon for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Funds Administrator at the Federal Funds Rate.   (c)  All payments by the Borrower of the fees payable to the Agent pursuant to the Fee Letter shall be made in Dollars directly to the Agent at its address specified in Section 9.03 in immediately available funds not later than 12:00 Noon (Houston time) on the date when due.   (d)  All computations of interest based on the Prime Rate shall be made on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Adjusted CD Rate, the Eurodollar Rate, the Federal Funds Rate, or Section 2.07(b), as well as commitment fees, shall be made on the basis of a year of 360 days (unless use of a 360 day year would cause the interest contracted for, charged or received hereunder to exceed the Highest Lawful Rate, in which case such computations shall be made on the basis of a year of 365 or 366 days, as the case may be), in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or commitment fees are payable.   -9- --------------------------------------------------------------------------------   (e)  Whenever any payment under the Loan Documents shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or commitment fee, as the case may be; provided, however, if such extension would cause payment of interest on or principal of Eurodollar Rate Loans to be made in the next following calendar month, such payment shall be made on the next preceding Business Day.   (f)  If any Bank shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of the Loans made by it (other than pursuant to Section 2.07(b), Section 2.11, Section 2.12, Section 2.13 or Section 2.14) in excess of its ratable share of payments on account of the Loans obtained by all the Banks, such Bank shall forthwith purchase from the other Banks such participations in the Loans made by such other Banks as shall be necessary to cause such purchasing Bank to share the excess payment ratably with each of them. The Borrower agrees that any Bank so purchasing a participation from another Bank pursuant to this Section 2.09(f) may, to the fullest extent permitted by law and this Agreement, exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Bank were the direct creditor of the Borrower in the amount of such participation.   Section 2.10 Fees. (a) Subject to the provisions of Section 9.13, the Borrower shall pay each Bank a commitment fee equal to the applicable percentage set forth in the pricing grid in Section 2.07(d) on the average unused portion of the Commitment of such Bank as in effect from time to time for the period from the date hereof to, but excluding, the Termination Date. Accrued commitment fees shall be due and payable in arrears on each Quarterly Payment Date in each year, on the date of any reduction or termination of the Commitment of such Bank and on the Termination Date, and shall be computed for the period commencing with the day to which such fee was last paid (or, in the case of the first commitment fee payment date, for the period commencing with and including the date hereof) to the date such fee is due and payable.   (b)  Subject to the provisions of Section 9.13, the Borrower shall pay the Agent the arrangement and administrative fees specified in that certain letter agreement dated __________, 2006 between the Agent and the Borrower concerning the same (the “Fee Letter”).   (c)  Subject to the provisions of Section 9.13, the Borrower shall pay to the Agent for the pro-rata accounts of the Banks, a utilization fee equal to the applicable percentage set forth in the grid contained in Section 2.07(d) on the daily average outstanding balance of the Loans during all times for which the principal balance of the Loans outstanding (including all outstanding, undrawn Letters of Credit) exceeds 33% of the Total Commitment.   -10- --------------------------------------------------------------------------------   Section 2.11 Setoff, Counterclaims and Taxes. (a) All payments of principal, interest, expenses, reimbursements, compensation, commitment fees, letter of credit fees, arrangement fees or administration fees and any other amount from time to time due under any Loan Document shall be made by the Borrower without setoff or counterclaim and shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each member of the Bank Group, taxes imposed on its income (or a taxable base in the nature of net income, or, in lieu of taxes so imposed or measured, on overall gross receipts and capital), and franchise taxes imposed on it, by the jurisdiction under the laws of which such member of the Bank Group is organized or any political subdivision thereof and, in the case of each Bank, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of such Bank’s Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “Taxes”). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable under any Loan Document to any member of the Bank Group, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.11) such member of the Bank Group receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law; provided that the Borrower shall not be required to pay any increased amount on account of Taxes to the extent that any such Bank shall not have furnished the Borrower with such forms, or shall not have taken such other action, as reasonably may be available to it under applicable tax laws and any applicable tax treaty to obtain an exemption from, or reduction of, such Taxes.   (b)  In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made under any Loan Document or from the execution, delivery or registration of, or otherwise with respect to, any Loan Document (hereinafter referred to as “Other Taxes”).   (c)  The Borrower will indemnify each member of the Bank Group for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.11) paid by such member of the Bank Group (whether paid on its own behalf or on behalf of any other member of the Bank Group) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such member of the Bank Group makes written demand therefor.   (d)  Within 30 days after the date of any payment of Taxes, the Borrower will furnish to the Agent, at its address referred to in Section 9.03, the original or a certified copy of a receipt evidencing payment thereof. If no Taxes are payable in respect of any payment made under any Loan Document, upon the request of the Agent, the Borrower will furnish to the Agent and the Funds Administrator, at its address referred to in Section 9.03, a certificate from each appropriate taxing authority, or an opinion of counsel acceptable to the Agent, in either case stating that such payment is exempt from or not subject to Taxes.   -11- --------------------------------------------------------------------------------   (e)  Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.11 shall survive the payment in full of the Loans and all other amounts owing under the other Loan Documents. The provisions of this Section 2.11 are in all respects subject to Section 9.13 hereof.   (f)  Each Bank represents and warrants to the Agent, the Funds Administrator and the Borrower that such Bank is either (i) a corporation organized under the laws of the United States, a state thereof or the District of Columbia, or (ii) entitled to complete exemption from United States withholding tax imposed on or with respect to any payments, including fees, to be made to it pursuant to this Agreement and the other Loan Documents (x) under an applicable provision of a tax convention or treaty to which the United States is a party or (y) because it is acting through a branch, agency or office in the United States and any payment to be received by it hereunder is effectively connected with a trade or business in the United States. Upon becoming a party to this Agreement (whether by assignment or as an original signatory hereto), and in any event, from time to time upon the request of the Agent, the Funds Administrator or the Borrower, each Bank which is not a corporation organized under the laws of the United States or any state thereof or the District of Columbia shall deliver to the Agent, the Funds Administrator and the Borrower such forms, certificates or other instruments as may be required by the Agent and the Funds Administrator in order to establish that such Bank is entitled to complete exemption from United States withholding taxes imposed on or with respect to any payments, including fees, to be made to such Bank under this Agreement and the other Loan Documents. Each Bank also agrees to deliver to the Borrower, the Agent and the Funds Administrator such other supplemental forms as may at any time be required as a result of the passage of time or changes in applicable law or regulation in order to confirm or maintain in effect its entitlement to exemption from United States withholding tax on any payments hereunder; provided, that the circumstances of the Bank at the relevant time and applicable laws permit it to do so. If a Bank determines, as a result of any change in either (1) applicable law, regulation or treaty, or in any official application thereof or (2) its circumstances, that it is unable to submit any form or certificate that it is obligated to submit pursuant to this Section 2.11(f), or that it is required to withdraw or cancel any such form or certificate previously submitted, it shall promptly notify the Borrower, the Agent and the Funds Administrator of such fact. If a Bank is organized under the laws of a jurisdiction outside the United States, and the Borrower, the Funds Administrator and the Agent have not received forms, certificates or other instruments indicating to their satisfaction that all payments to be made to such Bank hereunder are not subject to United States withholding tax or the Agent otherwise has reason to believe that such Bank is subject to U.S. withholding tax, the Borrower shall withhold taxes from such payments at the applicable statutory rate. Each Bank shall indemnify and hold the Borrower, the Funds Administrator and the Agent harmless from any United States taxes, penalties, interest and other expenses, costs and losses incurred or payable by them as a result of either (A) such Bank’s failure to submit any form or certificate that it is required to provide pursuant to this Section 2.11(f) or (B) reliance by the Borrower, the Funds Administrator or the Agent on any such form or certificate which such Bank has provided to them pursuant to this Section 2.11(f).   -12- --------------------------------------------------------------------------------   (g)  Any Bank claiming any additional amounts payable pursuant to this Section 2.11 shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document requested by the Borrower or to change the jurisdiction of its Applicable Lending Office if such a filing or change would avoid the need for or reduce the amount of any such additional amounts which may thereafter accrue and would not, in the sole determination of such Bank, be otherwise disadvantageous to such Bank.   Section 2.12 Funding Losses. The Borrower shall indemnify each member of the Bank Group against any loss or reasonable expense (including, but not limited to, any loss or reasonable expense sustained or incurred or to be sustained or incurred in liquidating or reemploying deposits from third parties acquired to effect or maintain a Loan or any part thereof as a Fixed Rate Loan) which such Person may sustain or incur as a consequence of (a) any failure by the Borrower to fulfill on the date of any Borrowing hereunder the applicable conditions set forth in Article III, (b) any failure by the Borrower to borrow hereunder or to Convert Loans hereunder after a Borrowing Request or Conversion Notice, respectively, has been given, (c) any payment, prepayment or Conversion of a Fixed Rate Loan required or permitted by any other provisions of this Agreement, including, without limitation, payments made due to the acceleration of the maturity of the Loans pursuant to Section 7.01, or otherwise made on a date other than the last day of the applicable Interest Period, (d) any default in the payment or prepayment of the principal amount of any Loan or any part thereof or interest accrued thereon, as and when due and payable (at the due date thereof, by notice of prepayment or otherwise) or (e) the occurrence of an Event of Default. Such loss or reasonable expense shall include, without limitation, an amount equal to the excess, if any, as determined by each Bank of (i) its cost of obtaining the funds for the Loan being paid, prepaid or Converted or not borrowed or Converted (based on the Fixed Rate applicable thereto) for the period from the date of such payment, prepayment or Conversion or failure to borrow or Convert to the last day of the Interest Period for such Loan (or, in the case of a failure to borrow or Convert, the Interest Period for the Loan which would have commenced on the date of such failure to borrow or Convert) over (ii) the amount of interest (as estimated by such Bank) that would be realized by such Bank in reemploying the funds so paid, prepaid or Converted or not borrowed or Converted for such period or Interest Period, as the case may be. A certificate of each member of the Bank Group setting forth any amount or amounts which such Person is entitled to receive pursuant to this Section 2.12 shall be delivered to the Borrower (with a copy to the Agent and the Funds Administrator) and shall be conclusive, if made in good faith, absent manifest error. The Borrower shall pay to the Funds Administrator for the account of each such Person the amount shown as due on any certificate within 30 days after its receipt of the same. Notwithstanding the foregoing, in no event shall any Bank be permitted to receive any compensation hereunder constituting interest in excess of the Highest Lawful Rate. Without prejudice to the survival of any other obligations of the Borrower hereunder, the obligations of the Borrower under this Section 2.12 shall survive the termination of this Agreement and/or the payment or assignment of any of the Notes.   Section 2.13 Change of Law. (a) If at any time any Bank determines in good faith (which determination shall be conclusive) that any change in any applicable law, rule or regulation or in the interpretation, application or administration thereof makes it unlawful, or any central bank or other Governmental Authority asserts that it is unlawful, for such Bank or its foreign branch or branches to fund or maintain any Eurodollar Rate Loan (any of the foregoing determinations being a “Eurodollar Event”), then, such Bank, at its option, may: (i) declare that Eurodollar Rate Loans will no longer be made or maintained by such Bank, whereupon the right of the Borrower to select Eurodollar Rate Loans for any Borrowing shall be suspended until such Bank shall notify the Funds Administrator and the Agent that the circumstances causing such Eurodollar Event no longer exist; (ii) with respect to any Eurodollar Rate Loans of such Bank then outstanding, require that all such Eurodollar Rate Loans be Converted to Prime Rate Loans, in which event all such Eurodollar Rate Loans shall automatically be Converted into Prime Rate Loans on the effective date of notice of such Eurodollar Event and all payments or prepayments of principal that would have otherwise been applied to repay such Converted Eurodollar Rate Loans shall instead be applied to repay the Prime Rate Loans resulting from such Conversion; and/or (iii) with respect to any Eurodollar Rate Loans requested of such Bank but not yet made as or Converted into such, require that such Eurodollar Rate Loans be made as or Converted into, as applicable, Prime Rate Loans.   -13- --------------------------------------------------------------------------------   (b)  Upon the occurrence of any Eurodollar Event, and at any time thereafter so long as such Eurodollar Event shall continue, such Bank may exercise its aforesaid option by giving written notice thereof to the Funds Administrator, the Agent and the Borrower, such notice to be effective upon receipt thereof by the Borrower. Any Conversion of any Eurodollar Rate Loan which is required under this Section 2.13 shall be made, together with accrued and unpaid interest and all other amounts payable to such Bank under this Agreement with respect to such Converted Loan (including, without limitation, amounts payable pursuant to Section 2.12 hereof), on the date stated in the notice to the Borrower referred to above.   Section 2.14 Increased Costs. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline issued or request made after the Effective Date by any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to any Bank of agreeing to make or making, funding or maintaining Adjusted CD Rate Loans or Eurodollar Rate Loans, then the Borrower shall from time to time, subject to the provisions of Section 9.13, pay to the Funds Administrator for the account of such Bank additional amounts sufficient to compensate such Bank for such increased cost upon demand by such Bank.   (b)  If any Bank shall have determined in good faith that any law, rule, regulation or guideline adopted pursuant to or arising out of the July 1988 report of the Basel Committee on Banking Regulations and Supervisory Practices entitled “International Convergence of Capital Measurement and Capital Standards” and becoming applicable to such Bank after the Effective Date, or that the adoption after the Effective Date of any applicable law, rule, regulation or guideline regarding capital adequacy, or any change in any of the foregoing or in the interpretation or administration thereof by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or compliance by such Bank (or any lending office of such Bank) with any request or directive regarding capital adequacy (whether or not having the force of law) issued after the Effective Date by any such Governmental Authority or comparable agency, affects or would affect the amount of capital required or expected to be maintained by such Bank or any corporation controlling such Bank and that the amount of such capital is increased by or based upon the existence of such Bank’s Commitment hereunder and other commitments of this type, then the Borrower shall from time to time, subject to the provisions of Section 9.13, pay to such Bank upon demand additional amounts sufficient to compensate such Bank or such corporation in light of such circumstances, to the extent that such Bank reasonably determines such increase in capital to be allocable to the existence of such Bank’s Commitment hereunder and similar amounts are being charged generally to other borrowers with similar commitments from such Bank.   -14- --------------------------------------------------------------------------------   (c)  Each Bank will notify the Borrower of any event occurring after the date of this Agreement which will entitle such Bank to compensation pursuant to this Section 2.14 as promptly as practicable after such Bank obtains knowledge of the occurrence of such event. In no event will the Borrower be obligated to compensate any Bank pursuant to this Section 2.14 for any amounts described in paragraphs (a) or (b) above that accrued more than one hundred eighty (180) days prior to the date the notice described in the preceding sentence is given by the party requesting such compensation, but the foregoing shall in no way limit the right of such Bank to request compensation for amounts accrued during such one hundred eighty (180) day period or any future period. A certificate of such Bank setting forth in reasonable detail (i) such amount or amounts as shall be necessary to compensate such Bank (or participating banks or other entities pursuant to Section 9.02) as specified above and (ii) the calculation of such amount or amounts shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay to such Bank the amount shown as due on any such certificate within thirty (30) days after its receipt of the same. The failure of any Bank to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital shall not constitute a waiver of the right of such Bank or any other Bank, to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital. The protection of this Section 2.14 shall be available to the Banks regardless of any possible contention of invalidity or inapplicability of law, regulation or condition which shall have been imposed.   Section 2.15 Substitution of Banks. If one or more Banks requests compensation pursuant to Section 2.14 or declares a Eurodollar Event pursuant to Section 2.13 or the Borrower is required to deduct United States withholding taxes pursuant to Section 2.11(f) from amounts payable to one or more Banks under the Loan Documents (any such request, declaration or withholding is herein called a “Substitution Event” and any such Bank is herein called an “Affected Bank”) the Borrower may give notice to such Affected Bank (with a copy to the Agent and the Funds Administrator) that it wishes to seek one or more Eligible Assignees (which may be one or more of the other Banks) to assume the Commitment of such Affected Bank and to purchase the Loans of such Affected Bank and the other interests of such Affected Bank in the Loan Documents (collectively, the “Affected Interests”). Each Affected Bank agrees to sell all of its Affected Interests pursuant to Section 9.02 to any such Eligible Assignee for an amount equal to the sum of the outstanding unpaid principal of and accrued interest on the Loans of such Affected Bank and all commitment fees and other fees and amounts due such Affected Bank under the Loan Documents, calculated, in each case, to the date such Affected Interests are purchased, whereupon such Affected Bank shall have no further Commitment or other obligation to the Borrower under the Loan Documents. Notwithstanding the foregoing, the Borrower may not replace any Affected Bank if (a) the Bank or Banks involved in such Substitution Event have aggregate Commitment Percentages in excess of thirty five percent (35%) or (b) the Borrower does not seek to replace each Bank involved in such Substitution Event. -15- -------------------------------------------------------------------------------- Section 2.16 Letters of Credit.   (a)  Subject to the terms and conditions of this Agreement, and on the condition that aggregate Letter of Credit Liabilities shall never exceed $25,000,000, Borrower shall have the right to, in addition to the Loans provided for in Section 2.01 hereof, utilize the Commitments from time to time during the term hereof by obtaining the issuance of letters of credit for the account of Borrower if Borrower shall so request in a form and with such accompanying documentation as Issuer may reasonably require not less than five (5) Business Days prior to the proposed date of issuance (such letters of credit, as any of them may be amended, supplemented, extended or confirmed from time to time, being herein collectively called the “Letters of Credit”). Upon the date of the issuance of a Letter of Credit, the Issuer shall be deemed, without further action by any party hereto, to have sold to each Bank, and each such Bank shall be deemed, without further action by any party hereto, to have purchased from the Issuer, a participation, to the extent of such Bank’s Commitment Percentage, in such Letter of Credit and the related Letter of Credit Liabilities, which participation shall terminate on the earlier of the expiration date of such Letter of Credit or the Termination Date.   (b)  The following additional provisions shall apply to each Letter of Credit:   (i)       Borrower shall give Agent and the Issuer notice requesting each issuance of a Letter of Credit hereunder as provided in Section 2.16(a) hereof and shall furnish such additional information regarding such transaction as Agent and the Issuer may reasonably request. Upon receipt of such notice, Issuer shall promptly notify each Bank of the contents thereof and of such Bank’s Commitment Percentage of the amount of such proposed Letter of Credit.   (ii)       No Letter of Credit may be issued if after giving effect thereto the sum of (A) the aggregate outstanding principal amount of Loans plus (B) the aggregate Letter of Credit Liabilities with respect to Letters of Credit would exceed the Total Commitment. On each day during the period commencing with the issuance of any Letter of Credit and until such Letter of Credit shall have expired or been terminated, the Commitment of each Bank shall be deemed to be utilized for all purposes hereof in an amount equal to such Bank’s Commitment Percentage of the amount then available for drawings under such Letter of Credit (or any unreimbursed drawings under such Letter of Credit).   (iii)      Upon receipt from the beneficiary of any Letter of Credit of any demand for payment thereunder, the Issuer shall promptly notify Borrower and each Bank as to the amount to be paid as a result of such demand and the payment date therefor. If at any time prior to the earlier of the expiration date of a Letter of Credit or the Termination Date, Issuer shall have made a payment to a beneficiary of a Letter of Credit in respect of a drawing under such Letter of Credit, each Bank will pay to Issuer promptly upon demand by Issuer at any time during the period commencing after such payment until reimbursement thereof in full by Borrower, an amount equal to such Bank’s Commitment Percentage of such payment, together with interest on such amount for each day from the date of demand for such payment (or, if such demand is made after 11:00 a.m. (Houston time) on such date, from the next succeeding Business Day) to the date of payment by such Bank of such amount at a rate of interest per annum equal to the Federal Funds Rate for such period.   -16- --------------------------------------------------------------------------------   (iv)      Borrower shall be irrevocably and unconditionally obligated forthwith to reimburse Issuer, on the date on which Issuer notifies Borrower of the date and amount of any payment by Issuer of any drawing under a Letter of Credit, for the amount paid by Issuer upon such drawing, without presentment, demand, protest or other formalities of any kind, all of which are hereby waived. Such reimbursement may, subject to satisfaction of the conditions in Sections 3.01 and 3.02 hereof and to the limitations of the Total Commitment (after adjustment in the same to reflect the elimination of the corresponding Letter of Credit Liability), be made by a Borrowing of Loans. Issuer will pay to each Bank such Bank’s Commitment Percentage of all amounts received from Borrower for application in payment, in whole or in part, in respect of any Letter of Credit, but only to the extent such Bank has made payment to Issuer in respect of such Letter of Credit pursuant to clause (iii) above.   (v)       Borrower will pay to Agent for the account of each Bank a letter of credit fee with respect to each Letter of Credit equal to the Eurodollar Rate Applicable Margin per annum, multiplied by the face amount of each Letter of Credit (and computed on the basis of the actual number of days elapsed in a year composed of 360 days), in each case for the period from and including the date of issuance of such Letter of Credit to and including the date of expiration or termination thereof, such fee to be due and payable quarterly in arrears based on the date of the issuance thereof. Agent will pay to each Bank, promptly after receiving any payment in respect of letter of credit fees referred to in this clause (v), an amount equal to the product of such Bank’s Commitment Percentage times the amount of such fees. In addition to and cumulative of the above described fees, Borrower shall pay to Issuer, quarterly in arrears, based on the date of the issuance of the applicable Letter of Credit, a fee in an amount equal to 0.125% per annum of the face amount of the applicable Letter of Credit and shall pay reasonable and customary fees imposed and expenses incurred by Issuer in connection with the issuance, administration, amendment, payment and negotiation of said Letter of Credit (such fees and expense reimbursements to be retained by Issuer for its own account).   (vi)        The issuance by Issuer of each Letter of Credit shall, in addition to the conditions precedent set forth in Article III hereof, be subject to the conditions precedent (A) that such Letter of Credit shall be in such form and contain such terms as shall be reasonably satisfactory to Issuer and Agent, and (B) that Borrower shall have executed and delivered such applications and other instruments and agreements relating to such Letter of Credit as Issuer and Agent shall have reasonably requested and which are not inconsistent with the terms of this Agreement. In the event of a conflict between the terms of this Agreement and the terms of any application, the terms of this Agreement shall control.   (vii)       Issuer will send to each Bank, immediately upon issuance of any Letter of Credit a true and correct copy of such Letter of Credit.   -17- --------------------------------------------------------------------------------   (viii)    Any Letter of Credit issued under this Agreement shall provide for an expiry date which is not later than the earlier of five (5) days prior to the Termination Date or twelve (12) months from the issuance date, provided, Borrower may request, and Issuer agrees to issue, Letters of Credit with expiry dates beyond five (5) days prior to the Termination Date if at the time of issuance thereof Borrower pledges to the Agent cash collateral in an amount and on such terms and conditions as Agent and Issuer may request. Each Letter of Credit which is self-extending beyond its stated expiration date must be cancelable upon no more than thirty (30) days’ written notice given by the Issuer to the beneficiary of such Letter of Credit.   (ix)      The issuance of a Letter of Credit shall constitute the making of a Loan except as otherwise expressly set forth herein, and each Letter of Credit and all related applications and other documents executed or delivered in connection with any Letter of Credit shall be considered Loan Documents.   Section 2.17 Increase of Commitments.   (a)  If no Default, Event of Default or Material Adverse Effect shall have occurred and be continuing, the Borrower may at any time and from time to time request an increase of the aggregate Commitments by notice to the Agent in writing, in the amount of such proposed increase request, substantially in the form of Exhibit 2.17(a) (such notice, a “Commitment Increase Notice”); provided, however, that (i) each such increase shall be at least $5,000,000, (ii) the cumulative increase in Commitments pursuant to this Section 2.17 shall not exceed $75,000,000 without the approval of the Majority Banks, (iii) the Commitment of any Bank may not be increased without such Bank’s consent, and (iv) the aggregate amount of the Banks’ Commitments shall not exceed $325,000,000 without the approval of the Majority Banks. Any such Commitment Increase Notice must offer each Bank the opportunity to subscribe for its pro rata share of the increased Commitment. If any portion of the increased Commitment is not subscribed for by such Banks, the Borrower may, in its sole discretion, but with the consent of the Agent as to any Person that is not at such time a Bank (which consent shall not be unreasonably withheld or delayed), offer to any existing Bank or to one or more additional banks or financial institutions the opportunity to participate in all or a portion of such unsubscribed portion of the increased Commitments pursuant to paragraph (b) or (c) below, as applicable.   (b)  Any additional bank or financial institution that the Borrower selects to offer participation in the increased Commitment shall become a party to this Agreement by executing and delivering to the Agent an agreement, substantially in the form of Exhibit 2.17(b) (a “New Bank Agreement”) setting forth its Commitment, whereupon such bank or financial institution (a “New Bank”) shall become a Bank for all purposes and to the same extent as if originally a party hereto and shall be bound by and entitled to the benefits of this Agreement, and the signature pages hereof shall be deemed to be amended to add the name of such New Bank and the definition of Commitment in Annex A of the Credit Agreement hereof shall be deemed amended to increase the aggregate Commitments of the Banks by the Commitment of such New Bank, provided that the Commitment of any New Bank shall be an amount not less than $5,000,000.   -18- --------------------------------------------------------------------------------   (c)  Any Bank that accepts an offer to it by the Borrower to increase its Commitment pursuant to this Section 2.17 shall, in each case, execute a Commitment Increase Agreement with the Borrower and the Agent, whereupon such Bank shall be bound by and entitled to the benefits of this Agreement with respect to the full amount of its Commitment as so increased, and the definition of Commitment in Annex A hereof shall be deemed to be amended to reflect such increase.   (d)  The effectiveness of any New Bank Agreement or Commitment Increase Agreement shall be contingent upon receipt by the Agent of such corporate resolutions of the Borrower and legal opinions of counsel to the Borrower as the Agent shall reasonably request with respect thereto, in each case in form and substance reasonably satisfactory to the Agent.   (e)  If any bank or financial institution becomes a New Bank pursuant to Section 2.17(b) or any Bank’s Commitment is increased pursuant to Section 2.17(c), additional Loans made on or after the effectiveness thereof (the “Re-Allocation Date”) shall be made pro rata based on their respective Commitments in effect on or after such Re-Allocation Date (except to the extent that any such pro rata borrowings would result in any Bank making an aggregate principal amount of Loans in excess of its Commitment, in which case such excess amount will be allocated to, and made by, such New Bank and/or Banks with such increased Commitments to the extent of, and pro rata based on, their respective Commitments), and continuations of Loans outstanding on such Re-Allocation Date shall be effected by repayment of such Loans on the last day of the Interest Period applicable thereto and the making of new Loans of the same Type pro rata based on the respective Commitments in effect on and after such Re-Allocation Date.   (f)  If on any Re-Allocation Date there is an unpaid principal amount of Fixed Rate Loans or Prime Rate Loans, (i) any such Prime Rate Loans shall be reallocated immediately among the Banks (including any New Banks and any Banks that have executed a Commitment Increase Agreement) so that all Borrowing and Loans that are outstanding are pro rated based on each Bank’s Commitment, after giving effect to the Re-Allocation Date, and (ii) any such Fixed Rate Loans shall remain outstanding with the respective holders thereof until the expiration of their respective Interest Periods (unless the Borrower elects to prepay any thereof in accordance with the applicable provisions of this Agreement), and interest on and repayments of all Loans will be paid thereon to the respective Banks holding same pro rata based on the respective principal amounts thereof outstanding.   ARTICLE III. CONDITIONS OF CREDIT   Section 3.01 Conditions Precedent to the Initial Borrowing. The obligation of each Bank to make its initial Loan on the occasion of the initial Borrowing hereunder is subject to the conditions precedent that the Agent shall have received on or before the date of such initial Borrowing all of the following, each dated (unless otherwise indicated) the date hereof, in form and substance reasonably satisfactory to the Bank Group and in such number of counterparts as may be reasonably requested by the Agent:   (a)  The following Loan Documents duly executed by the Persons indicated below:   -19- --------------------------------------------------------------------------------   (i)  this Agreement executed by the Borrower and each member of the Bank Group,   (ii)      the Notes executed by the Borrower, and   (iii)      the Fee Letter executed by the Borrower and the Agent.   (b)  A certificate of a Responsible Officer and of the secretary or an assistant secretary of the Borrower certifying, inter alia, (i) true and correct copies of resolutions adopted by the Board of Directors of the Borrower (A) authorizing the execution, delivery and performance by the Borrower of the Loan Documents to which it is or will be a party and the Borrowings to be made hereunder and the consummation of the transactions contemplated thereby, (B) approving the forms of the Loan Documents to which it is a party and which will be delivered at or prior to the date of the initial Borrowing and (C) authorizing officers of the Borrower to execute and deliver the Loan Documents to which it is or will be a party and any related documents, (ii) true and correct copies of the articles of incorporation and bylaws (or other similar charter documents) of the Borrower and (iii) the incumbency and specimen signatures of the officers of the Borrower executing any documents on behalf of it.   (c)  A certificate of a Responsible Officer of the Borrower certifying as to the satisfaction of the conditions specified in this Article III.   (d)  The favorable, signed opinion of Fulbright & Jaworski L.L.P., special counsel to the Borrower, addressed to the Bank Group, in form and substance reasonably satisfactory to the Bank Group.   (e)  Certificates of appropriate public officials as to the existence and good standing of the Borrower in the States of Nevada and Texas.   (f)  The payment to the Bank Group of the fees due to them as of such date under the Loan Documents, the payment to the Agent of the fees due to it as of such date under the Fee Letter, and the payment of all legal fees and expenses of Andrews Kurth LLP, special counsel to the Agent, in connection with the preparation of this Agreement and the other Loan Documents and the closing of this transaction.   (g)  All governmental and third party approvals necessary or, in the discretion of the Agent, advisable in connection with the financing contemplated hereby and the continuing operations of the Borrower and its Subsidiaries shall have been obtained and be in full force and effect.   (h)  The Bank Group shall have received (i) audited consolidated financial statements of the Borrower for the two (2) most recent fiscal years ended prior to the Effective Date as to which such financial statements are available and (ii) satisfactory unaudited interim consolidated financial statements of the Borrower for each fiscal quarterly period ended subsequent to the date of the latest financial statements delivered pursuant to clause (i) of this paragraph as to which such financial statements are available, which financial statements shall not be materially inconsistent with the financial statements or forecasts previously provided.   -20- --------------------------------------------------------------------------------   (i)  There shall have been no Material Adverse Effect in regard to the financial condition, business, affairs, operations or control of Borrower and no change or event shall have occurred which would impair the ability of Borrower to perform its obligations hereunder or under any of the Loan Documents to which it is a party or of Agent or any Bank to enforce the obligations hereunder since the date of its financial statements most recently delivered to Agent.   (j)  The Bank Group shall have received such documentation and certificates as Agent may reasonably request confirming no action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain or prohibit, or to obtain damages in respect of, or which is related to or arises out of this Agreement or the consummation of the transactions contemplated hereby or which could reasonably be expected to have a Material Adverse Effect on Borrower and its Subsidiaries taken as a whole, or in Agent’s judgment, would make it inadvisable to consummate the transactions contemplated by this Agreement or any of the other Loan Documents .   (k)  A certificate of a Responsible Officer of Borrower certifying that Borrower and its Subsidiaries are in compliance with all existing Debt obligations.   (l)       Such other documents, certificates and opinions as the Agent may reasonably request relating to this Agreement and the other Loan Documents.   Section 3.02 Conditions Precedent to All Borrowings. The obligation of each Bank to make any Loan shall be subject to the further conditions precedent that (a) on the Borrowing Date of such Loan the following statements shall be true, and the Borrower, by virtue of its delivery of a Borrowing Request shall be deemed to have certified to the Bank Group as of such Borrowing Date that (i) the representations and warranties contained in Article IV are true and correct on and as of such Borrowing Date, both before and after giving effect to such Loan, and as though made on and as of such Borrowing Date and (ii) no Default has occurred and is continuing, or would result from such Loan and (b) the Agent shall have received on or before such Borrowing Date such other documents, certificates and opinions as the Agent may reasonably request relating to this Agreement and the other Loan Documents, each in form and substance reasonably satisfactory to the Agent.   ARTICLE IV. REPRESENTATIONS AND WARRANTIES   In order to induce the Bank Group to enter into this Agreement, the Borrower hereby represents and warrants to the Bank Group as follows:   Section 4.01 Corporate Existence; Etc. Each of the Borrower and each of its Material Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and is duly qualified or licensed to transact business as a foreign corporation and is in good standing under the laws of each jurisdiction in which the conduct of its operations or the ownership or leasing of its properties requires such qualification or licensing, except where the failure to be so qualified or licensed will not have a Material Adverse Effect on either the Borrower individually or the Borrower and its Subsidiaries taken as a whole. Schedule 4.01 sets forth a complete list (including the Borrower’s percentage equity interest therein) as of the date hereof of (a) all Consolidated Subsidiaries (Part A), and (b) all Excluded Affiliates (Part B).   -21- --------------------------------------------------------------------------------   Section 4.02 Corporate Authority; Binding Obligations. Each of the Borrower and each of its Material Subsidiaries has all requisite power and authority, corporate or otherwise, to conduct its business and own, operate and encumber its property. Each of the Borrower and each of its Subsidiaries has all requisite power and authority, corporate or otherwise, to execute, deliver and perform all of its obligations under the Loan Documents executed by, or to be executed by, such Person. The execution, delivery and performance of each of the Loan Documents to which the Borrower or any of its Subsidiaries is a party and the consummation of the transactions contemplated thereby, have been duly authorized by all necessary corporate and shareholder action. Each of the Loan Documents to which the Borrower or any of its Subsidiaries is a party has been duly executed and delivered by such Person, is in full force and effect and constitutes the legal, valid and binding obligation of such Person, enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditor’s rights generally and general principles of equity.   Section 4.03 No Conflict. The execution, delivery and performance by the Borrower or any of its Subsidiaries of each Loan Document to which such Person is a party and the consummation of each of the transactions contemplated thereby do not and shall not, by the lapse of time, the giving of notice or otherwise: (a) constitute a violation of any Requirement of Law or a breach of any provision contained in the articles or certificate of incorporation or bylaws of such Person, or any shareholder agreement pertaining to such Person, or contained in any material agreement, instrument or document to which it is now a party or by which it or its properties is bound, except for such violations or breaches that will not have a Material Adverse Effect on either the Borrower individually or the Borrower and its Subsidiaries taken as a whole; or (b) result in or require the creation or imposition of any Lien whatsoever upon any of the properties or assets of the Borrower or any of its Subsidiaries.   Section 4.04 No Consent. No authorization, consent, approval, license, or exemption of or filing or registration with, any Governmental Authority or any other Person, was, is or will be necessary for the valid execution, delivery or performance by the Borrower or any of its Subsidiaries of any of the Loan Documents to which it is a party and the consummation of each of the transactions contemplated thereby other than those that the failure to obtain, file or make will not have a Material Adverse Effect on either the Borrower individually or the Borrower and its Subsidiaries taken as a whole.   Section 4.05 No Defaults or Violations of Law. No Default has occurred and is continuing. No default (or event or circumstance occurred which, but for the passage of time or the giving of notice, or both, would constitute a default) has occurred and is continuing with respect to any note, indenture, loan agreement, mortgage, lease, deed or other agreement to which the Borrower or any of its Subsidiaries is a party or by which any of them or their properties is bound, except for such defaults that will not have a Material Adverse Effect on either the Borrower individually or the Borrower and its Subsidiaries taken as a whole. Neither the Borrower nor any of its Subsidiaries is in violation of any applicable Requirement of Law except for such violations that will not have a Material Adverse Effect on either the Borrower individually or the Borrower and its Subsidiaries taken as a whole.   -22- --------------------------------------------------------------------------------   Section 4.06 Financial Position. (a) The consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 2005, and the related consolidated statements of income, retained earnings and cash flows for the fiscal year then ended, audited by KPMG LLP, independent public accountants, copies of which have been furnished to the Bank Group, fairly present the consolidated financial condition of the Borrower and its Subsidiaries at such date and the consolidated results of their operations and the consolidated cash flows of the Borrower and its Subsidiaries for the fiscal period ended on such date, all in accordance with generally accepted accounting principles applied on a consistent basis.   (b)  The unaudited consolidated balance sheet of the Borrower and its Subsidiaries as at March 31, 2006, and the related unaudited consolidated statements of income, retained earnings and cash flows for the three month period then ended, copies of which have been furnished to the Bank Group, fairly present the consolidated financial condition of the Borrower and its Subsidiaries at such date and the consolidated results of their operations and the consolidated cash flows of the Borrower and its Subsidiaries for the three month period ended on such date, all in accordance with generally accepted accounting principles applied on a consistent basis, subject to normal year-end adjustments.   (c)  Since December 31, 2005, there has been no Material Adverse Effect in regard to the consolidated financial condition or operations of the Borrower and its Material Subsidiaries, taken as a whole.   Section 4.07 Litigation. There are no actions, suits or proceedings pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries, or the properties of any such Person, before or by any Governmental Authority or other Person, which could reasonably be expected to have a Material Adverse Effect on either the Borrower individually or the Borrower and its Subsidiaries taken as a whole.   Section 4.08 Use of Proceeds. (a)  The Borrower’s uses of the proceeds of the Loans are, and will continue to be, legal and proper corporate uses (duly authorized by the Borrower’s board of directors), and such uses are permitted by the terms of the Loan Documents, including, without limitation, Section 5.09, and all Requirements of Law.   (b)  Neither the Borrower nor any of its Subsidiaries is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U). No part of the proceeds of any Loan will be used, directly or indirectly, (i) to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock or (ii) for the purpose of purchasing, carrying or trading in any securities, in either case under such circumstances as to involve any member of the Bank Group in a violation of Regulation U or the Borrower or any of its Subsidiaries in a violation of Regulation X. Following the application of the proceeds of each Loan, not more than 25% of the value of the assets of the Borrower, or of the Borrower and its Subsidiaries, which are subject to any arrangement with any member of the Bank Group (herein or otherwise) whereby the right or ability of the Borrower or its Subsidiaries to sell, pledge or otherwise dispose of such assets is in any way restricted, will be such margin stock.   -23- --------------------------------------------------------------------------------   Section 4.09 Governmental Regulation. Neither the Borrower nor any of its Subsidiaries is subject to regulation under the Interstate Commerce Act, as amended, the Investment Company Act of 1940, as amended, or any other Requirement of Law such that the ability of any such Person to incur indebtedness is limited or its ability to consummate the transactions contemplated by this Agreement, the other Loan Documents or any document executed in connection therewith is impaired.   Section 4.10 Disclosure. The schedules, documents, exhibits, reports, certificates and other written statements and information furnished by or on behalf of the Borrower or any of its Subsidiaries to the Bank Group do not contain any material misstatement of fact, or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading. Neither the Borrower nor any of its Subsidiaries has intentionally withheld any fact known to it which has or is reasonably likely to have a Material Adverse Effect on either the Borrower individually or the Borrower and its Subsidiaries taken as a whole.   Section 4.11 ERISA. The Borrower and its ERISA Affiliates are in compliance in all material respects with ERISA and all Requirements of Law related thereto. No Reportable Event has occurred and is continuing with respect to any Plan. Neither the Borrower nor any of its ERISA Affiliates has any accumulated funding deficiency (as defined in Section 302(a)(2) of ERISA) under any Plan.   Section 4.12 Payment of Taxes. The Borrower has filed, and has caused each of its Material Subsidiaries to file, all federal, state and local tax returns and other reports that the Borrower and each such Material Subsidiary are required by law to file and have paid all taxes and other similar charges that are due and payable pursuant to such returns and reports, except to the extent any of the same may be contested in good faith by appropriate proceedings promptly initiated and diligently conducted, and with respect to which adequate reserves have been set aside on the books of such Person in accordance with generally accepted accounting principles.   Section 4.13 Properties; Title and Liens. (a)  Each of the Borrower and its Material Subsidiaries has good and marketable title to each of the material properties and assets of such Person. All properties of the Borrower and its Material Subsidiaries and such Person’s use thereof comply with applicable zoning and use restrictions, except where the failure to so comply will not have a Material Adverse Effect upon any such Person.   (b)  Each of the Borrower and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringement that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.   Section 4.14 Pari Passu Ranking. The obligations of the Borrower to pay the principal of and interest on the Loans and all other amounts payable under the Loan Documents will rank at least pari passu as to payment with all other Debt of the Borrower now existing or hereafter incurred.   -24- --------------------------------------------------------------------------------   Section 4.15 Environmental Matters. The Borrower and each of its Subsidiaries possess all environmental, health and safety licenses, permits, authorizations, registrations, approvals and similar rights necessary under law or otherwise for such Person to conduct its operations as now being conducted, each of such licenses, permits, authorizations, registrations, approvals and similar rights is valid and subsisting, in full force and effect and enforceable by such Person, and such Person is in compliance with all terms, conditions or other provisions of such permits, authorizations, registrations, approvals and similar rights except for such noncompliance that will not have a Material Adverse Effect on either the Borrower individually or the Borrower and its Subsidiaries taken as a whole. Neither the Borrower nor any of its Subsidiaries has received any notices of any violation of, noncompliance with, or remedial obligation under, Requirements of Environmental Laws, and there are no writs, injunctions, decrees, orders or judgments outstanding, or lawsuits, claims, proceedings, investigations or inquiries pending or, to the knowledge of the Borrower, threatened, relating to the ownership, use, condition, maintenance, or operation of, or conduct of business related to, any property owned, leased or operated by the Borrower or any of its Subsidiaries, or other assets of the Borrower or any of its Subsidiaries, other than those violations, instances of noncompliance, obligations, writs, injunctions, decrees, orders, judgments, lawsuits, claims, proceedings, investigations or inquiries that will not have a Material Adverse Effect on either the Borrower individually or the Borrower and its Subsidiaries taken as a whole. There are no material obligations, undertakings or liabilities arising out of or relating to Environmental Laws to which the Borrower or any of its Material Subsidiaries has agreed to, assumed or retained, or by which the Borrower or any of its Material Subsidiaries is adversely affected, by contract or otherwise. Neither the Borrower nor any of its Material Subsidiaries has received a written notice or claim to the effect that such Person is or may be liable to any Person as the result of a Release or threatened Release of a Hazardous Material.   Section 4.16 No Undisclosed Liabilities. Except as set forth in Schedule 4.16, the Borrower and its Subsidiaries have no liabilities or obligations of any nature (whether known or unknown, and whether absolute, accrued, contingent or otherwise) except for (i) liabilities or obligations reflected or reserved against in the financial statements most recently delivered by the Borrower pursuant to Section 5.01, (ii) current liabilities incurred in the ordinary course of business since the date of such financial statements, (iii) liabilities or obligations that are not required to be included in financial statements prepared in accordance with generally accepted accounting principles, and (iv) liabilities or obligations arising under governmental approvals or contracts to which the Borrower or its Subsidiaries is a party or otherwise subject.   Section 4.17 Labor Matters. As of the Effective Date, there are no strikes, lockouts or slowdowns against the Borrower or its Subsidiaries pending or, to the knowledge of the Borrower, threatened. The hours worked by and payments made to employees of the Borrower and its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other Requirement of Law dealing with such matters in any manner that could reasonably be expected to have a Material Adverse Effect. All payments due from the Borrower or any Subsidiary, or for which any claim may be made against any of them, 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 the Borrower and its Subsidiaries. The consummation of the transactions contemplated by the Loan Documents will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which the Borrower or any of its Subsidiaries is bound.   -25- --------------------------------------------------------------------------------   ARTICLE V. AFFIRMATIVE COVENANTS   So long as any principal amount of any Loan, any amount of interest accrued under any Loan Document, or any commitment, facility or other fee, expense, compensation or any other amount payable to any member of the Bank Group under the Loan Documents shall remain unpaid or outstanding or any Bank shall have any Commitment hereunder:   Section 5.01 Reporting Requirements. The Borrower shall deliver or cause to be delivered to the Agent (with sufficient copies for the Agent to distribute the same to the other members of the Bank Group):   (a)  As soon as available and in any event within forty five (45) days after the end of each calendar quarter (other than the fourth quarter):   (i)      copies of the consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of the end of such period, and consolidated and consolidating statements of income and retained earnings and a statement of cash flows of the Borrower and its Subsidiaries for that fiscal period and for the portion of the fiscal year ending with such period, in each case setting forth in comparative form (on a consolidated, but not a consolidating basis) the figures for the corresponding period of the preceding fiscal year, all in reasonable detail; and   (ii)  a certificate of a Responsible Officer of the Borrower (A) stating that such financial statements fairly present the consolidated financial position and results of operations of the Borrower and its Subsidiaries in accordance with generally accepted accounting principles consistently applied, subject to normal year-end adjustments, (B) stating that no Default has occurred and is continuing or, if any Default has occurred and is continuing, the action the Borrower is taking or proposes to take with respect thereto, (C) setting forth calculations demonstrating compliance by the Borrower with Section 6.01 and Section 6.07, accompanied by a summary (on an entity-by-entity basis) of Investments in Excluded Affiliates and Funded Debt of the Borrower and its Consolidated Subsidiaries, as well as any Funded Debt resulting from a Guaranty of Debt of an Excluded Affiliate, and (D) identifying any changes in the Consolidated Subsidiaries and Excluded Affiliates since the date of the most recent certificate delivered pursuant to this Section 5.01(a)(ii) or Section 5.01(b)(ii) (or in the case of the initial certificate, any changes from those specified in Schedule 4.01).   (b)  As soon as available and in any event within ninety (90) days after the end of each calendar year:   (i)       copies of the consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as of the close of such calendar year and consolidated and consolidating statements of income and retained earnings and a statement of cash flows of the Borrower and its Subsidiaries for such calendar year, in each case setting forth in comparative form (on a consolidated basis) the figures for the preceding calendar year, all in reasonable detail and accompanied by an opinion thereon (which shall not be qualified by reason of any limitation imposed by the Borrower) of independent accountants of recognized national standing selected by the Borrower and reasonably satisfactory to the Majority Banks, to the effect that such consolidated financial statements have been prepared in accordance with generally accepted accounting principles consistently applied (except for changes in which such accountants concur) and that the examination of such accounts in connection with such financial statements has been made in accordance with generally accepted auditing standards; and   -26- --------------------------------------------------------------------------------   (ii)  a certificate of a Responsible Officer of the Borrower (A) stating that no Default has occurred and is continuing or, if any Default has occurred and is continuing, the action the Borrower is taking or proposes to take with respect thereto, (B) setting forth calculations demonstrating compliance by the Borrower with Section 6.01 and Section 6.07, accompanied by a summary (on an entity-by-entity basis) of Investments in Excluded Affiliates and Funded Debt of the Borrower and its Consolidated Subsidiaries, as well as any Funded Debt resulting from a Guaranty of Debt of an Excluded Affiliate, and (C) identifying any changes in the Consolidated Subsidiaries and Excluded Affiliates since the date of the most recent certificate delivered pursuant to Section 5.01(a)(ii) or this Section 5.01(b)(ii).   (c)  Promptly after the sending or filing thereof, copies of all proxy statements and reports which the Borrower or any of its Subsidiaries sends to any holders of its respective securities, and copies of all regular, periodic and special reports and all registration statements which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange.   (d)  Promptly after the receipt thereof, copies of any reports or notices that the Borrower may receive from the PBGC or the U. S. Department of Labor indicating that a Reportable Event has occurred or an accumulated funding deficiency (as defined in Section 302(a)(2) of ERISA) exists under any Plan or that any such Person or its ERISA Affiliates has failed to comply in all material respects with ERISA and all Requirements of Law related thereto.   (e)  As soon as possible and in any event within ten (10) days after a Responsible Officer of the Borrower becomes aware of the occurrence of a Default, a certificate of a Responsible Officer of the Borrower setting forth details of such Default and the action which has been taken or is to be taken with respect thereto.   (f)  As soon as possible and in any event within ten (10) days after a Responsible Officer of the Borrower becomes aware thereof, written notice from a Responsible Officer of the Borrower of (i) the institution of or threat of, any action, suit, proceeding, governmental investigation or arbitration by any Governmental Authority or other Person against or affecting the Borrower or any of its Subsidiaries that could have a Material Adverse Effect on the Borrower or any of its Material Subsidiaries and that has not previously disclosed in writing to the Bank Group pursuant to this Section 5.01(f) or (ii) any material development in any action, suit, proceeding, governmental investigation or arbitration already disclosed to the Bank Group pursuant to this Section 5.01(f).   -27- --------------------------------------------------------------------------------   (g)  Promptly upon a Responsible Officer of the Borrower obtaining knowledge thereof, notice of (i) any violation of, noncompliance with, or remedial obligations under, Requirements of Environmental Laws that could have a Material Adverse Effect on the Borrower or any of its Material Subsidiaries, (ii) any Release or threatened Release affecting any property owned, leased or operated by the Borrower or any of its Subsidiaries that could have a Material Adverse Effect on the Borrower or any of its Material Subsidiaries, (iii) the amendment or revocation of any permit, authorization, registration, approval or similar right that could have a Material Adverse Effect on the Borrower or any of its Material Subsidiaries or (iv) new or proposed changes to Requirements of Environmental Laws that could have a Material Adverse Effect on the Borrower or any of its Material Subsidiaries.   (h)  Such other information as any member of the Bank Group may from time to time reasonably request respecting the business, properties, operations or condition, financial or otherwise, of the Borrower or any of its Subsidiaries.   Section 5.02 Taxes; Claims. The Borrower will pay and discharge, and will cause each of its Subsidiaries to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon such Person or upon its income or profits, or upon any properties belonging to such Person, prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might become a Lien upon any properties of the Borrower or any of its Material Subsidiaries, other than any such tax, assessment, charge, levy or claim which is being contested in good faith by appropriate proceedings promptly initiated and diligently conducted, and with respect to which adequate reserves are set aside on the books of such Person in accordance with generally accepted accounting principles.   Section 5.03 Compliance with Laws and Agreements. The Borrower will comply, and will cause each of its Subsidiaries to comply, with all applicable Requirements of Law imposed by any Governmental Authority and all indentures, notes, loan agreements, mortgages, leases, material agreements and other material instruments binding upon it or its property, noncompliance with which might have a Material Adverse Effect on the Borrower or any of its Material Subsidiaries. Without limitation of the foregoing, the Borrower shall, and shall cause each of its Subsidiaries to, comply with all Requirements of Environmental Laws, operate its properties and conduct its business in accordance with good environmental practices, and handle, treat, store and dispose of Hazardous Materials in accordance with such practices, except where the failure to do so will not have a Material Adverse Effect on the Borrower or any of its Material Subsidiaries.   Section 5.04 Insurance. The Borrower will maintain, and will cause each of its Subsidiaries to maintain, with financially sound, responsible and reputable insurance companies or associations, insurance, or self-insure against such risks, and in such amounts (and with co-insurance and deductibles), as are usually insured against by Persons of established reputation engaged in the same or similar businesses and similarly situated.   -28- --------------------------------------------------------------------------------   Section 5.05 Corporate Existence; Etc. The Borrower will preserve and maintain, and (except as otherwise permitted by Section 6.04 and 6.06) will cause each of its Material Subsidiaries to preserve and maintain, its existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified, and cause each of its Material Subsidiaries to qualify and remain qualified, as a foreign corporation in each jurisdiction in which such qualification is material to the business and operations of such Person or the ownership or leasing of the properties of such Person. The Borrower will, and will cause each of its Subsidiaries to, carry on and conduct its business in substantially the same manner and in substantially the same lines of business as it is presently conducted, provided that the Borrower may, in its reasonable business judgment, dispose of any subsidiary or exit any line of business if it determines it to be in the Borrower’s best interest to do so, subject to the provisions of Sections 6.04 and 6.06.   Section 5.06 Inspections; Etc. From time to time during regular business hours upon reasonable prior notice, the Borrower will permit, and will cause each of its Subsidiaries to permit, any agents or representatives of any member of the Bank Group to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and its Subsidiaries and to discuss the affairs, finances and accounts of any such Person with any of their respective independent public accountants, officers or directors, all at the expense of the Borrower.   Section 5.07 Maintenance of Properties. The Borrower will maintain and preserve, and will cause each of its Material Subsidiaries to maintain and preserve, all of its material properties necessary for the proper conduct of its business in good working order and condition, ordinary wear and tear excepted.   Section 5.08 Accounting Systems; Etc. The Borrower will keep, and will cause each of its Subsidiaries to keep, adequate records and books of account in which complete entries will be made in accordance with generally accepted accounting principles consistently applied (subject to year end adjustments), reflecting all financial transactions of such Person. The Borrower shall maintain or cause to be maintained a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with generally accepted accounting principles, and each of the financial statements described herein shall be prepared from such system and records.   Section 5.09 Use of Loan Proceeds. The Borrower will use the proceeds of all Loans hereunder for the following purposes: (a) for general corporate purposes of the Borrower and its Consolidated Subsidiaries, (b) payment of all amounts owing by the Borrower under this Agreement, (c) to fund any cash consideration payable by the Borrower or any of its Consolidated Subsidiaries in connection with a merger or acquisition which is not prohibited by Section 6.06 or Section 6.07, or (d) to fund Investments in Excluded Affiliates permitted by Section 6.07; provided that such uses are, at the time made, otherwise consistent with the terms of this Agreement and all Requirements of Law and no Default would result therefrom.   Section 5.10 Further Assurances in General. The Borrower at its expense shall, and shall cause each of its Subsidiaries to, promptly execute and deliver all such other and further documents, agreements and instruments in compliance with or accomplishment of the covenants and agreements of the Borrower or any of its Subsidiaries in the Loan Documents, including, without limitation, the accomplishment of any condition precedent that may have been waived by the Banks prior to the initial Borrowing or any subsequent Borrowings.   -29- --------------------------------------------------------------------------------   ARTICLE VI. NEGATIVE COVENANTS   So long as any principal amount of any Loan, any amount of interest accrued under any Loan Document, or any commitment, facility or other fee, expense, compensation or any other amount payable to any member of the Bank Group under the Loan Documents shall remain unpaid or outstanding or any Bank shall have any Commitment hereunder:   Section 6.01 Financial Covenants. The Borrower will not:   (a)  Interest Coverage Ratio. Permit the ratio of (i) EBITDA to (ii) Interest Expense, measured as of the last day of any calendar quarter for the twelve month period then ended to be less than 2.5 to 1.0.   (b)  Debt to Capitalization Ratio. Permit the ratio of (i) Funded Debt as of the last day of any calendar quarter to (ii) Total Capitalization for the twelve month period then ended to equal or exceed 0.6 to 1.0.   Section 6.02 Restrictions on Debt. (a) The Borrower will not, and will not permit any of its Consolidated Subsidiaries to, create, incur, assume or suffer to exist, any Debt, including obligations in respect of Capital Leases, other than:   (i)       Debt of the Borrower under the Loan Documents, and, prior to the initial Borrowing hereunder, the loans outstanding under the Existing Credit Agreement;   (ii)  unsecured Debt owing by the Borrower to any Consolidated Subsidiary;   (iii)     unsecured Debt owing by any Consolidated Subsidiary to the Borrower or any other Consolidated Subsidiary so long as such Debt ranks pari passu with all other Debt of such Consolidated Subsidiary;   (iv)     Debt (other than Derivative Obligations) of Consolidated Subsidiaries, so long as (A) no Default or Event of Default exists on the date such Debt is incurred or would result from the incurrence of such Debt, and (B) the aggregate amount of such Debt does not exceed ten percent (10%) of Net Worth;   (v)      Debt (other than Derivative Obligations) of the Borrower, so long as (A) such Debt is not Guaranteed by any Subsidiary of the Borrower and (B) no Default or Event of Default exists on the date such Debt is incurred or would result from the incurrence of such Debt; and   (vi)     Derivative Obligations of the Borrower and its Consolidated Subsidiaries, so long as (A) no Default or Event of Default exists on the date such Derivative Obligations are incurred or would result from the incurrence thereof and (B) the aggregate amount of such Derivative Obligations does not exceed ten percent (10%) of Net Worth.   -30- --------------------------------------------------------------------------------   (b)  The Borrower will not, and will not permit any of its Consolidated Subsidiaries to, create, incur, assume or suffer to exist, any Guaranties or other contingent liabilities other than (i) Guaranties by Consolidated Subsidiaries that constitute Debt permitted by Section 6.02(a)(iv), (ii) Guaranties by the Borrower that constitute Debt permitted by Section 6.02(a)(v), (iii) other contingent liabilities (including undrawn letters of credit not issued under the Agreement) in an amount not exceeding $10,000,000 at any time, and (iv) contingent liabilities arising under guaranties by the Borrower or its Subsidiaries of the obligations of the Borrower’s Subsidiaries under Environmental Laws, including the Comprehensive Environmental Response, Compensation and Liability Act, as amended, and the Oil Pollution Act of 1990, as amended.   (c)  The Borrower will not permit any Excluded Affiliate to create, incur, assume or suffer to exist any Debt unless the agreements evidencing or providing for such Debt contain a provision to the effect that the holders of such Debt shall have no recourse against the Borrower or any of its Consolidated Subsidiaries, or any of their respective assets, for the payment of such Debt; provided, however, that the foregoing shall not apply to any such Debt of an Excluded Affiliate that is covered by a Guaranty from the Borrower or a Consolidated Subsidiary permitted by Section 6.02(b).   Section 6.03 Restriction on Liens. The Borrower will not, and will not permit any of its Consolidated Subsidiaries to, create, incur, assume or suffer to be created, assumed or incurred or to exist, any Lien upon any of their property or assets, whether now owned or hereafter acquired other than:   (a)  Liens against assets of the Borrower or a Consolidated Subsidiary securing Debt of such Person, so long as (i) the aggregate amount of all such secured Debt does not exceed $5,000,000, and (ii) such secured Debt is otherwise permitted by Section 6.02(a)(v), in the case of the Borrower, or Section 6.02(a)(iv), in the case of a Consolidated Subsidiary;   (b)  Liens imputed to Capital Leases under which a Consolidated Subsidiary is the lessee, so long as the Debt of such Consolidated Subsidiary in respect of such Capital Lease is permitted by Section 6.02(a)(iv);   (c)  Liens on property of any Consolidated Subsidiary that attach concurrently with such Consolidated Subsidiary’s purchase thereof, and securing only Debt of such Consolidated Subsidiary permitted by Section 6.02(a)(iv) and incurred to finance all or part of the purchase price of such property, and any extensions and renewals of such Liens so long as the Debt secured thereby is not greater than the Debt secured immediately prior to such extension and renewal and such Debt is permitted by Section 6.02(a)(iv) at the time of such extension and renewal;   (d)  Liens for taxes, assessments or governmental charges or levies if the same shall at the time not be delinquent or thereafter may be paid without penalty, or the validity of which are being contested in good faith by appropriate proceedings promptly initiated and diligently conducted and as to which adequate reserves shall have been set aside on the books of the Borrower in accordance with generally accepted accounting principles;   -31- --------------------------------------------------------------------------------   (e)  carriers’, warehousemen’s and mechanics’ liens and other similar Liens which arise in the ordinary course of business, do not materially impair the use or value of its properties or assets or the conduct of its business, and secure obligations that are not yet due and payable or are being contested in good faith by appropriate proceedings promptly initiated and diligently conducted and as to which adequate reserves shall have been set aside on the books of the Borrower in accordance with generally accepted accounting principles or as to which adequate bonds shall have been obtained;   (f)  pledges or deposits to secure obligations under workmen’s compensation laws or similar legislation or to secure public or statutory obligations of the Borrower;   (g)  Liens created in favor of a Governmental Authority to secure partial, progress, advance or other contractual payments pursuant to any agreement or statute;   (h)  attachment, judgment and other similar Liens arising in connection with court proceedings, provided the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings in such manner as not to have the property subject to such Liens forfeitable; and   (i)       easements, rights-of-way, reservations, exceptions, minor encroachments, restrictions and similar charges created or incurred in the ordinary course of business which in the aggregate do not materially interfere with the business operations of the Borrower and its Subsidiaries taken as a whole, and which were not incurred in connection with the borrowing of money.   Section 6.04 Consolidated Subsidiary Dispositions. The Borrower will not, and will not permit any of its Subsidiaries to, sell, transfer or otherwise dispose of (i) any capital stock or other equity interests of any Consolidated Subsidiary or (ii) all or substantially all of the assets of any Consolidated Subsidiary (whether in a single transaction or series of transactions), in excess of ten percent (10%) of the Consolidated Net Worth of Borrower and its Consolidated Subsidiaries during any rolling twelve (12) month period, other than any such dispositions made to the Borrower or a wholly-owned Consolidated Subsidiary.   Section 6.05 Restrictions on Consolidated Subsidiary Distributions. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any agreement restricting the ability of any Consolidated Subsidiary to (a) pay dividends or make other distributions on the capital stock or other equity interests of such Consolidated Subsidiary or (b) make loans or advances to the Borrower or any Subsidiary of the Borrower, other than this Agreement.   Section 6.06 Mergers and Acquisitions. The Borrower will not, and will not permit any of its Consolidated Subsidiaries to, acquire (whether in one transaction or a series of transactions) all or substantially all of the assets of any Person or the capital stock or securities of any Person, or consolidate with or merge into any Person or permit any Person to consolidate or merge into it, unless: (a) any business acquired in such transaction is similar or related to the businesses engaged in by the Borrower and its Consolidated Subsidiaries on the date hereof; (b) in the case of a merger (i) if the Borrower is a party to such merger, the Borrower is the surviving entity and the management of the Borrower shall be substantially unchanged and (ii) if a Consolidated Subsidiary is a party to such merger, either the Borrower or a Consolidated Subsidiary is the surviving entity; and (d) immediately after giving effect and pro forma effect thereto, no Default shall exist. The Agent shall have received (A) a certificate of a Responsible Officer of the Borrower showing satisfaction of the condition set forth in this Section 6.06, and (B) such other documents, opinions and information that the Agent or the Majority Banks may reasonably request in order to substantiate the same.   -32- --------------------------------------------------------------------------------   Section 6.07 Restricted Investments. (a) The Borrower will not, and will not permit any Consolidated Subsidiary to, make, or enter into any commitment to make, any Restricted Investment if a Default exists either before or after giving effect thereto.   (b)  The Borrower will not, and will not permit any Consolidated Subsidiary to, make, or enter into any commitment to make, or permit to exist any Restricted Investment other than Restricted Investments that do not in the aggregate exceed twenty percent (20%) of Net Worth.   (c)  The Borrower will not permit the sum (without duplication) of (i) all Restricted Investments, made by the Borrower and its Consolidated Subsidiaries, plus (ii) all commitments by the Borrower and its Consolidated Subsidiaries to make Restricted Investments, plus (iii) all Debt (other than Derivative Obligations) of Consolidated Subsidiaries, to at any time exceed thirty-five percent (35%) of Net Worth.   Section 6.08 Lines of Business. The Borrower will not, and will not permit any of its Consolidated Subsidiaries to, directly or indirectly engage to a material extent in any business other than those in which it is presently engaged or that are directly related thereto, or discontinue any of its existing lines of business or substantially alter its method of doing business.   Section 6.09 Transactions with Affiliates. Neither the Borrower, nor any of its Consolidated Subsidiaries, will enter into any transaction with an Affiliate other than (a) transactions entered into in the ordinary course of business and upon terms no less favorable than those that the Borrower or its Consolidated Subsidiary, as applicable, could obtain in an arms length transaction with a Person that is not an Affiliate and (b) transactions between the Borrower and any of its Consolidated Subsidiaries, or between such Consolidated Subsidiaries, that do not and will not, either directly or indirectly, cause a Default.   Section 6.10 Restricted Payments. The Borrower will not, and will not permit any of its Subsidiaries to, at any time, declare or make, any Restricted Payment unless, immediately after giving effect to such action, no Default or Event of Default would exist; provided, any Subsidiary may pay a dividend of any type to the Borrower.   -33- --------------------------------------------------------------------------------   ARTICLE VII. DEFAULT   Section 7.01 Events of Default. If any of the following events (each an “Event of Default”) shall occur and be continuing:   (a)  the Borrower shall fail to pay when due any installment of principal of the Loans; or   (b)  the Borrower shall fail to pay any interest on any Loan or any arrangement fee, commitment fee, administration fee, commission, expense, compensation, reimbursement or other amount when due, or any Person (other than a member of the Bank Group) shall fail to pay any amount payable by such Person hereunder or under any other Loan Document or other agreement or security document contemplated by or delivered pursuant to or in connection with this Agreement when due, and, in either event, such failure shall continue for five (5) Business Days; or   (c)  the Borrower shall fail to perform any term, covenant or agreement contained in Article VI or Section 5.01(e) of this Agreement; or   (d)  the Borrower shall fail to perform any term, covenant or agreement contained in this Agreement (other than those referenced in subsections (a), (b) and (c) of this Section 7.01) and such failure shall not have been remedied within ten (10) days after the earlier of (i) notice thereof from the Agent to the Borrower or (ii) discovery thereof by the Borrower; or   (e)  any Person (other than a member of the Bank Group) shall fail to perform any term, covenant or agreement contained in any Loan Document (other than those referenced in subsections (a), (b), (c) and (d) of this Section 7.01) to which it is a party and such failure shall not have been remedied within thirty (30) days after the earlier of (i) notice thereof from the Agent to the Borrower or (ii) discovery thereof by the Borrower; or   (f)  any representation or warranty made by any Person (other than a member of the Bank Group), or any such Person’s officers, in any Loan Document to which it is a party or in any certificate, agreement, instrument or statement contemplated by or delivered pursuant to, or in connection with, any Loan Document shall prove to have been incorrect in any material respect when made or deemed made; or   (g)  the Borrower or any of its Subsidiaries shall (i) default in the payment of any Debt (other than the amounts referred to in subsections (a) and (b) of this Section 7.01) owing by such Person that constitutes Material Debt as of the date of such default, or any interest or premium thereon, when due (or, if permitted by the terms of the relevant document, within any applicable grace period), whether such Debt shall become due by scheduled maturity, by required prepayment, by acceleration, by demand or otherwise; or (ii) fail to perform any term, covenant or condition on its part to be performed under any agreement or instrument evidencing, securing or relating to any such Debt, when required to be performed, and such failure shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such failure is to accelerate, or to permit the holder or holders of such Debt to accelerate, the maturity of such Debt; or   -34- --------------------------------------------------------------------------------   (h)  any Loan Document shall (other than with the consent of the Banks required pursuant to Section 9.02), at any time after its execution and delivery and for any reason, cease to be in full force and effect (except for such provisions that the Banks required to give consent pursuant to Section 9.02 determine are not material either individually or in the aggregate), or shall be declared to be null and void, or the validity or enforceability thereof shall be contested by any Person party to the Loan Documents or any such Person shall deny that it has any or further liability or obligation under any Loan Document; or   (i)        any Reportable Event that might constitute grounds for the termination of any Plan, or for the appointment by an appropriate United States district court of a trustee to administer any Plan, shall have occurred and be continuing for at least thirty (30) days, or any Plan shall be terminated, or a trustee shall be appointed by an appropriate United States district court to administer any Plan, or the PBGC shall institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan, and, in any such event, the then-current value of such Plan’s benefits guaranteed under Title IV of ERISA at the time shall exceed by more than $5,000,000 the then-current value of such Plan’s assets allocable to such benefits at such time; or   (j)        the Borrower or any of its Subsidiaries shall be adjudicated insolvent, or shall make a general assignment for the benefit of creditors, or any proceeding shall be instituted by any such Person seeking to adjudicate it insolvent, seeking liquidation, winding-up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property, or the Borrower or any of its Subsidiaries shall take any action in furtherance of any of the actions set forth above in this Section 7.01(j); or   (k)  any proceeding of the type referred to in Section 7.01(j) is filed, or any such proceeding is commenced against the Borrower or any of its Subsidiaries or any such Person by any act indicates its approval thereof, consent thereto or acquiescence therein, or an order for relief is entered in an involuntary case under the bankruptcy law of the United States, or an order, judgment or decree is entered appointing a trustee, receiver, custodian, liquidator or similar official or adjudicating any such Person insolvent, or approving the petition in any such proceedings, and such order, judgment or decree remains in effect for sixty (60) days; or   (l)        a final judgment or order for the payment of money in excess of $5,000,000 (net of acknowledged, uncontested insurance coverage from a financially sound, responsible and reputable insurance company or association) shall be rendered against the Borrower or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) a stay of enforcement of such judgment or order by reason of a pending appeal or otherwise, shall not be in effect for any period of thirty (30) consecutive days; or   (m)  a Change of Control occurs with respect to the Borrower;   then, (i) upon the occurrence of any Event of Default described in Section 7.01(j) or Section 7.01(k), (A) the Commitments shall automatically terminate and (B) the entire unpaid principal amount of all Loans, all interest accrued and unpaid thereon, and all other amounts payable by the Borrower or any other Person under this Agreement, the Notes and the other Loan Documents shall automatically become immediately due and payable, without presentment for payment, demand, protest, notice of intent to accelerate, notice of acceleration or further notice of any kind, all of which are hereby expressly waived by the Borrower and each other Person, and (ii) upon the occurrence of any Event of Default, the Agent may, and upon the direction of the Majority Banks shall, by notice to the Borrower (A) declare the Commitments to be terminated, whereupon the same shall forthwith terminate and (B) declare the entire unpaid principal amount of all Loans, all interest accrued and unpaid thereon, and all other amounts payable by the Borrower or any other Person under this Agreement, the Notes and the other Loan Documents, to be forthwith due and payable, whereupon all such amounts shall become and be forthwith due and payable, without presentment for payment, demand, protest, notice of intent to accelerate, notice of acceleration or further notice of any kind, all of which are hereby expressly waived by the Borrower and each other Person.   -35- --------------------------------------------------------------------------------   Section 7.02 Setoff in Event of Default. Upon the occurrence and during the continuance of any Event of Default, each member of the Bank Group is hereby authorized, at any time and from time to time, without notice to the Borrower (any such notice being expressly waived by the Borrower) and to the fullest extent permitted by applicable law, to setoff and apply any and all deposits at any time held and other indebtedness at any time owing by such member of the Bank Group (or any branch, subsidiary or affiliate of such member of the Bank Group) to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower or any other Person, now or hereafter existing under this Agreement, the Notes or the other Loan Documents, irrespective of whether or not such member of the Bank Group shall have made any demand for satisfaction of such obligations and although such obligations may be unmatured. Any member of the Bank Group exercising such right agrees to notify the Borrower promptly after any such setoff and application made by such Person; provided, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of the Bank Group under this Section 7.02 are in addition to other rights and remedies (including, without limitation, other rights of setoff) which the Bank Group may have hereunder or under any applicable law.   Section 7.03 No Waiver; Remedies. No failure on the part of any member of the Bank Group to exercise, or any delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies provided in this Agreement are cumulative and not exclusive of any remedies provided in any of the other Loan Documents or by applicable law.   Section 7.04 No Preservation of Security for Unmatured Reimbursement Obligations. In the event that, following (i) the occurrence and during the continuation of an Event of Default and the exercise of any rights available to Agent, Issuer or any Bank under the Loan Documents and (ii) payment in full of the principal amount then outstanding of and the accrued interest on the Loans and fees and all other amounts payable hereunder and under the Notes, any Letters of Credit shall remain outstanding and undrawn, Agent shall be entitled to hold (and Borrower hereby grants and conveys to Agent a security interest in and to) all cash or other Property (“Proceeds of Remedies”) realized or arising out of the exercise of any rights available under the Loan Documents, at law or in equity, including, without limitation, the proceeds of any foreclosure, as collateral for the payment of any amounts due or to become due under or in respect of such outstanding Letters of Credit. Such Proceeds of Remedies shall be held by the Agent for the ratable benefit of the Banks. The rights, titles, benefits, privileges, duties and obligations of Agent with respect thereto shall be governed by the terms and provisions of this Agreement. Agent may, but shall have no obligation to, invest any such Proceeds of Remedies in such manner as Agent, in the exercise of its sole discretion, deems appropriate. Such Proceeds of Remedies shall be applied to amounts owing in respect of any such Letters of Credit and/or the payment of Borrower’s or any Bank’s obligations under any such Letter of Credit when such Letter of Credit is drawn upon. Nothing in this Section 7.04 shall cause or permit an increase in the maximum amount permitted to be outstanding from time to time under this Agreement.   -36- --------------------------------------------------------------------------------   ARTICLE VIII. THE AGENTS AND THE FUNDS ADMINISTRATOR   Section 8.01 Authorization and Action. Each Bank hereby appoints and authorizes the Agent and the Funds Administrator to take such action in such capacity on such Bank’s behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Agent and the Funds Administrator, as the case may be, by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes or of amounts owing under the other Loan Documents), the Agent and the Funds Administrator shall not be required to exercise any discretion or take any action, but such Person shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Banks, and such instructions shall be binding upon all Banks and any other holders of Notes; provided, however, that the Agent and the Funds Administrator shall not be required to take any action which exposes such Person to personal liability or which is contrary to the Loan Documents or applicable law. Each of the Agent and the Funds Administrator is hereby expressly authorized on behalf of the other members of the Bank Group, (a) to receive on behalf of each of the other members of the Bank Group any payment of principal of or interest on the Loans outstanding hereunder and all other amounts accrued hereunder paid to such Persons, and promptly to distribute to each other member of the Bank Group its proper share of all payments so received; (b) in the case of the Agent only, to give notice within a reasonable time on behalf of each other member of the Bank Group to the Borrower of any Default of which the Agent has actual knowledge as provided in Section 8.09; (c) to distribute to the other members of the Bank Group copies of all notices, agreements and other material as provided for in this Agreement as received by such Person; and (d) to distribute to the Borrower any and all requests, demands and approvals received by such Person from any other member of the Bank Group. Nothing herein contained shall be construed to constitute either the Agent or the Funds Administrator as a trustee for any holder of the Notes or of a participation therein, nor to impose on any such Person any duties or obligations other than those expressly provided for in the Loan Documents.   Section 8.02 Reliance, Etc. The Agent, the Funds Administrator and their respective directors, officers, agents or employees shall not be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for such acts or omissions of such Person constituting gross negligence or willful misconduct on the part of such Person (IT BEING THE EXPRESS INTENTION OF THE PARTIES THAT THE AGENT, THE FUNDS ADMINISTRATOR AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS SHALL HAVE NO LIABILITY FOR ACTIONS AND OMISSIONS HEREUNDER RESULTING THAT CONSTITUTE ORDINARY NEGLIGENCE, WHETHER SOLE OR CONTRIBUTORY) OR RESULT IN STRICT LIABILITY. Without limitation of the generality of the foregoing, each of the Agent and the Funds Administrator: (a) may treat the payee of any Note as the holder thereof until the Agent receives and accepts an Assignment and Acceptance entered into by the Bank which is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section 9.02, and the Agent notifies such Person thereof; (b) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Bank and shall not be responsible to any Bank for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement or the other Loan Documents; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the other Loan Documents on the part of the Borrower or any other Person or to inspect the property (including the books and records) of the Borrower or any other Person; (e) shall not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document, any collateral provided for therein, or any other instrument or document furnished pursuant thereto; and (f) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. The Agent, the Funds Administrator and their respective directors, officers, employees or agents shall not have any responsibility to the Borrower on account of the failure or delay in performance or breach by any Bank of any of its obligations hereunder or to any Bank on account of the failure of or delay in performance or breach by any other Bank or the Borrower of any of their respective obligations hereunder or in connection herewith.   -37- --------------------------------------------------------------------------------   Section 8.03 Chase and Affiliates. Without limiting the right of any other Bank to engage in any business transactions with the Borrower or any of its Affiliates, with respect to its Commitment, the Loans made by it, the Note issued to it, and its interest in the Loan Documents, Chase shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not the Funds Administrator or the Agent; and the term “Bank” or “Banks” shall, unless otherwise expressly indicated, include Chase in its individual capacity. Chase, or any of its Affiliates, may be engaged in, or may hereafter engage in, one or more loan, letter of credit, leasing or other financing activities not the subject of the Loan Documents (such financing activities of Chase being, collectively, the “Other Financings”) with the Borrower or any of its Affiliates, or may act as trustee on behalf of, or depositary for, or otherwise engage in other business transactions with the Borrower or any of its Affiliates (all Other Financings and other such business transactions of Chase being, collectively, the “Other Activities”) with no responsibility to account therefor to the Banks. Without limiting the rights and remedies of the Banks specifically set forth in the Loan Documents, no other Bank shall have any interest in (a) any Other Activities, (b) any present or future guarantee by or for the account of the Borrower not contemplated or included in the Loan Documents, (c) any present or future offset exercised by the Agent or the Funds Administrator in respect of any such Other Activities, (d) any present or future property taken as security for any such Other Activities or (e) any property now or hereafter in the possession or control of the Agent or the Funds Administrator which may be or become security for the obligations of the Borrower under the Loan Documents by reason of the general description of indebtedness secured, or of property, contained in any other agreements, documents or instruments related to such Other Activities; provided, however, that if any payment in respect of such guarantees or such property or the proceeds thereof shall be applied to reduction of the obligations evidenced hereunder and by the Notes, then each Bank shall be entitled to share in such application according to its pro rata portion of such obligations.   -38- --------------------------------------------------------------------------------   Section 8.04 Bank Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon any other member of the Bank Group and based on the financial statements referred to in Section 4.06 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon any other member of the Bank Group and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.   Section 8.05 Indemnification. The Banks agree to indemnify each of the Agent and the Funds Administrator (to the extent not reimbursed by the Borrower), ratably according to their respective Commitment Percentages, from and against any and all liabilities, 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 the Agent or the Funds Administrator, as the case may be, in any way relating to or arising out of this Agreement or the other Loan Documents or any action taken or omitted by the Agent or the Funds Administrator under this Agreement or the other Loan Documents, provided, that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Person’s gross negligence or willful misconduct. IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT THE AGENT AND THE FUNDS ADMINISTRATOR SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND ARISING OUT OF OR RESULTING FROM THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OR STRICT LIABILITY OF SUCH PERSON. The Agent and the Funds Administrator shall not be required to do any act hereunder or under any other document or instrument delivered hereunder or in connection herewith or take any action toward the execution or enforcement of the agencies hereby created, or to prosecute or defend any suit in respect of this Agreement or the Loan Documents or any collateral security, unless indemnified to its satisfaction by the holders of the Notes against loss, cost, liability, and expense. If any indemnity furnished to the Agent or the Funds Administrator for any purpose is, in the opinion of such Person insufficient or becomes impaired, such Person may call for additional indemnity and not commence or cease to do the acts indemnified against until such additional indemnity is furnished. Without limitation of the foregoing, each Bank agrees to reimburse the Agent and the Funds Administrator promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by such Person in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement and the other Loan Documents, to the extent that the Agent and the Funds Administrator are not reimbursed for such expenses by the Borrower.   -39- --------------------------------------------------------------------------------   Section 8.06 Employees of the Agent, Etc. Each of the Agent and the Funds Administrator may execute any of their respective duties under this Agreement, the other Loan Documents and any instrument, agreement or document executed, issued or delivered pursuant hereto or thereto or in connection herewith or therewith, by or through employees, agents and attorneys-in-fact, and shall not be answerable for the default or misconduct of any such employee, agent or attorney-in-fact selected by it with reasonable care. Each of the Agent and the Funds Administrator may, and upon the written instruction of the Majority Banks shall, enforce on behalf of the Banks any claims which the Agent, the Funds Administrator and/or the Banks may have against any such employee, agent or attorney-in-fact, and any recovery therefrom shall be applied for the pro rata benefit of the Banks.   Section 8.07 Successor Agent. The Agent may resign at any time by giving written notice thereof to the other members of the Bank Group and the Borrower and may be removed at any time with or without cause by the Majority Banks. Upon any such resignation or removal, the Majority Banks shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Majority Banks, and shall have accepted such appointment, within thirty (30) days after the retiring Agent’s giving of notice of resignation or the Majority Banks’ removal of the retiring Agent, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon 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 under this Agreement, subject to the requirement that such retiring Agent will execute such documents and take such actions as may be necessary or desirable to cause the successor Agent to be vested with all such rights, powers, privileges and duties. After any retiring Agent’s resignation or removal hereunder as Agent, the provisions of this Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. All costs and expenses incurred by the Bank Group in connection with any amendments or other documentation required by this Section 8.07 shall be paid by the Borrower pursuant to Section 9.04 hereof.   Section 8.08 Successor Funds Administrator. The Funds Administrator may resign at any time by giving written notice thereof to the other members of the Bank Group and the Borrower and may be removed at any time with or without cause by the Majority Banks. Upon any such resignation or removal, the Majority Banks shall have the right to appoint a successor Funds Administrator. If no successor Funds Administrator shall have been so appointed by the Majority Banks, and shall have accepted such appointment, within thirty (30) days after the retiring Funds Administrator’s giving of notice of resignation or the Majority Banks’ removal of the retiring Funds Administrator, then the retiring Funds Administrator may, on behalf of the Banks, appoint a successor Funds Administrator, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Funds Administrator hereunder by a successor Funds Administrator, such successor Funds Administrator shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Funds Administrator, and the retiring Funds Administrator shall be discharged from its duties and obligations under this Agreement, subject to the requirement that such retiring Funds Administrator will execute such documents and take such actions as may be necessary or desirable to cause the successor Funds Administrator to be vested with all such rights, powers, privileges and duties. After any retiring Funds Administrator’s resignation or removal hereunder as Funds Administrator, the provisions of this Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Funds Administrator under this Agreement. All costs and expenses incurred by the Bank Group in connection with any amendments or other documentation required by this Section 8.08 shall be paid by the Borrower pursuant to Section 9.04 hereof.   -40- --------------------------------------------------------------------------------   Section 8.09 Notice of Default. Neither the Agent nor the Funds Administrator shall be deemed to have knowledge or notice of the occurrence of any Default unless such Person shall have received notice from a Bank or the Borrower referring to this Agreement, describing such Default and stating that such notice is a “notice of default” or “notice of event of default,” as applicable. If the Agent receives such a notice from the Borrower, the Agent shall give notice thereof to the other members of the Bank Group and, if such notice is received from a Bank, the Agent shall give notice thereof to the other members of the Bank Group and the Borrower. The Agent shall be entitled to take action or refrain from taking action with respect to such Default as provided in this Article VIII.   Section 8.10 Execution of Loan Documents. Each member of the Bank Group hereby authorizes and directs the Agent and the Funds Administrator to execute and deliver each Loan Document (including, without limitation, those specified in Section 3.01) to be executed by the Agent or the Funds Administrator on or about the Effective Date pursuant to the terms of this Agreement and the other Loan Documents.   Section 8.11 Duties of Syndication Agent and Documentation Agent. The Syndication Agent and the Document Agent shall have no duties under this Agreement other than those of a Bank.   ARTICLE IX. MISCELLANEOUS   Section 9.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement, any Note or any other Loan Document, or consent to any departure by any Person herefrom or therefrom, shall in any event be effective unless the same shall be in writing and signed by the Borrower and the Majority Banks, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall: (a) increase the Commitment of any Bank or subject a Bank to any additional obligations without the written consent of such Bank, (b) reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, without the written consent of each Bank directly affected thereby, (c) postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, without the written consent of each Bank directly affected thereby, (d) release the Borrower or any other Person from its payment obligations to the Bank Group, regardless of whether such obligations are those of a primary obligor, a guarantor or surety, or otherwise, without the consent of each Bank, (e) take action which expressly requires the signing of all the Banks pursuant to the terms of this Agreement, without the consent of each Bank, (f) change the Commitment Percentages or the aggregate unpaid principal amount of the Notes, or the number of Banks, as the case may be, required for the Agent, the Funds Administrator or the Banks or any of them to take any action under this Agreement or amend the definition of Majority Banks, without the consent of each Bank or (g) amend Article II, without the written consent of each Bank directly affected thereby or this Section 9.01, without the consent of each Bank; provided, further, that no amendment, waiver or consent shall (1) unless in writing and signed by the Agent in addition to the Banks required above to take such action, affect the rights or duties of the Agent under this Agreement or any other Loan Document, and (2) unless in writing and signed by the Funds Administrator in addition to the Banks required above to take such action, affect the rights or duties of the Funds Administrator under this Agreement or any other Loan Document. No notice to or demand on Borrower or any other Person in any case shall entitle them to any other or further notice or demand in similar or other circumstances.   -41- --------------------------------------------------------------------------------   Section 9.02 Participation Agreements and Assignments. (a) (1) Subject to Section 9.02(a)(ii), each Bank may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Loans owing to it and the Note held by it) and the other Loan Documents by executing an Assignment and Acceptance substantially in the form of Exhibit 9.02(a) (an “Assignment and Acceptance”); provided, that (A) no such assignment shall be made unless such assignment and assignee have been approved by the Agent and, so long as no Default exists, the Borrower, such approvals not to be unreasonably withheld, provided that such approvals shall not be required if the assignee is an Affiliate of the assignor Bank, (B) each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations of the assignor under this Agreement and the other Loan Documents, and no assignment shall be made unless it covers a pro rata share of all rights and obligations of such assignor under this Agreement and the other Loan Documents, (C) the amount of the Commitment of the assigning Bank being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall, unless otherwise agreed to by the Agent, in no event be less than $5,000,000 and shall be an integral multiple of $1,000,000, (D) each such assignment shall be to an Eligible Assignee and (E) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register (defined below), an Assignment and Acceptance, together with any Note subject to such assignment. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (1) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations under the Loan Documents have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Bank under the Loan Documents and (2) the assigning Bank thereunder shall, to the extent that rights and obligations under the Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Bank’s rights and obligations under this Agreement, such Bank shall cease to be a party hereto).   -42- --------------------------------------------------------------------------------   (ii)  In the event any Bank desires to transfer all or any portion of its rights and obligations under the Loan Documents to any Person other than an Affiliate of such Bank, it shall give the Borrower and the Agent prior written notice of the identity of such transferee and the terms and conditions of such transfer (a “Transfer Notice”). So long as no Default has occurred and is continuing, the Borrower may, no later than ten (10) days following receipt of such Transfer Notice, designate an alternative transferee and such Bank shall thereupon be obligated to sell the interests specified in such Transfer Notice to such alternative transferee, subject to the following: (A) such transfer shall be made on the same terms and conditions outlined in such Transfer Notice, (B) such transfer shall otherwise comply with the terms and conditions of the Loan Documents (including Section 9.02(a)(i)), and (C) such alternative transferee must be an Eligible Assignee approved by the Agent. If the Borrower shall fail to designate an alternative transferee within such ten (10) day period, such Bank shall, subject to compliance with the other terms and provisions hereof, be free to consummate the transfer described in such Transfer Notice.   (b)  By executing and delivering an Assignment and Acceptance, the assigning Bank thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Bank makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Bank 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 this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement and the other Loan Documents, together with copies of the financial statements referred to in Section 4.06 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon any member of the Bank Group (including such assigning Bank) and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Agent and the Funds Administrator to take such action on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to such Person by the terms thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement and the other Loan Documents are required to be performed by it as a Bank.   (c)  The Agent shall maintain at its address referred to in Section 9.03 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Banks and the Commitment of, and principal amount of the Loans owing to, each Bank from time to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower and each member of the Bank Group may treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any member of the Bank Group at any reasonable time and from time to time upon reasonable prior notice.   -43- --------------------------------------------------------------------------------   (d)  Upon its receipt of an Assignment and Acceptance executed by an assigning Bank and an assignee representing that it is an Eligible Assignee, together with any Note subject to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit 9.02 and satisfies all other requirements set forth in this Section 9.02, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower and the other members of the Bank Group. Within five (5) Business Days after its receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Agent, in exchange for the surrendered Notes, new Notes to the order of such Eligible Assignee in an amount corresponding to the Commitment assumed by such Eligible Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank has retained a Commitment hereunder, new Notes to the order of the assigning Bank in an amount corresponding to the Commitment retained by it hereunder. Such new Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form prescribed by Section 2.04 hereto.   (e)  Each Bank may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of its Commitment and the Loans owing to it); provided, however, that (i) such Bank’s obligations under this Agreement (including, without limitation, its Commitment to the Borrower hereunder) and the other Loan Documents shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, and the participating banks or other entities shall not be considered a “Bank” for purposes of the Loan Documents, (iii) the participating banks or other entities shall be entitled to the cost protection provisions contained in Section 2.11 through Section 2.14 and the rights of setoff contained in Section 7.02, in each case to the same extent that the Bank from which such participating bank or other entity acquired its participation would be entitled to the benefit of such cost protection provisions and rights of setoff and (iv) the Borrower and the other members of the Bank Group shall continue to deal solely and directly with such Bank in connection with such Bank’s rights and obligations under this Agreement and the other Loan Documents, and such Bank shall retain the sole right to enforce the obligations of the Borrower relating to the Loans and to approve any amendment, modification or waiver of any provision of this Agreement (other than amendments, modifications or waivers with respect to the amounts of any fees payable hereunder or the amount of principal of or the rate at which interest is payable on the Loans, or the dates fixed for payments of principal or interest on the Loans).   (f)  Anything in this Section 9.02 to the contrary notwithstanding, any Bank may at any time, without the consent of the Borrower or the Agent, assign and pledge all or any portion of its Commitment and the Loans owing to it to any Federal Reserve Bank (and its transferees) as collateral security pursuant to Regulation A of the Federal Reserve Board and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Bank from its obligations hereunder.   -44- --------------------------------------------------------------------------------   (g)  Any Bank may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.02, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrower furnished to such Bank by or on behalf of the Borrower; provided that prior to any such disclosure, each such assignee or participant or proposed assignee or participant shall agree (subject to customary exceptions) to preserve the confidentiality of any confidential information relating to the Borrower received from such Bank.   Section 9.03 Notices. All correspondence, statements, notices, requests and demands (collectively “Communications”) shall be in writing (including telegraphic Communications) and mailed, telegraphed, telecopied, facsimile transmitted or delivered as follows:   if to the Borrower --   Kirby Corporation 55 Waugh Drive, Suite 1000 Houston, Texas 77007 Attention: Chief Financial Officer Telephone: (713) 435-1102 Telecopier: (713) 435-1011   if to the Funds Administrator or the Agent --   JPMorgan Chase Bank, N.A. 10 South Dearborn St., Floor 19 Chicago, Illinois 60603 Attention: Judy Warren Telecopier: (312) 385-7096 Telephone: (312) 732-4860 [email protected] with a copy to --   JPMorgan Chase Bank, N.A. 707 Travis, Floor 8 Houston, Texas 77002 Attention: Janice Carter Telecopier: (713) 216- 4651 Telephone: (713) 216-4383 [email protected]   -45- --------------------------------------------------------------------------------   if to any Bank, at its Domestic Lending Office, or as to each such party, at such other address as such party shall designate in a written Communication to each of the other parties hereto. All such Communications shall be effective, in the case of written or telegraphed Communications, when deposited in the mails or delivered to the telegraph company, respectively, and, in the case of a Communication by telecopy or facsimile transmission, when telecopied or transmitted against receipt of a confirmation, in each case addressed as aforesaid, except that Communications to any member of the Bank Group pursuant to Article II and Article VIII shall not be effective until received by such Persons.   Section 9.04 Costs and Expenses. The Borrower agrees to pay on demand (a) all reasonable costs and expenses of the Agent and the Funds Administrator incurred in connection with the preparation, execution, delivery, filing, administration and recording of the Loan Documents and any other agreements or security documents delivered in connection with or pursuant to any of the Loan Documents and the syndication of this Agreement both before and after the date hereof, including, without limitation, the reasonable fees and out-of-pocket expenses of Andrews Kurth LLP, special counsel to the Agent, and local counsel who may be retained by such special counsel, with respect thereto, and (b) all reasonable costs and expenses of the Agent and the Funds Administrator, and during the existence of an Event of Default any Bank, incurred in connection with the enforcement of the Loan Documents and any other agreements or security documents executed in connection with or pursuant to any of the Loan Documents, including, but not limited to, the reasonable fees and out-of-pocket expenses of counsel to the Agent, and local counsel who may be retained by such counsel, with respect thereto, and the costs and expenses in connection with the custody, preservation, use or operation of, or the sale of, or collection from, or other realization upon the sale of, or collection from, or other realization upon any collateral covered by any of the Loan Documents or any other documents executed in connection with or pursuant to any of the Loan Documents. The agreements of Borrower contained in this Section 9.04 shall survive the termination of the Commitments and the payment of all other amounts owing hereunder or under any of the other Loan Documents.   Section 9.05 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Agent, the Funds Administrator, the Banks and their respective successors and assigns, except that the Borrower may not assign or transfer its rights hereunder without the prior written consent of the Banks.   Section 9.06 Independence of Covenants. All covenants contained in the Loan Documents shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that such action or condition would be permitted by an exception to, or otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists.   Section 9.07 Survival of Representations and Warranties. All representations and warranties contained in this Agreement and the other Loan Documents or made in writing by the Borrower in connection herewith or therewith, shall survive the execution and delivery of this Agreement, the Notes and the other Loan Documents and the repayment of the Loans. Any investigation by any member of the Bank Group shall not diminish in any respect whatsoever its right to rely on such representations and warranties.   -46- --------------------------------------------------------------------------------   Section 9.08 Separability. Should any clause, sentence, paragraph, subsection, Section or Article of this Agreement be judicially declared to be invalid, unenforceable or void, such decision will not have the effect of invalidating or voiding the remainder of this Agreement, and the parties hereto agree that the part or parts of this Agreement so held to be invalid, unenforceable or void will be deemed to have been stricken herefrom by the parties hereto, and the remainder will have the same force and effectiveness as if such stricken part or parts had never been included herein.   Section 9.09 Captions. The captions in this Agreement have been inserted for convenience only and shall be given no substantive meaning or significance whatsoever in construing the terms and provisions of this Agreement.   Section 9.10 Limitation by Law. All provisions of this Agreement and the other Loan Documents are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Agreement or any other Loan Document invalid or unenforceable, in whole or in part, or not entitled to be recorded, registered or filed under the provisions of any applicable law.   Section 9.11 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 shall be deemed to be an original, and all of which taken together shall constitute one and the same agreement.   Section 9.12 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas and applicable federal law; provided, however, notwithstanding the foregoing or any other provision of this Agreement, nothing in this Agreement, the Notes or the other Loan Documents shall be deemed to constitute a waiver of any rights which any Bank may have under federal legislation relating to the rate of interest which such Bank may contract for, take, reserve, receive or charge in respect of any Debt owing to such Bank hereunder. Chapter 15, Subtitle 3, Title 79, of the Revised Civil Statutes of Texas, 1925, as amended (relating to revolving loan and revolving triparty accounts), shall not apply to this Agreement or the Notes or the transactions contemplated hereby.   Section 9.13 Limitation on Interest. Each provision in this Agreement and each other Loan Document is expressly limited so that in no event whatsoever shall the amount paid, or otherwise agreed to be paid, by the Borrower for the use, forbearance or detention of the money to be loaned under this Agreement or any other Loan Document or otherwise (including any sums paid as required by any covenant or obligation contained herein or in any other Loan 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 thereon to exceed the Highest Lawful Rate, and all amounts owed under this Agreement and each other Loan 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 Loan Document shall in no event exceed that amount of money which would cause the effective rate of interest thereon to exceed the Highest Lawful Rate. To the extent that the Highest Lawful Rate applicable to a Bank is at any time determined by Texas law, such rate shall be the “indicated rate ceiling” described in the Texas Finance Code, Chapter 303, as amended; provided, however, to the extent permitted by such Finance Code, the Banks from time to time by notice from the Agent to Borrower may revise the aforesaid election of such interest rate ceiling as such ceiling affects the then-current or future balances of the Loans outstanding under the Notes. Notwithstanding any provision in this Agreement or any other Loan Document to the contrary, if the maturity of the Notes or the obligations in respect of the other Loan Documents are accelerated for any reason, or in the event of prepayment of all or any portion of the Notes or the obligations in respect of the other Loan Documents by the Borrower or in any other event, earned interest on the Loans and such other obligations of the Borrower may never exceed the maximum amount permitted by applicable law, and any unearned interest otherwise payable under the Notes or the obligations in respect of the other Loan Documents that is in excess of the maximum amount permitted by applicable law shall be cancelled automatically as of the date of such acceleration or prepayment or other such event and, if theretofore paid, shall be credited on the principal of the Notes or, if the principal of the Notes has been paid in full, refunded to the Borrower. In determining whether or not the interest paid or payable, under any specific contingency, exceeds the Highest Lawful Rate, the Borrower and the Banks 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 the Loan Documents.   -47- --------------------------------------------------------------------------------   Section 9.14 Indemnification. The Borrower agrees to indemnify, defend and hold each member of the Bank Group, as well as their respective officers, employees, agents, Affiliates, directors and shareholders (collectively, “Indemnified Persons”) harmless from and against any and all loss, liability, damage, judgment, claim, deficiency or reasonable expense (including interest, penalties, reasonable attorneys’ fees and amounts paid in settlement) incurred by or asserted against any Indemnified Person arising out of, in any way connected with, or as a result of (i) the execution and delivery of this Agreement and the other documents contemplated hereby, the performance by the parties hereto and thereto of their respective obligations hereunder and thereunder (including but not limited to the making of the Loans by each Bank) and consummation of the transactions contemplated hereby and thereby, (ii) the actual or proposed use of the proceeds of the Loans, (iii) any violation by the Borrower or any of its Subsidiaries of any Requirement of Law, including but not limited to Environmental Laws, (iv) any member of the Bank Group being deemed an operator of any real or personal property of the Borrower or any of its Subsidiaries in circumstances in which no member of the Bank Group is generally operating or generally exercising control over such property, to the extent such losses, liabilities, damages, judgments, claims, deficiencies or expenses arise out of or result from any Hazardous Materials located in, on or under such property or (v) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnified Person is a party thereto; provided that such indemnity shall not apply to any such losses, claims, damages, liabilities or related expenses that are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of, or willful violation of the Loan Documents by, such Indemnified Person. WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, IT IS THE EXPRESS INTENTION OF THE BORROWER THAT EACH INDEMNIFIED PERSON SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DEFICIENCIES, JUDGMENTS OR REASONABLE EXPENSES ARISING OUT OF OR RESULTING FROM THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OR STRICT LIABILITY OF SUCH INDEMNIFIED PERSON. Each Indemnified Person will attempt to consult with the Borrower prior to entering into any settlement of any lawsuit or proceeding that could give rise to a claim for indemnity under this Section 9.14, although nothing herein shall give the Borrower the right to direct or control any such settlement negotiations or any related lawsuit or proceeding on behalf of such Indemnified Party. The obligations of the Borrower under this Section 9.14 shall survive the termination of this Agreement.   -48- --------------------------------------------------------------------------------   Section 9.15 Submission to Jurisdiction. The Borrower hereby irrevocably submits to the jurisdiction of any Texas state or federal court sitting in Houston, Texas over any action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents, and the Borrower irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Texas state or federal court; provided, however, nothing in this Section 9.15 is intended to waive the right of any member of the Bank Group to remove any such action or proceeding commenced in any such Texas state court to an appropriate Texas federal court to the extent the basis for such removal exists under applicable law. The Borrower irrevocably consents to the service of any and all process in any such action or proceeding by the mailing by certified mail of copies of such process to it at its address specified herein. The Borrower 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 Section 9.15 shall affect the right of any member of the Bank Group to serve legal process in any other manner permitted by law or affect the right of any member of the Bank Group to bring any action or proceeding against the Borrower, or its properties, in the courts of any other jurisdiction.   Section 9.16 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER AND THE BANK GROUP HEREBY IRREVOCABLY AND EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES, OR ANY OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF THE BANK GROUP IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.   Section 9.17 FINAL AGREEMENT OF THE PARTIES. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE A LOAN AGREEMENT FOR PURPOSES OF SECTION 26.02(a) OF THE TEXAS BUSINESS AND COMMERCE CODE, AND REPRESENT THE FINAL AGREEMENT 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.   Section 9.18 Patriot Act. Each Bank hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Bank to identify the Borrower in accordance with the Act.   -49- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written.     BORROWER           KIRBY CORPORATION                     By: /s/ Norman W. Nolen     Name: Norman W. Nolen     Title: Executive Vice President and Chief       Financial Officer     --------------------------------------------------------------------------------     BANKS           JPMORGAN CHASE BANK, N.A., as Administrative Agent, Issuer and a Bank                     By: /s/ H. David Jones     Name: H. David Jones     Title: Vice President     --------------------------------------------------------------------------------   BANK OF AMERICA, N.A., as Syndication Agent and as a Bank                     By: /s/ David McCauley     Name: David McCauley     Title: Principal   --------------------------------------------------------------------------------   THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., as Documentation Agent and as a Bank                     By: /s/ D. Barnell     Name: D. Barnell     Title: Vice President and Manager   --------------------------------------------------------------------------------     DNB NOR BANK ASA, as Documentation Agent and as a Bank                     By: /s/ Kevin O’Hara     Name: Kevin O’Hara     Title: Vice President             By: /s/ Sanjiv Nayar     Name: Sanjiv Nayar     Title: Senior Vice President     --------------------------------------------------------------------------------     WELLS FARGO BANK, N.A., as Syndication Agent and as a Bank                     By: /s/ Michael B. Sullivan     Name: Michael B. Sullivan     Title: Senior Vice President     --------------------------------------------------------------------------------     COMERICA BANK                     By: /s/ Charles T. Johnson     Name: Charles T. Johnson     Title: Vice President   --------------------------------------------------------------------------------   THE NORTHERN TRUST COMPANY                 By: /s/ Paul H. Theiss     Name: Paul H. Theiss     Title: Vice President     --------------------------------------------------------------------------------     AMEGY BANK                 By: /s/ Gary Tolbert     Name: Gary Tolbert     Title: Senior Vice President     -------------------------------------------------------------------------------- ANNEX A DEFINITIONS   “Acquisition” means a transaction resulting in (a) acquisition by the Borrower, directly or indirectly, of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) acquisition by the Borrower of in excess of 50% of the capital stock, partnership interests, or other equity of any Person, or otherwise causing such Person to become a Subsidiary of the Borrower, or (c) a merger or consolidation or other combination of the Borrower with another Person.   “Adjusted CD Rate” means, for any Interest Period for each Adjusted CD Rate Loan comprising part of the same Borrowing, an interest rate per annum equal to the sum of: (a) the rate per annum obtained by dividing (i) the rate of interest determined by the Agent to be the arithmetic average (rounded upward to the nearest whole multiple of 1/100 of 1% per annum, if such average is not such a multiple) of the consensus bid rate determined by the Agent for the bid rates per annum, on or about 9:00 A.M. (Houston time) (or as soon thereafter as practicable) one Business Day before the first day of such Interest Period, of certificate of deposit dealers of recognized standing selected by the Agent for the purchase at face value of certificates of deposit of the Agent in an amount approximately equal to the Adjusted CD Rate Loan to be made by the Agent in its capacity as a Bank and comprising part of such Borrowing and with a maturity equal to such Interest Period, by (ii) a percentage equal to 100% minus the Adjusted CD Rate Reserve Percentage for such Interest Period, plus (b) the Assessment Rate in effect from time to time during such Interest Period.   “Adjusted CD Rate Borrowing” means a Borrowing consisting of Adjusted CD Rate Loans.   “Adjusted CD Rate Loan” means a Loan that the Borrower has designated, or is deemed to have designated, as such in accordance with Article II.   “Adjusted CD Rate Reserve Percentage” means, for the Interest Period for each Adjusted CD Rate Loan comprising part of the same Borrowing, the reserve percentage applicable one Business Day before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in Houston, Texas with deposits exceeding one billion dollars with respect to liabilities consisting of or including (among other liabilities) U.S. dollar nonpersonal time deposits in the United States with a maturity equal to such Interest Period.   “Adjusted Net Income” means, for any period, Net Income for such period; less, to the extent otherwise included in such Net Income (a) any gain or loss arising from the sale of capital assets of the Borrower and its Consolidated Subsidiaries; (b) any gain arising from any write-up of assets of the Borrower and its Consolidated Subsidiaries; (c) earnings of any other Person, substantially all of the assets of which have been acquired by the Borrower or any of its Consolidated Subsidiaries in any manner, to the extent that such earnings were realized by such other Person prior to the date of such acquisition; (d) net earnings of any Person (other than a Consolidated Subsidiary) in which the Borrower or any of its Consolidated Subsidiaries has an ownership interest, except for the portion of such net earnings that have been distributed to the Borrower or a Consolidated Subsidiary; (e) the earnings of any Person to which assets of the Borrower or any of its Consolidated Subsidiaries shall have been sold, transferred or disposed of, to the extent that such earnings arise after the date of such transaction; (f) the earnings of any Person into which the Borrower or any of its Consolidated Subsidiaries shall have merged, to the extent that such earnings arise prior to the date of such merger; (g) any gain arising from the acquisition of any securities of the Borrower or any of its Consolidated Subsidiaries; and (h) the taxes, if any, included in the calculation of the consolidated net earnings, if any, described in clauses (a) through (g); plus, to the extent not otherwise included in such Net Income, all distributions, other than returns of capital, which have been made to the Borrower or a Consolidated Subsidiary by any Person, other than a Consolidated Subsidiary, in which Borrower or any of its Consolidated Subsidiaries has an ownership interest.   Annex A - Page 1 --------------------------------------------------------------------------------   “Affected Bank” has the meaning specified in Section 2.15.   “Affected Interests” has the meaning specified in Section 2.15.   “Affiliate” means, when used with respect to any Person, (a) any other Person (including any member of the immediate family of any such natural person) who directly or indirectly beneficially owns or controls five percent (5%) or more of the total voting power of shares of capital stock of such Person having the right to vote for directors (or other individuals performing similar functions) under ordinary circumstances, (b) any Person controlling, controlled by or under common control with any such Person (within the meaning of Rule 405 under the Securities Act of 1933) and (c) any director or executive officer of such Person.   “Agent” has the meaning specified in the introduction to this Agreement.   “Agreement” means this Credit Agreement, as the same may from time to time be amended, supplemented or modified and in effect.   “Applicable Lending Office” means, with respect to each Bank, such Bank’s Domestic Lending Office in the case of a Prime Rate Loan, such Bank’s CD Lending Office in the case of an Adjusted CD Rate Loan and such Bank’s Eurodollar Lending Office in the case of a Eurodollar Rate Loan.   “Applicable Margin” has the meaning specified in Section 2.07(d).   “Assessment Rate” means, for any day, the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund classified as well capitalized and within supervisory subgroup “B” (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. §327.4 (or any successor provision) to the Federal Deposit Insurance Corporation (or any successor thereto) for such Corporation’s (or such successor’s) insuring time deposits at offices of such institution in the United States. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Assessment Rate.   “Assignment and Acceptance” has the meaning specified in Section 9.02(a).   Annex A - Page 2 --------------------------------------------------------------------------------   “Bank Group” means, collectively, the Agent, the Funds Administrator and the Banks.   “Banks” has the meaning specified in the introduction to this Agreement.   “Borrower” has the meaning specified in the introduction to this Agreement.   “Borrowing” means (a) a group of Revolving Loans of a single Type made by the Banks, or Converted into such, as applicable, on a single date and as to which a single Interest Period is in effect; or (b) a Swingline Loan.   “Borrowing Date” means, with respect to the initial funding of any Borrowing, the date on which the proceeds of such Borrowing are to be made available to the Borrower.   “Borrowing Request” has the meaning specified in Section 2.02(a).   “Business Day” means a day of the year on which banks are not required or authorized to close in Houston, Texas and, if the applicable Business Day relates to any Eurodollar Rate Loans, on which dealings are carried on in the applicable eurodollar interbank market.   “Capital Lease” means, as to any Person, any lease or rental agreement in respect of which such Person’s obligations as lessee under such lease or rental agreement, constitute obligations which shall have been or should be, in accordance with generally accepted accounting principles consistently applied, capitalized on the balance sheet of such Person.   “CD Lending Office” means, with respect to any Bank, the office of such Bank specified as its “CD Lending Office” on Schedule 2.01 (or, if no such office is specified, its Domestic Lending Office), or such other office of such Bank as such Bank may from time to time specify to the Borrower, the Agent and the Funds Administrator.   “Change of Control” means any of (a) the acquisition by any Person or two or more Persons (excluding underwriters in the course of their distribution of voting stock in an underwritten public offering) acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission) of 25% or more of the outstanding shares of voting stock of the Borrower, (b) 30% or more of the members of the Board of Directors of the Borrower on any date shall not have been (i) members of the Board of Directors of the Borrower on the date 12 months prior to such date or (ii) approved by Persons who constitute at least a majority of the members of the Board of Directors of the Borrower as constituted on the date 12 months prior to such date, (c) all or substantially all of the assets of the Borrower are sold in a single transaction or series or related transactions to any Person or (d) the Borrower merges or consolidates with or into any other Person, with the effect that immediately after such transaction the stockholders of the Borrower immediately prior to such transaction hold less than 75% of the total voting power entitled to vote in the election of directors, managers or trustees of the Person surviving such transaction.   “Chase” means JPMorgan Chase Bank, N.A.   Annex A - Page 3 --------------------------------------------------------------------------------   “Commitment” means as to any Bank, the amount of such Bank’s Commitment set forth on Schedule 2.01, as the same may be increased pursuant to Section 2.17 or reduced or terminated pursuant to Sections 2.05 or 7.01.   “Commitment Increase Agreement” means an Agreement, substantially in the form of Exhibit 2.17A attached hereto, executed by a Bank that has increased its Commitment pursuant to Section 2.17 hereof.   “Commitment Increase Notice” has the meaning specified in Section 2.17(a).   “Commitment Percentage” means, as to any Bank, a percentage determined pursuant to the following formula: (C ÷ T) × 100 = CP; where C is such Bank’s Commitment (without giving effect to any termination of the Commitments pursuant to Section 7.01), T is the Total Commitment (without giving effect to any termination of the Commitments pursuant to Section 7.01) and CP is such percentage.   “Communications” has the meaning specified in Section 9.03.   “Consolidated Subsidiary” means, as of any date, any Subsidiary of the Borrower that, in accordance with generally accepted accounting principles, would be included in the consolidated financial statements of the Borrower prepared as of such date.   “Conversion Date” means, when used with respect to the Conversion of any group of Loans, the date such Loans are to be Converted into Loans of another Type pursuant to Section 2.02 or otherwise in accordance with Article II.   “Conversion Notice” has the meaning specified in Section 2.02(c).   “Convert,” “Conversion” and “Converted” each refers to a conversion of Loans of one Type into Loans of another Type pursuant to Section 2.02 or otherwise in accordance with Article II.   “Current Liabilities” means, as of any date, all liabilities (including, without limitation, accounts payable incurred for services rendered and property purchased in the ordinary course of business) which would be reflected as current liabilities on a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries prepared as of such date in accordance with generally accepted accounting principles consistently applied, but excluding current maturities of Funded Debt of the Borrower and its Consolidated Subsidiaries as of such date.   “Debt” of any Person shall mean, without duplication: (a) any obligation of such Person for borrowed money, (b) any obligation of such Person evidenced by bonds, debentures, notes or other similar debt instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person, (d) any obligation of such Person for the deferred purchase price of any property or services, except accounts payable arising in the ordinary course of such Person’s business that have been outstanding less than ninety (90) days since the date of the related invoice, (e) the present value (discounted at the implicit rate, if known, or ten percent (10%) per annum otherwise) of all Capital Leases of such Person, (f) any Derivative Obligations of such Person, (g) any reimbursement obligations of such Person in respect of drawings under a letter of credit or similar instrument, and (h) any indebtedness or obligations of others of the type described in clauses (a) through (g) that is Guaranteed by such Person or secured by a Lien on any asset of such Person.   Annex A - Page 4 --------------------------------------------------------------------------------   “Default” means an Event of Default or an event which with the giving of notice or the lapse of time or both could, unless cured or waived, become an Event of Default.   “Default Rate” has the meaning specified in Section 2.07.   “Derivative Obligations” means, with respect to any Person, payment obligations with respect to foreign exchange transactions and interest rate, currency and commodity swaps, caps, floors, collars, forward sale contracts, other similar obligations and combinations of the foregoing (collectively, “swaps”). For the purposes of this Agreement, the amount of any Derivative Obligations shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that all swaps had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to any such swap provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined.   “Dollars” and “$” each means lawful money of the United States.   “Domestic Lending Office” means, with respect to any Bank, the office of such Bank specified as its “Domestic Lending Office” on Schedule 2.01, or such other office of such Bank as such Bank may from time to time specify to the Borrower, the Agent and the Funds Administrator.   “EBITDA” means Adjusted Net Income plus, to the extent same caused a reduction in Adjusted Net Income, Interest Expense, depreciation, amortization and income tax expense.   “Effective Date” means the date on which the conditions to effectiveness set forth in Article III to this Agreement are first satisfied.   “Eligible Assignee” means (a) any Bank or any Affiliate of any Bank; (b) a commercial bank organized under the laws of the United States, or any state thereof, and having total assets in excess of $1,000,000,000 and having deposits rated in either of the two highest generic letter rating categories (without regard to subcategories) from either Standard & Poor’s Rating Group or Moody’s Investors Service, Inc.; (c) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (“OECD”), or a political subdivision of any such country, and having total assets in excess of $1,000,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; (d) the central bank of any country which is a member of the OECD; and (e) any other financial institution approved by the Agent.   Annex A - Page 5 --------------------------------------------------------------------------------   “Environmental Laws” means federal, state or local laws, rules or regulations, and any judicial, arbitral or administrative interpretations thereof, including, without limitation, any judicial, arbitral or administrative order, judgment, permit, approval, decision or determination pertaining to health, safety or the environment in effect at the time in question, including, without limitation, the Clean Air Act, as amended, the Oil Pollution Act of 1990, as amended, the Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act, as amended, the Resource Conservation and Recovery Act, as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendment and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, comparable state and local laws, and other environmental conservation and protection laws.   “ERISA” means the Employee Retirement Income Security Act of 1974, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed to also refer to any successor sections.   “ERISA Affiliate” means any (i) corporation which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Internal Revenue Code) as the Borrower, (ii) partnership or other trade or business (whether or not incorporated) under common control (within the meaning of Section 414(c) of the Internal Revenue Code) with the Borrower, (iii) member of the same affiliated service group (within the meaning of Section 414(m) of the Internal Revenue Code) as the Borrower, any corporation described in clause (i) above or any partnership or trade or business described in clause (ii) above or (iv) other Person required to be aggregated with the Borrower or an ERISA Affiliate thereof, as defined above, pursuant to Section 414(o) of the Internal Revenue Code.   “Eurocurrency Liabilities” has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.   “Eurodollar Event” has the meaning specified in Section 2.13.   “Eurodollar Lending Office” means, with respect to any Bank, the office of such Bank specified as its “Eurodollar Lending Office” on Schedule 2.01 (or, if no such office is specified, its Domestic Lending Office), or such other office of such Bank as such Bank may from time to time specify to the Borrower, the Agent and the Funds Administrator.   “Eurodollar Rate” means, for the Interest Period for each Eurodollar Rate Loan comprising part of the same Borrowing, an interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rates per annum at which deposits in U.S. dollars are offered to the Agent by prime banks in whatever eurodollar interbank market may be selected by the Agent in its sole discretion, acting in good faith, on or about 9:00 a.m. (Houston time) (or as soon thereafter as practicable) two Business Days before the first day of such Interest Period, and in accordance with the then existing practice in such eurodollar interbank market for delivery of such deposits on the first day of such Interest Period in immediately available funds, in an amount substantially equal to the Eurodollar Rate Loan to be made by the Agent in its capacity as a Bank and comprising part of such Borrowing and for a period equal to such Interest Period.   Annex A - Page 6 --------------------------------------------------------------------------------   “Eurodollar Rate Borrowing” means a Borrowing consisting of Eurodollar Rate Loans.   “Eurodollar Rate Loan” means a Loan that the Borrower has designated, or is deemed to have designated, as such in accordance with Article II.   “Eurodollar Rate Reserve Percentage” means, as to any Bank for the Interest Period for any Eurodollar Rate Loan, the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for such Bank with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period.   “Events of Default” has the meaning specified in Section 7.01.   “Excluded Affiliate” means (a) any Subsidiary of the Borrower other than a Consolidated Subsidiary, and (b) all Persons, other than Subsidiaries, in which the Borrower, directly or indirectly, owns or controls five percent (5%) or more of the equity interests of such Person.   “Existing Credit Agreement” has the meaning specified in the Preliminary Statement to this Agreement.   “Fair Market Value” shall mean (a) with respect to any asset (other than Dollars) the price at which a willing buyer would buy and a willing seller would sell such asset in an arms’ length transaction and (b) with respect to Dollars, the amount of such Dollars.   “Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of Dallas, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it.   “Fee Letter” has the meaning specified in Section 2.10.   “Fitch Rating” means the rating classification of the Borrower’s senior debt, classified according to risk, issued by Fitch, Inc.   “Fixed Rate” means the Adjusted CD Rate or the Eurodollar Rate.   Annex A - Page 7 --------------------------------------------------------------------------------   “Fixed Rate Borrowing” means an Adjusted CD Rate Borrowing or a Eurodollar Rate Borrowing.   “Fixed Rate Loan” means an Adjusted CD Rate Loan or a Eurodollar Rate Loan.   “Funded Debt” means, as of any date, the sum of the following: (a) all Debt of the Borrower and its Consolidated Subsidiaries on a consolidated basis as of such date, less (b) to the extent included in the amount described in clause (a), the sum of the following (without duplication): (i) all Current Liabilities (other than Current Liabilities that represent Debt for borrowed money or Capital Leases) on a consolidated basis as of such date, (ii) any Debt of any Consolidated Subsidiary in excess of the Borrower’s proportionate share thereof (based on its direct or indirect equity interest therein), (iii) all other deferred long term liabilities that do not represent Debt for borrowed money or Capital Leases, including deferred compensation, deferred revenue and other deferred items classified as other liabilities of the Borrower and its Consolidated Subsidiaries on a consolidated basis as of such date, and (iv) all Derivative Obligations of the Borrower and its Consolidated Subsidiaries as of such date; plus (c) to the extent not otherwise included in the amount described in clause (a), the sum of the following (without duplication): (i) all Debt of the Borrower and its Consolidated Subsidiaries outstanding under a revolving credit or similar agreement, (ii) the present value (discounted at the implicit rate, if known, or ten percent (10%) per annum otherwise) of all obligations in respect of Capital Leases of the Borrower and its Consolidated Subsidiaries, and (iii) all obligations of the Borrower and its Consolidated Subsidiaries under Guaranties of Debt.   “Funds Administrator” has the meaning specified in the introduction to this Agreement.   “Governmental Authority” means any nation or government, any federal, state, province, city, town, municipality, county, local or other political subdivision thereof or thereto and any court, tribunal, department, commission, board, bureau, instrumentality, agency or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.   “Guaranties” means, as to any Person, all obligations (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or, in effect, guaranteeing any Debt of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including all obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such Debt or any property or assets constituting security therefor, (b) to advance or supply funds (i) for the purchase or payment of such Debt or (ii) to maintain working capital or other balance sheet conditions or otherwise to advance or make available funds for the purchase or payment of such Debt, (c) to lease property or to purchase securities or other property or services primarily for the purpose of assuring the owner of such Debt of the ability of the primary obligor to make payment of the Debt or (d) otherwise to assure the owner of the Debt of the primary obligor against loss in respect thereof.   “Hazardous Materials” means any pollutant, contaminant, solid waste, asbestos, petroleum product, crude oil or a fraction thereof, any toxic or hazardous substance, material or waste, any flammable, explosive or radioactive material, any chemical which causes cancer or reproductive effects, or any other material or substance not mentioned above which is regulated under any Environmental Law.   Annex A - Page 8 --------------------------------------------------------------------------------   “Highest Lawful Rate” means, as to any Bank, at the particular time in question, the maximum nonusurious rate of interest which, under applicable law, such Bank is then permitted to charge the Borrower on the Loans or the other obligations of the Borrower under the Loan Documents, and as to any other Person, at the particular time in question, the maximum nonusurious rate of interest which, under applicable law, such Person is then permitted to charge with respect to the obligation in question. If the maximum rate of interest which, under applicable law, the Banks are permitted to charge the Borrower on the Loans or the other obligations of the Borrower under the Loan Documents shall change after the date hereof, the Highest Lawful Rate shall be automatically increased or decreased, as the case may be, as of the effective time of such change without notice to the Borrower or any other Person.   “Interest Expense” means, for any period, the aggregate of all interest expense deducted in the calculation of the Net Income of the Borrower for such period, determined in accordance with generally accepted accounting principles.   “Interest Period” means, for each Loan comprising part of the same Borrowing, the period commencing on the date of such Loan or the date of the Conversion of such Loan, as applicable, and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be (a) in the case of an Adjusted CD Rate Loan, 30, 60, 90 or 180 days, (b) in the case of a Prime Rate Loan, a period ending on the Termination Date, and (c) in the case of a Eurodollar Rate Loan, 1, 2, 3 or 6 months; provided, however, that:   (i)    the Borrower may not select any Interest Period for a Loan that ends after the Termination Date;   (ii)   Interest Periods commencing on the same date for Loans comprising part of the same Borrowing shall be of the same duration; and   (iii)   whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, in the case of any Interest Period for a Eurodollar Rate Loan, that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day.   “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time to time (or any successor statute), and the regulations promulgated thereunder.   “Investment” means any direct or indirect investment by one Person (the “investor”) in another Person (the “investee”), including, without limitation, (a) any loan or advance, whether initially funded by the investor or acquired by the investor from a third party, (b) any acquisition of equity interests by the investor, whether directly from the investee or from a third party by way of share purchase, merger or otherwise, (c) any capital or other contribution to the investee, whether made in cash or other assets, or by contributing a promissory note payable by the investor to the investee, (d) any Guarantee by the investor of Debt of the investee, and (e) the Fair Market Value of any assets or services transferred to the investee less the Fair Market Value of any consideration received by the investor in exchange therefor; provided, however, that the term “Investment” shall not include undistributed earnings on an Investment; and the amount of an “Investment,” for purposes of Section 6.07 hereof, shall be reduced by the amount of capital returned to the investor by the investee. The amount of any Investment that is made by transferring property other than Dollars shall be the Fair Market Value of the property so transferred.   Annex A - Page 9 --------------------------------------------------------------------------------   “Issuer” means JPMorgan Chase Bank, N.A. and its successors and assigns, or any other Bank that agrees to be an issuer of a Letter of Credit hereunder.   “Letter of Credit” means a letter of credit issued pursuant to Section 2.16 hereof.   “Letter of Credit Liabilities” means, at any time and in respect of any Letter of Credit, the sum of (i) the amount available for drawings under such Letter of Credit plus (ii) the aggregate unpaid amount of all payments made by Issuer to the beneficiary of a Letter of Credit that are not either repaid by Borrower or added to the amounts outstanding under the Notes.   “Lien” means, when used with respect to any Person, any mortgage, lien, charge, pledge, security interest or encumbrance of any kind (whether voluntary or involuntary, and whether imposed or created by operation of law or otherwise) upon, or pledge of, any of its property or assets, whether now owned or hereafter acquired, or any conditional sale agreement, Capital Lease or other title retention agreement.   “Loans” means the Loans made by the Banks to the Borrower pursuant to this Agreement.   “Loan Documents” shall mean this Agreement, the Notes, the Fee Letter and all other agreements, instruments and documents, including, without limitation, security agreements, notes, warrants, guaranties, mortgages, deeds of trust, subordination agreements, pledges, powers of attorney, consents, assignments, collateral assignments, letter agreements, contracts, notices, leases, amendments, financing statements, letter of credit applications and reimbursement agreements, and all other writings heretofore, now, or hereafter executed by or on behalf of the Borrower, any of its Affiliates or any other Person in connection with or relating to this Agreement, together with all agreements, instruments and documents referred to therein or contemplated thereby.   “Majority Banks” means at any time Banks holding at least fifty-one percent (51%) of the then aggregate unpaid principal amount of the Loans or, if no Loans are outstanding, Banks having Commitment Percentages in the aggregate equal to at least fifty-one percent (51%).   “Material Adverse Effect” means, as to any Person, the occurrence of any event that has, or could reasonably be expected to have, a material adverse effect on the business, property, assets, operations or condition, financial or otherwise, of such Person or on the ability of such Person to perform its obligations under the Loan Documents to which it is a party or to consummate the transactions contemplated thereby.   Annex A - Page 10 --------------------------------------------------------------------------------   “Material Debt” means, as at any date, an amount equal to five percent (5%) of the Borrower’s Funded Debt as of such date.   “Material Subsidiaries” means, collectively, each Consolidated Subsidiary of the Borrower that meets any of the following conditions: (a) the aggregate Investment of the Borrower and its other Consolidated Subsidiaries in such Consolidated Subsidiary exceeds five percent (5%) of the total assets of the Borrower and its Consolidated Subsidiaries as of the end of the most recently completed calendar year; or (b) the Borrower and its other Consolidated Subsidiaries’ proportionate share of the total assets (after intercompany eliminations) of such Consolidated Subsidiary exceeds five percent (5%) of the total assets of the Borrower and its Consolidated Subsidiaries as of the end of the most recently completed calendar year; or (c) the Borrower and its other Consolidated Subsidiaries’ equity in the income from continuing operations before income taxes, extraordinary items and cumulative effect of a change in accounting principle of such Consolidated Subsidiary exceeds five percent (5%) of Net Income for the most recently completed calendar year.   “Moody’s Rating” means the rating classification of the Borrower’s senior debt, classified according to risk, issued by Moody’s Investors Service.   “Net Income” means, for any period, the consolidated net earnings of the Borrower and its Consolidated Subsidiaries for such period, determined in accordance with generally accepted accounting principles.   “Net Worth” means, as of any date, the total shareholder’s equity (including capital stock, additional paid-in capital and retained earnings after deducting treasury stock) which would appear on a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries prepared as of such date in accordance with generally accepted accounting principles.   “New Bank” has the meaning specified in Section 2.17(b).   “New Bank Agreement” has the meaning specified in Section 2.17(b).   “Note” shall mean a Note issued pursuant to Section 2.04, together with all modifications, extensions, renewals and rearrangements thereof from time to time in effect.   “Other Activities” has the meaning specified in Section 8.03.   “Other Financings” has the meaning specified in Section 8.03   “Other Taxes” has the meaning specified in Section 2.11.   “PBGC” means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA and any successor thereto.   Annex A - Page 11 --------------------------------------------------------------------------------   “Person” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or other entity, or Governmental Authority.   “Plan” means any employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code, and in respect of which the Borrower, or any ERISA Affiliate is an “employer” as defined in Section 3(5) of ERISA.   “Prime Rate” means, as of any particular date, a rate per annum equal to the highest of (a) the Federal Funds Rate plus one-half of one percent (½%), (b) the secondary market rate for three-month Certificates of Deposit (adjusted for statutory reserve requirements) plus one percent (1%), and (c) the prime rate per annum most recently announced by the Agent as its prime rate of interest per annum, automatically fluctuating upward or downward, as the case may be, on the day of each announcement without special notice to the Borrower or any other Person. The Borrower acknowledges that the prime rate referred to in clause (c) of the preceding sentence may not be the Agent’s best or lowest rate, or favored rate, and any statement, representation or warranty in that regard or to that effect is hereby expressly disclaimed by the Agent.   “Prime Rate Borrowing” means a Borrowing consisting of Prime Rate Loans.   “Prime Rate Loan” means a Loan that the Borrower has designated, or is deemed to have designated, as such in accordance with Article II.   “Proceeds of Remedies” has the meaning specified in Section 7.04.   “Quarterly Payment Date” means each of September 30, December 31, March 31 and June 30 of each year.   “Re-Allocation Date” has the meaning specified in Section 2.17(e).   “Register” has the meaning specified in Section 9.02.   “Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System (respecting margin credit extended by banks), as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof.   “Regulation X” means Regulation X of the Board of Governors of the Federal Reserve System (respecting borrowers who obtain margin credit) as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof.   “Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment (including the abandonment or discarding of barrels, containers and other closed receptacles).   “Reportable Event” means any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder.   Annex A - Page 12 --------------------------------------------------------------------------------   “Requirements of Environmental Laws” means the requirements of any applicable Environmental Law relating to or affecting the Borrower or any of its Subsidiaries or the condition or operation of such Person’s business or its properties, both real and personal.   “Requirements of Law” shall mean any federal, state or local law, rule or regulation, permit or other binding determination of any Governmental Authority.   “Responsible Officer” means, as to any Person, the Chief Executive Officer, the President, the Chief Financial Officer or the Treasurer of such Person, or any employee of such Person designated in writing as a Responsible Officer by the Chief Executive Officer of such Person.   “Restricted Investment” means (a) any Investment by the Borrower or a Consolidated Subsidiary in an Excluded Affiliate and (b) any payment by the Borrower or any Consolidated Subsidiary of Debt of any Excluded Affiliate to the extent the Borrower or such Consolidated Subsidiary is not legally obligated to make such payment under the terms of such Debt.   “Restricted Payment” means any dividend or other distribution in respect of the capital stock or other equity interest of the Borrower or any Subsidiary of the Borrower (other than a distribution of capital stock or other equity interests of a Subsidiary of the Borrower), including, without limitation, any distribution resulting in the acquisition by the Borrower of securities which would constitute treasury stock. For purposes of this Agreement, the amount of any Restricted Payment made in property shall be the greater of (x) the Fair Market Value of such property (as determined by good faith by the board of directors (or equivalent governing body) of the person making such Restricted Payment) and (y) the net book value thereof on the books of such Person, in each case determined as of the date on which such Restricted Payment is made.   “Revolving Credit Exposure” means, with respect to any Bank at any time, the sum of the outstanding principal amount of such Bank’s Revolving Loans and its Letter of Credit Liabilities and Swingline Exposure at such time.   “Revolving Loan” means a Loan made pursuant to Section 2.02.   “S&P Rating” means the rating classification of the Borrower’s senior debt, classified according to risk, issued by Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc.   “Subsidiary” means, with respect to any Person, each other Person of which or in which such Person and its other Subsidiaries own, hold or control, directly or indirectly, securities or other ownership interests having ordinary voting power, in the absence of contingencies, to elect a majority of the board of directors of such other Person, or other persons performing similar functions for such Person, or, if there are no such directors or persons, having general voting power with respect to the activities of such Person, it being understood that the power to elect exactly 50% of the board of directors or such other persons does not constitute a “majority” as used herein. Unless the context otherwise requires, all references to a Subsidiary shall be considered to be references to Subsidiaries of the Borrower.   Annex A - Page 13 --------------------------------------------------------------------------------   “Substitution Event” has the meaning specified in Section 2.15.   "Swingline Bank" means JPMorgan Chase Bank, in its capacity as lender of Swingline Loans hereunder.   "Swingline Exposure" means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Bank at any time shall be its Commitment Percentage of the total Swingline Exposure at such time.   "Swingline Loan" means a Loan made pursuant to Section 2.03.   “Taxes” has the meaning specified in Section 2.11.   “Termination Date” means June 14, 2011, or the earlier termination in whole of the Commitments pursuant to Sections 2.05 or 7.01.   “Total Capitalization” means the total capitalization of the Borrower, including all debt and all equity, as determined in accordance with generally accepted accounting principles.   “Total Commitment” means an amount equal to the sum of the Banks’ Commitments.   “Transfer Notice” has the meaning specified in Section 9.02.   “Type” means, with respect to any Loan, the type of interest rate applicable to such Loan pursuant to this Agreement, and refers to an Adjusted CD Rate Loan, a Prime Rate Loan or a Eurodollar Rate Loan, each of which shall is a “Type” of Loan. Loans having different Interest Periods, regardless of whether they commence on the same date or have the same type of interest rate, shall be considered different Types of Loans.   Annex A - Page 14 -------------------------------------------------------------------------------- SCHEDULE 2.01 ALLOCATION AND BANK NAMES   1. JPMorgan Chase Bank, N.A.           Allocation $45,000,000.00 JPMorgan Chase Bank, N.A. 707 Travis Street, 8 CBBN 96 Houston, Texas 77002 Attention: John Stucker Telecopier: (713) 216-3769 Telephone: (713) 216-2339 [email protected] 2. Bank of America, N.A.           Allocation $45,000,000.00 Bank of America, N.A. Attention: David McCauley 901 Main Street, 66th Floor Dallas, Texas 75202-3714 Telecopier: (214) 209-0985 Telephone: (214) 209-0940 [email protected] 3. Wells Fargo Bank, N.A.           Allocation $35,000,000.00 Wells Fargo Bank, N.A. Wells Fargo U.S. Corporate Banking 1445 Ross Ave, Suite 2320 Dallas, Texas 75202 Attention: Stephen C. Melton Telecopier (214) 969-0371 Telephone: (214) 661-1221 [email protected] 4. DnB NOR Bank ASA           Allocation $35,000,000.00 DnB NOR Bank ASA 200 Park Avenue, 31st Floor New York, New York 10166 Attention: Kevin O’Hara Telecopier: (212) 681-3900 Telephone: (212) 681-3860   Schedule 2.01 - Page 1 --------------------------------------------------------------------------------   5. The Bank of Tokyo-Mitsubishi UFJ, Ltd.           Allocation $35,000,000.00 The Bank of Tokyo-Mitsubishi UFJ, Ltd. 2001 Ross Avenue, Suite 3150 Dallas, Texas 75201 Attention: Doug Barnell Telecopier: (214) 954-1007 Telephone: (214) 954-1240 [email protected] 6. Comerica Bank           Allocation $20,000,000.00 Comerica Bank 4100 Spring Valley Road, Suite 400 Dallas, Texas 75244 Attention: Bancroft Mattei Telecopier: (972) 361-2550 Telephone: _____________   7. The Northern Trust Company           Allocation $20,000,000.00 The Northern Trust Company 50 South LaSalle Street B-2 Chicago, Illinois 60603 Attention: Paul H. Theiss Telecopier: (312) 444-7028 Telephone: (312) 557-1791 [email protected] 8. Amegy Bank           Allocation $15,000,000.00 Amegy Bank 4400 Post Oak Parkway Houston, Texas 77027 Attention: Preston Moore Telecopier: (713) 571-5154 Telephone: _____________     Schedule 2.01 - Page 2 --------------------------------------------------------------------------------

  Exhibit 10.1 PURCHASE AND SALE AGREEMENT by and between NOBLE ENERGY, INC. and COLDREN RESOURCES LP dated May 15, 2006   --------------------------------------------------------------------------------   TABLE OF CONTENTS                               PAGE   ARTICLE 1   PURCHASE AND SALE     1     1.1     Purchase and Sale of Assets     1     1.2     Entech Properties     2   ARTICLE 2   PURCHASE PRICE     3     2.1     Purchase Price; Method of Payment; Deposit     3     2.2     Adjustments to Purchase Price     4     2.3     Payment and Calculation of Estimated Adjusted Purchase Price and Payment at Closing     5     2.4     Like-Kind Exchange Option     6     2.5     Post-Closing Adjustment     6   ARTICLE 3   TITLE AND ENVIRONMENTAL MATTERS     6     3.1     Title Due Diligence     6     3.2     Environmental Due Diligence     10     3.3     Notice of Breaches of Representations and Warranties Pre-Closing     12     3.4     Adjustments to Purchase Price for Title Defects, Environmental Defects and Breaches of Representations and Warranties     12     3.5     Deferred Claims and Disputes     12     3.6     Option to Cure Title Defects Post-Closing     13     3.7     Limited Warranty of Title     14     3.8     Notices to Holders of Preferential Purchase Rights     14     3.9     Exercise of Preferential Purchase Rights     15     3.10    Consents to Assignment     15     3.11    Casualty Loss     16   ARTICLE 4   REPRESENTATIONS AND WARRANTIES OF NOBLE     16     4.1     Existence     16     4.2     Power     16     4.3     Authorization     16     4.4     Brokers     17     4.5     Foreign Person     17     4.6     Litigation     17     4.7     Material Contracts     17     4.8     No Violation of Laws     18     4.9     Royalties, Etc     18   i --------------------------------------------------------------------------------   TABLE OF CONTENTS (CONTINUED)                               PAGE     4.10     Personal Property     18     4.11     Consents     19     4.12     Preferential Rights     19     4.13     Current Commitments     19     4.14     Environmental Orders/Notices     19     4.15     Gas Prepayment Arrangements; Take-or-Pay     19     4.16     Production Taxes     19     4.17     Leases     20     4.18     Well Status     20     4.19     Suspense     20     4.20     Additional Representations and Warranties     20   ARTICLE 5   REPRESENTATIONS AND WARRANTIES OF PURCHASER     20     5.1      Existence     20     5.2     Power     20     5.3     Authorization     21     5.4     Brokers     21     5.5     Further Distribution     21     5.6     Financial Statements     21     5.7     Matters Affecting United States Minerals Management Service Approval     21     5.8     Purchaser Financing     22     5.9     Bankruptcy Proceedings     22     5.10    Additional Representations and Warranties     22   ARTICLE 6   PRE-CLOSING OBLIGATIONS OF NOBLE     22     6.1     Operations     22     6.2     HSR Act     23   ARTICLE 7   PRE-CLOSING OBLIGATIONS OF PURCHASER     23     7.1     Confidentiality     23     7.2     Return of Data     24     7.3     Notice of Certain Title Matters and Imbalance     24     7.4     Indemnity Regarding Access     24     7.5     HSR Act     25   ARTICLE 8   NOBLE’S CONDITIONS OF CLOSING     25   ii --------------------------------------------------------------------------------   TABLE OF CONTENTS (CONTINUED)                               PAGE     8.1     Representations and Warranties     25     8.2     Performance     25     8.3     Officer or Attorney-in-Fact Certificate     25     8.4     Operatorship Forms     25     8.5     Bonds     25     8.6     Insurance     25     8.7     Certificate of Authority     25     8.8     Exemption Certificates     26     8.9     HSR Act     26     8.10    Casualty Loss or Condemnation     26     8.11    Purchase Price Adjustments     26   ARTICLE 9   PURCHASER’S CONDITIONS OF CLOSING     26     9.1     Representations and Warranties     26     9.2     Performance     26     9.3     Officer or Attorney-in-Fact Certificate     26     9.4     Litigation     26     9.5     Certificate of Authority     27     9.6     Operatorship Forms     27     9.7     HSR Act     27     9.8     Casualty Loss     27     9.9     Purchase Price Adjustments     27   ARTICLE 10   CLOSING     27     10.1    Time and Place of Closing     27     10.2    Closing Obligations     27     10.3    Post Closing Obligations     28   ARTICLE 11   ADDITIONAL AGREEMENTS     28     11.1    Calculation of Adjusted Purchase Price     28     11.2    Suspended Funds     29     11.3    Receipts and Credits     29     11.4    Assumption of Liabilities; Cross Indemnity     29     11.5    Imbalances     33     11.6    Transition Agreement     34   iii --------------------------------------------------------------------------------   TABLE OF CONTENTS (CONTINUED)                               PAGE     11.7     Further Assurances     34     11.8     Material Contracts     34     11.9     Marketing Contracts and Calls on Production     34     11.10    Gas Processing Arrangement     34     11.11    Payout Balances     34     11.12    Employee and Benefit Matters     34     11.13    Amendment of Schedules     36     11.14    Gas Processing     36     11.15    Description of Parties’ Intent     36   ARTICLE 12   TERMINATION     36     12.1     Right of Termination     36     12.2     Effect of Termination     37   ARTICLE 13   TAXES     37     13.1     Apportionment of Ad Valorem and Property Taxes     37     13.2     Sales Taxes     37     13.3     Other Taxes     38     13.4     Cooperation     38   ARTICLE 14   DOCUMENT RETENTION     38     14.1     Inspection     38     14.2     Destruction     39   ARTICLE 15   INDEPENDENT INVESTIGATION AND DISCLAIMER     39     15.1     Independent Investigation and Disclaimer     39   ARTICLE 16   ENVIRONMENTAL INDEMNITY     40     16.1     Physical and Environmental Conditions     40     16.2     General Environmental Indemnity     40   ARTICLE 17   MISCELLANEOUS     41     17.1     Dispute Resolution     41     17.2     Governing Law     43     17.3     Entire Agreement     43     17.4     Waiver     44     17.5     Captions     44     17.6     Assignment     44   iv --------------------------------------------------------------------------------   TABLE OF CONTENTS (CONTINUED)                               PAGE     17.7     Notices     44     17.8     Expenses     46     17.9     Severability     46     17.10    Publicity     46     17.11    Use of Noble’s Name     46     17.12    Consequential Damages     46     17.13    No Third-Party Beneficiary     46     17.14    Survival; Limitation of Liability     46     17.15    Counterparts and Exhibits     47     17.16    Operatorship Matters     47     17.17    Conflict With Assignment     48     17.18    DTPA Waiver     48     17.19    Redhibition Waiver     48     17.20    UTPCPL Waiver     48     17.21    Recordation     48     17.22    MMS Approval     49     17.23    Additional Documents and Actions     49     17.24    Cooperation in Connection with Regulatory Filings     49   ARTICLE 18   DEFINITIONS AND REFERENCES     50     18.1     Certain Defined Terms     50     18.2     Certain Additional Defined Terms     52             Exhibits:         Exhibit “A”   —   Leasehold Interests Exhibit “A-1”   —   Wells Exhibit “A-2”   —   Orders and Contracts Exhibit “A-3”   —   Rights-of-Way, Easements, etc. Exhibit “A-4”   —   Platforms Exhibit “B”   —   Excluded Assets Exhibit “C”   —   Entech Properties Exhibit “C-1”   —   Entech Wells v --------------------------------------------------------------------------------             Schedules:         Schedule 2.4(a)   —   Form of Assignment of Purchase and Sale Agreement Schedule 3.1(c)   —   Allocated Value Schedule 3.9   —   Form of Preferential Purchase Right Election Letter Schedule 4.6   —   Litigation Assumed by Purchaser Schedule 4.7   —   Defaults Schedule 4.8   —   Violation of Laws Schedule 4.9   —   Royalties Schedule 4.10   —   Personal Property Schedule 4.11   —   Consents Schedule 4.12   —   Preferential Purchase Rights Schedule 4.13   —   Current Commitments Schedule 4.14(a)   —   Environmental Orders Schedule 4.14(b)   —   Environmental Notices Schedule 4.16   —   Production Taxes Schedule 4.17   —   Leases Schedule 4.18   —   Well Status Schedule 4.19   —   Suspense Funds Schedule 8.6   —   Purchaser’s Insurance Schedule 10.2(a)(1)   —   Assignment and Bill of Sale (Texas) Schedule 10.2(a)(2)   —   Assignment and Bill of Sale (Louisiana) Schedule 10.2(a)(3)   —   Assignment and Bill of Sale (Mississippi) Schedule 10.2(a)(4)   —   Assignment and Bill of Sale (Alabama) Schedule 10.2(a)(5)   —   Assignment and Bill of Sale (Record Title) Schedule 10.2(a)(6)   —   Assignment and Bill of Sale (Operating Rights) Schedule 11.6   —   Transition Agreement Schedule 11.9   —   Marketing Contracts and Calls on Production Schedule 11.11   —   Payout Balances vi --------------------------------------------------------------------------------   PURCHASE AND SALE AGREEMENT      This Purchase and Sale Agreement (“Agreement”) is made and entered into this the 15th day of May 2006, by and between NOBLE ENERGY, INC., a Delaware corporation (“Noble”), and COLDREN RESOURCES LP, a Delaware limited partnership (“Purchaser”). Noble and Purchaser are sometimes hereinafter referred to collectively as the “Parties” and individually as a “Party”.      WHEREAS, Noble desires to sell to Purchaser, and Purchaser desires to purchase from Noble, certain oil and gas properties and related assets on the terms and conditions set forth in this Agreement;      NOW, THEREFORE, for and in consideration of the premises and of the mutual covenants and agreements contained herein, Noble and Purchaser hereby agree as follows: ARTICLE 1 PURCHASE AND SALE      1.1 Purchase and Sale of Assets. On the Closing Date, but effective as of 7:00 a.m. Central Time, March 1, 2006 (the “Effective Time”), subject to the terms and conditions of this Agreement, Noble agrees to sell and convey to Purchaser, and Purchaser agrees to purchase and pay for, all of Noble’s right, title and interest in and to the following properties and related assets (collectively, the “Assets”):           (a) The oil, gas and mineral leasehold estates described in Exhibit “A”, together with all of Noble’s rights in respect of any pooled, communitized or unitized acreage of which any such interest is a part (collectively, the “Leasehold Interests”);           (b) (i) all wells, including, but not limited to, the wells described in Exhibit “A-1” (the “Wells”), equipment, pipelines, flowlines and facilities (including the platforms described on Exhibit “A-4” (the “Platforms”)), that are located on and used directly in connection with the production or treatment of oil and gas from the Leasehold Interests or that are located off the Leasehold Interests but used directly in connection with the production or treatment of oil and gas from the Leasehold Interests, (ii) all Hydrocarbon volumes attributable to the Leasehold Interests and produced on or after the Effective Time, (iii) to the extent same are assignable or transferable by Noble without restriction under Applicable Law or third-party agreements (without the payment of any funds or other consideration), all orders, contracts, agreements and other instruments (other than instruments subject or relating to attorney/client privilege, and production sales agreements with any Affiliates or divisions of Noble, which will be terminated effective as of the Closing Date), which are described in Exhibit “A-2”   (collectively, the “Orders and Contracts”), (iv) to the extent same are assignable or transferable by Noble under Applicable Law or third-party agreements (without the payment of any funds or other consideration), all rights-of-way, easements, authorizations, permits and similar rights and interests that are used directly in connection with the operation of the Assets which are described in Exhibit “A-3”, and (v) all other rights, privileges, benefits, powers and obligations conferred or imposed upon the owner and holder of the Leasehold Interests; and 1 --------------------------------------------------------------------------------             (c) To the extent same are attributable or allocable to the Leasehold Interests and not subject or relating to attorney/client privilege or a third party restriction on disclosure and such restriction is not removed or otherwise satisfied, originals, to the extent available, or, if originals are not available to Noble, copies of the following records: (i) lease and land records, (ii) development geological records, (iii) operations, production and engineering records, (iv) facility and well records, and (v) to the extent requested by Purchaser and to the extent Noble is reasonably capable of providing same, certain data base information, in each case excluding any exploration geological records, any geophysical data, any interpretive or forecast data, and any such records or data that are not assignable pursuant to the terms of Applicable Law or third party agreements (without the payment of any funds or other consideration) (collectively, the “Records”);      The Parties acknowledge that the Parties intend that, pursuant to this Agreement, Noble shall convey and Purchaser shall purchase, except for the Excluded Assets, any and all of Noble’s right, title, and interest in the leases described on Exhibit “A”, including all of Noble’s right, title and interest in and to all depths associated with the leases described on Exhibit “A”.      SAVE AND EXCEPT, and the Assets shall not include, the assets and properties described in Exhibit “B” and any other assets and properties excluded pursuant to the terms hereof (the “Excluded Assets”).      1.2 Entech Properties. Pursuant to that certain Amended and Restated Participation Agreement dated December 27, 1993 by and between Noble (formerly known as Energy Development Corporation) and Entech Enterprises, Inc. (“Entech”), Noble assigned five percent (5%) of its interest in the properties identified on Exhibit “C” and Exhibit “C-1” to Entech. Entech has not divested itself of its interest in said properties. Under the Amended and Restated Participation Agreement, in the event that Noble receives an offer from a third party to purchase all or a portion of its interest in the properties identified on Exhibit “C” and Exhibit “C-1”, Entech shall have the right to cause Noble to purchase Entech’s interest in such properties or cause said interest to be purchased on the same terms and conditions applicable to the sale of Noble’s interest. Accordingly, upon execution of this Agreement, Noble will give Entech written notice of the proposed price and all of the pertinent terms and conditions of the proposed sale, and Noble shall promptly provide Purchaser with a copy of all correspondence sent to or received from Entech with respect thereto. Should Entech elect to sell its interests, Purchaser hereby agrees that it shall negotiate in good faith an agreement to purchase the Entech interests from Entech on the same terms and conditions applicable to the sale of Noble’s interest hereunder (proportionately reduced as is commensurate with the price to be paid for the Entech interests). The Entech interest will be priced on the same basis as Noble’s interests and the purchase thereof will be subject to the same terms and conditions as Noble’s interests (proportionately reduced as is commensurate with the price to be paid for the Entech interests). 2 --------------------------------------------------------------------------------   ARTICLE 2 PURCHASE PRICE      2.1 Purchase Price; Method of Payment; Deposit.           (a) The purchase price for the Assets shall be $625,000,000 (the “Purchase Price”), which amount shall be adjusted as provided in Section 2.2.           (b) All amounts required under this Article 2 to be paid by any Party to the other Party shall be made by wire transfer of immediately available funds to an account designated by the payee thereof, which designation shall be made not later than two (2) Business Days prior to the date such payment is due.           (c) On May 16, 2006, Purchaser shall deliver to JPMorgan Chase Bank, N.A. (the “Escrow Agent”), an amount equal to $20,000,000, and Purchaser shall deliver an additional $30,000,000 to the Escrow Agent within twelve (12) Business Days after the date hereof pursuant to that certain letter guarantee of even date herewith from First Reserve Fund X, L.P. (collectively, the “Deposit”).           (d) The Deposit shall be held by the Escrow Agent and distributed as follows:                (i) if this Agreement is terminated by mutual consent of the Parties as provided in Section 12.1(a), the Deposit shall be returned by the Escrow Agent to Purchaser;                (ii) if this Agreement is terminated by either Party pursuant to the termination right provided in Article 12 and at such time Noble has not performed in all material respects its obligations hereunder or has materially breached any representation and warranty, and has been unwilling or unable to perform, and Purchaser has performed, or has been willing and able to perform, in all material respects the obligations to be performed by it at or prior to Closing (and Noble’s failure is not due to a breach by Purchaser of its obligations hereunder), Purchaser shall have the right to have the Deposit returned by the Escrow Agent to Purchaser; or as an alternative to termination under Article 12, Purchaser shall have the right to specific performance;                (iii) if this Agreement is terminated by either Party pursuant to the termination right provided in Article 12 and at such time Noble has performed, or been willing and able to perform, in all material respects its obligations hereunder and Purchaser has been unwilling or unable to perform, or has materially breached any representation or warranty by Purchaser or failed to perform in all material respects the obligations to be performed by it at or prior to Closing (and Purchaser’s failure is not due to a breach by Noble of its obligations hereunder), Noble shall have the right to have the Deposit released by the Escrow Agent to Noble as liquidated damages, in which case Noble shall be free immediately to enjoy all rights of ownership of the Assets, and to sell, transfer, encumber or otherwise dispose of the Assets to any third party without restriction under this Agreement;                (iv) if this Agreement is terminated and neither Party is in material default hereunder, the Deposit will be returned by the Escrow Agent to Purchaser; and 3 --------------------------------------------------------------------------------                  (v) if Closing occurs, Noble shall (or shall cause the Escrow Agent to) (A) if Noble has elected to effect a like-kind exchange pursuant to Section 2.4, (1) return the Deposit to Purchaser or (2) if Purchaser so directs in writing, transfer the Deposit to the qualified escrow/trust account or (B) if Noble has not elected to effect a like-kind exchange pursuant to Section 2.4, apply the Deposit towards the Purchase Price.           (e) Purchaser and Noble will enter into a form of escrow agreement (the “Deposit Escrow Agreement”) simultaneously with the execution of this Agreement setting forth the specific terms regarding the Deposit, including directing the Escrow Agent to invest the Deposit in an interest-bearing account and providing that the Party entitled to receive the Deposit under this Agreement shall also be entitled to receive all interest earned thereon.           (f) Purchaser further acknowledges and agrees that if Noble becomes entitled to the Deposit pursuant to the provisions of Section 2.1(d)(iii), Noble’s damages under such circumstances would be difficult to ascertain and Noble shall be entitled to liquidated damages in an amount equal to the Deposit. Accordingly, the delivery to Noble of the Deposit as provided in Section 2.1(d)(iii) above shall be deemed to constitute the payment by Purchaser to Noble of such liquidated damages, but in no event shall such delivery of the Deposit as payment of liquidated damages constitute or be construed as a penalty.      2.2 Adjustments to Purchase Price. The Purchase Price for the Assets shall be adjusted as follows (the resulting amount being herein referred to as the “Adjusted Purchase Price”):           (a) The Purchase Price shall be increased by an amount equal to the sum of the following amounts:                (i) the amount of all expenses (net to Noble’s interest) incurred and paid or to be paid by or on behalf of Noble that are attributable to the ownership or operation of the Assets and to the period of time from and after the Effective Time, including without limitation, capital expenditures, royalties, ad valorem, property and similar taxes and assessments, severance, sales and production taxes (but excluding income taxes and franchise taxes), rentals and similar charges, amounts billed under applicable operating agreements and prepaid expenses, but excluding all costs and expenses associated with litigation for which Noble expressly retains liability in this Agreement as described in Section 11.4(c);                (ii) the amount equal to the aggregate sum of the Allocated Value of each Asset designated with a negative value that is either (A) purchased by a holder of a preferential purchase right covering such Asset as contemplated in Section 3.9, (B) held back from the Closing pursuant to Section 3.9 or 3.10 or (C) excluded from this Agreement pursuant to Section 3.2(c) or Section 3.11;                (iii) an amount equal to the sum of four and 50/100 dollars ($4.50) per mcf, less royalties, overrides and taxes, that the total amount of net underproduction of the Assets reflect an Imbalance in excess of 2.1 bcf of gas; and 4 --------------------------------------------------------------------------------                  (iv) an amount equal to the sum of all amounts for which Noble is entitled to receive a Purchase Price increase pursuant to Section 3.1(f).                (b) The Purchase Price shall be decreased by an amount equal to the sum of the following amounts (determined without duplication):                (i) the amount of all proceeds (net to Noble’s interest) earned and received or to be received by or on behalf of Noble (other than proceeds from the exercise by third parties of preferential rights to purchase all or any portion of the Leasehold Interests) that are attributable to the ownership or operation of the Assets from and after the Effective Time;                (ii) an amount equal to the aggregate sum of the Allocated Value of each Asset designated with a positive value that is either purchased by a holder of a preferential purchase right covering such Asset as contemplated in Section 3.9 or held back from the Closing pursuant to Section 3.9 or 3.10;                (iii) an amount equal to the aggregate of the Title Defect Amounts, Environmental Defect Values and Damages for which Purchaser is entitled to receive as a Purchase Price reduction pursuant to Section 3.4;                (iv) an amount equal to the aggregate sum of the Allocated Value of each Asset designated with a positive value that is excluded from this Agreement pursuant to Section 3.2(c) or Section 3.11;                (v) an amount equal to the Adjustment Amount referenced in Section 3.5;                (vi) an amount equal to the Defects Escrow Amount as provided in Section 3.6; and                (vii) an amount equal to the sum of four and 50/100 dollars ($4.50) per mcf, less royalties, overrides and taxes, that the Assets reflect an Imbalance of gas equal to the sum of (A) net underproduction of the Assets between or equal to .1 or 0 bcf of gas, and (B) any net overproduction of gas.      2.3 Payment and Calculation of Estimated Adjusted Purchase Price and Payment at Closing.           (a) Noble shall prepare and deliver to Purchaser, at least five (5) “Business Days” (which term shall mean any day except a Saturday, Sunday or other day on which commercial banks in New York, New York, or Houston, Texas are required or authorized by law to be closed) prior to the Closing Date, Noble’s good faith estimate of the Adjusted Purchase Price to be paid at Closing to Noble (such estimated Adjusted Purchase Price being herein referred to as the “Estimated Adjusted Purchase Price”), together with a statement setting forth Noble’s good faith estimate of the amount of each adjustment to the Purchase Price to be made pursuant to Section 2.2. The Parties shall negotiate in good faith and attempt to agree on such estimated adjustments prior to Closing. In the event any estimated adjustment amounts are not 5 --------------------------------------------------------------------------------   agreed upon prior to Closing, then such disagreement shall be resolved as provided in Section 17.1.           (b) At Closing, Purchaser shall pay to Noble (or to the qualified escrow/trust account if Noble has exercised its right to consummate this transaction as a like-kind exchange pursuant to Section 2.4) the Estimated Adjusted Purchase Price determined as set forth in Section 2.3(a), less an amount equal to the Deposit only if (i) Noble has not elected to effect a like-kind exchange pursuant to Section 2.4 or (ii) Noble has elected to effect a like-kind exchange pursuant to Section 2.4 and the Parties have directed the Escrow Agent to transfer the Deposit to the qualified escrow/trust account.      2.4 Like-Kind Exchange Option.           (a) Noble and Purchaser hereby agree that Noble, in lieu of the sale of the Assets to Purchaser for the cash consideration provided herein, shall have the right at any time prior to Closing to assign all or a portion of its rights under this Agreement to a qualified intermediary in order to accomplish the transaction in a manner that will comply, either in whole or in part, with the requirements of a like-kind exchange pursuant to §1031 of the Code. In the event Noble assigns its rights under this Agreement pursuant to this Section 2.4, Noble agrees to notify Purchaser in writing of such assignment at or before Closing. If Noble assigns its rights under this Agreement pursuant to this Section 2.4, Purchaser agrees to (i) acknowledge Noble’s assignment of its rights in this Agreement in the form attached hereto as Schedule 2.4(a), and (ii) deposit the Estimated Adjusted Purchase Price with the qualified escrow or qualified trust account at Closing.           (b) Noble hereby acknowledges that assignment of its rights pursuant to this Section 2.4 does not relieve Noble from any of its obligations under this Agreement.      2.5 Post-Closing Adjustment. Within five (5) Business Days after the final determination of the Adjusted Purchase Price in accordance with Section 11.1, Purchaser shall pay to Noble or Noble shall pay to Purchaser, as the case may be, the amount by which such final Adjusted Purchase Price is greater than or less than, respectively, the Estimated Adjusted Purchase Price. ARTICLE 3 TITLE AND ENVIRONMENTAL MATTERS      3.1 Title Due Diligence.           (a) From the date of this Agreement until 5:00 p.m. Central Time on June 30, 2006 (the “Examination Period”), Noble shall afford Purchaser and its authorized representatives reasonable access during normal business hours to the office, personnel and books and records of Noble in order for Purchaser to conduct a title examination as it may choose to conduct with respect to the Assets in order to determine whether Title Defects exist (“Purchaser’s Title Review”); provided, however, that such investigation shall be upon reasonable notice and shall not unreasonably disrupt the personnel and operations of Noble or 6 --------------------------------------------------------------------------------   impede the efforts of Noble to comply with its other obligations under this Agreement. Such books and records shall include all abstracts of title, title opinions, title files, ownership maps, lease files, assignments, division orders, operating records and agreements, well files, financial and accounting records, geological, geophysical and engineering records, in each case insofar as same may now be in existence and in the possession of Noble, excluding, however, any information that Noble is prohibited from disclosing by bona fide, Third Party confidentiality restrictions (provided that Noble shall use its reasonable efforts to cause such restrictions to be removed with respect to Purchaser). The cost and expense of Purchaser’s Title Review, if any, shall be borne solely by Purchaser. Prior to the Closing Date, Purchaser shall not contact any of the customers or suppliers of Noble or its working interest co-owners or operators in connection with the transactions contemplated hereby, whether in person or by telephone, mail or other means of communication, without the prior written consent of Noble.           (b) If Purchaser discovers any Title Defect affecting any of the Assets, Purchaser may notify Noble prior to the expiration of the Examination Period of such alleged Title Defect. To be effective, such notice (“Title Defect Notice”) must (i) be in writing, (ii) be received by Noble prior to the expiration of the Examination Period, (iii) describe the Title Defect in detail (including any alleged variance in the Net Revenue Interest), (iv) identify the specific Asset(s) affected by such Title Defect, and (v) include the value of such Title Defect as determined by Purchaser in good faith. Subject to Sections 3.7, 3.9, 3.10, 4.11, 4.12, 4.16 and 4.17, any matters that may otherwise constitute Title Defects, but of which Noble has not been specifically notified by Purchaser in accordance with the foregoing, shall be deemed to have been waived by Purchaser for all purposes. Upon the receipt of such effective Title Defect Notice from Purchaser, Noble shall have the option, in addition to the remedies set forth in Section 3.1(c), but not the obligation, to attempt to cure such Title Defect at any time prior to the Closing. The Asset affected by such uncured Title Defect shall be a “Title Defect Asset”.           (c) With respect to each Title Defect that is not cured on or before the Closing, the Purchase Price shall be reduced, subject to Section 3.4, by the Title Defect Amount with respect to such Title Defect Asset. The “Title Defect Amount” shall mean, with respect to a Title Defect Asset, the amount by which such Title Defect Asset is impaired as a result of the existence of one or more Title Defects, which amount shall be determined as follows:                (i) The Title Defect Amount with respect to a Title Defect Asset shall be determined by taking into consideration the “Allocated Value” (as set forth in Schedule 3.1(c) attached hereto) of the Asset (or the Wells associated therewith) subject to such Title Defect, the portion of the Asset subject to such Title Defect, and the legal effect of such Title Defect on the Asset (or the Wells or other property associated therewith) affected thereby; provided, however, that: (A) if such Title Defect is in the nature of Noble’s Net Revenue Interest in an Asset being less than the Net Revenue Interest set forth in Exhibit “A” or Exhibit “A-1” hereto, as the case may be, and the Working Interest remains the same, then the Title Defect Amount shall be equal to the Allocated Value for the relevant Asset (or the Wells associated therewith) multiplied by the percentage reduction in such Net Revenue Interest as a result of such Title Defect or (B) if such Title Defect is in the nature of a Lien, then the Title Defect Amount shall equal the amount required to fully discharge such Lien; and 7 --------------------------------------------------------------------------------                  (ii) If the Title Defect results from any matter not described in clause (A) or (B) of Section 3.1(c)(i), the Title Defect Amount shall be an amount equal to the difference between the value of the Title Defect Asset affected by such Title Defect with such Title Defect and the value of such Title Defect Asset without such Title Defect (taking into account the Allocated Value of the Title Defect Asset); and                (iii) If the Title Defect Asset has not been separately allocated an Allocated Value, but is part of an Asset or group of Assets which has or have an Allocated Value, then the Allocated Value of such Title Defect Asset shall be a fair and reasonable portion of the Allocated Value of such Asset or group of Assets which has or have an Allocated Value; and                (iv) In no event shall the Title Defect Amount related to a particular Asset exceed the Allocated Value, if any, of such Asset; and                (v) The Title Defect Amount with respect to a Title Defect Asset shall be determined without duplication of any costs or losses included in another Title Defect Amount hereunder. For example, but without limitation, if a lien affects more than one Title Defect Asset or the curative work with respect to one Title Defect results in the curing of any other Title Defect affecting the same or another Title Defect Asset, the amount necessary to discharge such lien or the cost and expense of such curative work shall be allocated among the Title Defect Assets so affected (in the ratios of the respective portions of the Purchase Price allocated to such Title Defect Assets) and the amount so allocated to a Title Defect Asset shall be included only once in the Title Defect Amount therefor.           (d) As used in this Section 3.1:                (i) “Defensible Title” means, as of the date of this Agreement and the Closing Date with respect to the Assets, such record title and ownership by Noble that: (A) entitles Noble to receive and retain, without reduction, suspension or termination, not less than the percentage set forth in Exhibit “A” or Exhibit “A-1”, as the case may be, as Noble’s Net Revenue Interest of all Hydrocarbons produced, saved and marketed from each Leasehold Interest and/or Well comprising such Asset as set forth in Exhibit “A” or Exhibit “A-1”, as the case may be, through plugging, abandonment and salvage of all Wells comprising or included in such Asset, and except for changes or adjustments that result from the establishment of units, changes in existing units (or the participating areas therein), or the entry into of pooling or unitization agreements after the date hereof unless made in breach of the provisions of Section 6.1; (B) obligates Noble to bear not greater than the percentage set forth in Exhibit “A”, Exhibit “A-1” or Exhibit “A-4”, as the case may be, as Noble’s Working Interest of the costs and expenses relating to the maintenance, development and operation of each Leasehold Interest, Well and/or Platform comprising such Asset, through plugging, abandonment and salvage of all Wells and/or Platforms comprising or included in such Asset, and except for changes or adjustments that result from the establishment of units, changes in existing units (or the participating areas therein), or the entry into of pooling or unitization agreements after the date hereof unless made in breach of the provisions of Section 6.1; (C) is free and clear of all Liens, except Permitted Encumbrances; (D) reflects that all consents to assignment, notices of 8 --------------------------------------------------------------------------------   assignment or preferential purchase rights which are applicable to or must be complied with in connection with the transaction contemplated by this Agreement or any prior sale, assignment or the transfer of such Asset, have been obtained and complied with or waived to the extent the failure to obtain or comply with the same could render this transaction or any such sale, assignment or transfer (or any right or interest affected thereby) void or voidable or could result in Purchaser or Noble incurring any liability; and (E) with respect to those Assets for which there is no Net Revenue Interest and/or Working Interest expressed on Exhibit “A”, Exhibit “A-1” or Exhibit “A-4”, as the case may be, is defensible.                (ii) “Permitted Encumbrances” shall mean (A) Liens for taxes which are not yet delinquent; (B) normal and customary Liens of co-owners under operating agreements, unitization agreements, and pooling orders relating to the Assets, which obligations are not yet due and pursuant to which Noble is not in default; (C) mechanic’s and materialman’s Liens relating to the Assets, which obligations are not yet due and pursuant to which Noble is not in default; (D) Liens in the ordinary course of business consisting of minor defects and irregularities in title or other restrictions (whether created by or arising out of joint operating agreements, farm-out agreements, leases and assignments, contracts for purchases of Hydrocarbons or similar agreements, or otherwise in the ordinary course of business) that are of the nature customarily accepted by prudent purchasers of oil and gas properties and do not decrease the Net Revenue Interest or increase the Working Interest set forth in Exhibit “A”, Exhibit “A-1” or Exhibit “A-4”, as the case may be (without a proportionate increase in the corresponding Net Revenue Interest), or materially affect the value of any property encumbered thereby; (E) all approvals required to be obtained from Governmental Entities that are lessors under Leasehold Interests forming a part of the Assets (or who administer such Leasehold Interests on behalf of such lessors) which are customarily obtained post-closing; (F) preferential rights to purchase and consent to transfer requirements of any Person (to the extent same have been complied with in connection with the prior sale, assignment or the transfer of such Asset); and (G) conventional rights of reassignment normally actuated by an intent to abandon or release a lease and requiring notice to the holders of such rights.                (iii) “Title Defect” shall mean any particular defect in or failure of Noble’s ownership of any Asset: (A) that causes Noble to not have Defensible Title to such Asset, (B) that has attributable thereto a Title Defect Amount in excess of $100,000 and (C) regarding which a Title Defect Notice has been timely and otherwise validly delivered. Notwithstanding any other provision in this Agreement to the contrary, defects or irregularities that have been cured or remedied by the applicable statutes of limitation or statutes for prescription shall not constitute and shall not be asserted a Title Defect.           (e) If prior to Closing Noble and Purchaser are unable to reach an agreement as to whether a Title Defect exists or, if it does exist, the Title Defect Amount attributable to such Title Defect, then the provisions of Section 3.5 shall apply.           (f) If Noble determines (or should Purchaser, in the course of Purchaser’s Title Review, determine) that Noble’s Net Revenue Interest in an Asset is greater than the Net Revenue Interest set forth in Exhibit “A” or Exhibit “A-1” hereto, as the case may be, by more than $100,000 and the Working Interest remains the same, then the Parties agree that the 9 --------------------------------------------------------------------------------   Purchase Price shall be increased in an amount equal to the Allocated Value for the relevant Asset multiplied by the percentage increase in such Net Revenue Interest.      3.2 Environmental Due Diligence.           (a) Purchaser shall have the right, or the right to cause an environmental consultant acceptable to Purchaser in its sole discretion (“Purchaser’s Environmental Consultant”), to conduct an environmental review of the Assets prior to the expiration of the Examination Period (“Purchaser’s Environmental Review”). No less than three (3) Business Days prior to the proposed commencement date of Purchaser’s Environmental Review, Purchaser shall notify Noble of the commencement of Purchaser’s Environmental Review and shall coordinate the locations of such activities with Noble. The cost and expense of Purchaser’s Environmental Review shall be borne solely by Purchaser. No Person, other than Purchaser’s Environmental Consultant and Purchaser’s employees or representatives, may conduct Purchaser’s Environmental Review. Noble shall have the right to have representatives thereof present to observe Purchaser’s Environmental Review conducted in Noble’s offices or on the Assets. With respect to any samples taken in connection with Purchaser’s Environmental Review, Noble shall be permitted to take split samples. Purchaser agrees to conduct Purchaser’s Environmental Review in a manner so as not to unduly interfere with the business operations of Noble and in compliance with all Applicable Laws, and Purchaser shall exercise due care with respect to Noble’s properties and their condition.           (b) Prior to the Closing, unless otherwise required by Applicable Law, Purchaser shall (and shall cause Purchaser’s Environmental Consultant, if applicable, to) treat confidentially any matters revealed by Purchaser’s Environmental Review and any reports or data generated from such review (the “Environmental Information”), and Purchaser shall not (and shall cause Purchaser’s Environmental Consultant, if applicable, to not) disclose any Environmental Information to any Governmental Entity or other third party (other than to any of Purchaser’s shareholders, employees, lenders or representatives that agree to treat such information confidentially in accordance herewith) without the prior written consent of Noble, except to the extent required by Applicable Law. Prior to the Closing, unless otherwise required by Applicable Law, Purchaser may use the Environmental Information only in connection with the transactions contemplated by this Agreement. If Purchaser, Purchaser’s Environmental Consultant, if applicable, or any third party to whom Purchaser has provided any Environmental Information in accordance with this Section 3.2(b) becomes legally compelled to disclose any of the Environmental Information, Purchaser shall provide Noble with prompt written notice and Noble may file a protective order, or seek any other remedy, as it deems appropriate under the circumstances. If this Agreement is terminated prior to the Closing, Purchaser shall deliver the Environmental Information to Noble, which Environmental Information shall become the sole property of Noble. At any time upon Noble’s written request to Purchaser, Purchaser shall provide copies of any report of Purchaser’s Environmental Consultant to Noble without charge.           (c) If Purchaser or Purchaser’s Environmental Consultant, if applicable, discovers any Environmental Defect prior to the expiration of the Examination Period, Purchaser shall notify Noble prior to the expiration of the Examination Period of such alleged Environmental Defect. To be effective, such notice (an “Environmental Defect Notice”) must 10 --------------------------------------------------------------------------------   (i) be in writing; (ii) be received by Noble prior to the expiration of the Examination Period; (iii) describe the Environmental Defect in reasonable detail, including (A) the specific Asset affected by or associated with such Environmental Defect, (B) if applicable, a site plan showing the location of all sampling events, boring logs and other field notes describing the sampling methods utilized and the field conditions observed, (C) the written conclusion of Purchaser’s Environmental Consultant, if applicable, that an Environmental Defect is believed to exist, which conclusion shall be reasonably substantiated by the factual data gathered during Purchaser’s Environmental Review, and (D) if feasible and applicable, a separate, reasonably specific citation of the provisions of the Environmental Laws alleged to be violated and the related facts that substantiate such violation; (iv) describe the procedures recommended to correct, eliminate or pay the Environmental Defect, together with any related recommendations from Purchaser’s Environmental Consultant, if applicable; and (v) set forth Purchaser’s good faith estimate of the Environmental Defect Value, including the basis for such estimate. Subject to Noble’s representations and indemnity obligations herein, any matters that may otherwise constitute Environmental Defects, but of which Noble has not been specifically notified by Purchaser in accordance with the foregoing, together with any environmental matter that does not constitute an Environmental Defect, shall be deemed to have been waived by Purchaser for purposes of this Section 3.2. Upon the receipt of effective notice from Purchaser, Noble shall have the option, in addition to the remedy set forth in Section 3.2(d), but not the obligation, to (x) attempt to cure such Environmental Defect at any time prior to the Closing, at the sole cost and expense of Noble or (y) exclude the Assets affected by such Environmental Defect from this Agreement and the Purchase Price to be paid at Closing shall be reduced by the Allocated Value for such Assets if such Allocated Value is positive and increased by such Allocated Value for such Assets if such Allocated Value is negative. If prior to Closing Noble and Purchaser are unable to reach an agreement as to whether an Environmental Defect exists or, if it does exist, the amount of the Environmental Defect Value attributable thereto, then the provisions of Section 3.5 shall be applicable.           (d) If any Environmental Defect described in a notice delivered in accordance with Section 3.2 is not cured on or before the Closing, then the Purchase Price shall be reduced, subject to Section 3.4, by the Environmental Defect Value of such Environmental Defect.           (e) As used in this Section 3.2:                (i) “Environmental Defect” shall mean, with respect to any given Asset, a violation of Environmental Laws in effect as of the date hereof in the jurisdiction in which such Asset is located, an obligation under Environmental Laws to undertake within a reasonable period of time any corrective action on an Asset, or any Environmental Liability arising from or attributable to any condition, event, circumstance, activity, practice, incident, action, or omission existing or occurring prior to the Closing Date, or the use, release, storage, treatment, transportation, or disposal of hazardous substances prior to the Closing Date (A) regarding which an Environmental Defect has been timely and otherwise validly delivered, and (B) that has an Environmental Defect Value attributable thereto in excess of $100,000.                (ii) “Environmental Defect Value” shall mean, (A) the reasonably estimated costs and expenses to correct such Environmental Defect in the most cost effective 11 --------------------------------------------------------------------------------   manner reasonably available, consistent with Environmental Laws, and (B) the amount of the Environmental Liabilities reasonably believed will be incurred or required to be paid by Noble and/or the Purchaser with respect thereto. The Parties recognize that the calculation of an Environmental Defect Value may require the use of assumptions and extrapolations; however, it is acknowledged and agreed that any such assumptions and extrapolations will be consistent with the known factual information and reasonable in nature.      3.3 Notice of Breaches of Representations and Warranties Pre-Closing. If, in the course of conducting its due diligence examination of Noble prior to Closing (other than in connection with Purchaser’s Title Review and Purchaser’s Environmental Review), Purchaser becomes aware of a breach of a representation and warranty made by Noble in this Agreement, Purchaser shall give Noble prompt notice of such breach, which notice shall (a) describe in detail the nature of the asserted breach and (b) specify the proposed Damages resulting from such asserted breach. The Parties shall endeavor in good faith to agree upon whether any breach of a representation and warranty made by Noble, in this Agreement asserted by Purchaser is an actual breach and, if it is determined that there is an actual breach, the amount of the Damages attributable thereto. If, however, the Parties are unable to reach an agreement, either on whether there is an actual breach or the amount of the Damages attributable thereto (as appropriate), the provisions of Section 17.1 shall be applicable.      3.4 Adjustments to Purchase Price for Title Defects, Environmental Defects and Breaches of Representations and Warranties. Notwithstanding anything to the contrary contained in this Agreement: (i) if the aggregate of the Title Defect Amounts, Environmental Defect Values and Damages arising from a breach of a representation and warranty made by Noble (excluding the representation and warranty contained in Section 4.7(d)), each as determined in accordance with this Agreement, is less than or equal to ten million dollars ($10,000,000) (the “Deductible Amount”), then no adjustment of the Purchase Price shall be made therefor, and (ii) if the aggregate of the Title Defect Amounts, Environmental Defect Values and Damages arising from a breach of a representation and warranty made by Noble (excluding the representation and warranty contained in Section 4.7(d)), each as determined in accordance with this Agreement, is greater than the Deductible Amount, then the Purchase Price shall be adjusted downward by (a) the amount that the aggregate of such Title Defect Amounts, Environmental Defect Values and Damages exceeds the Deductible Amount and (b) the amount of Damages attributable to an actual breach of the representation and warranty contained in Section 4.7(d).      3.5 Deferred Claims and Disputes. Subject to the terms of Section 3.9 and Section 3.10, in the event that the Parties are unable to reach an agreement prior to Closing as to whether (a) a Title Defect exists or, if it does exist, the Title Defect Amount attributable to such Title Defect or (b) an Environmental Defect exists or, if it does exist, the amount of the Environmental Defect Value attributable thereto, any such dispute or claim (a “Deferred Adjustment Claim”) shall be settled pursuant to this Section 3.5 and shall not prevent or delay Closing. In no event shall any Title Defect Amount or Environmental Defect Value asserted by Purchaser as a Deferred Adjustment Claim exceed the amount asserted by Purchaser therefor prior to the end of the Examination Period. With respect to each potential Deferred Adjustment Claim, Purchaser shall deliver to Noble prior to Closing a written notice describing each such potential Deferred 12 --------------------------------------------------------------------------------   Adjustment Claim, Purchaser’s good faith estimate of the value attributable to such Deferred Adjustment Claim (the “Purchaser‘s Estimate”) and a statement setting forth the facts and circumstances that support Purchaser’s position with respect to such Deferred Adjustment Claim and Purchaser’s Estimate. An amount equal to Purchaser’s Estimate of any Deferred Adjustment Claims (the “Adjustment Amount”) shall be deducted from the Purchase Price otherwise payable at Closing and paid into the Defects Escrow with the Defects Escrow Agent pursuant to the terms of the Defects Escrow Agreement. Any Adjustment Amount deposited into the Defects Escrow pursuant to this Section 3.5 will remain therein until released as provided in this Section 3.5. On or prior to the thirtieth (30th) consecutive calendar day following the Closing Date (the “Deferred Matters Date”), the Parties shall attempt in good faith to reach agreement on the Deferred Adjustment Claims and, ultimately, to resolve by written agreement all disputes regarding the Deferred Adjustment Claims. Any Deferred Adjustment Claims which are not so resolved on or before the Deferred Matters Date may be submitted by either Party to final and binding arbitration in accordance with Section 17.1. Notwithstanding anything herein provided to the contrary, including Section 3.6, Noble shall be entitled to cure any Title Defect which gives rise to a Deferred Adjustment Claim at any time prior to the point in time when a final and binding written decision of the Independent Expert is made pursuant to Section 17.1. If the value of any Deferred Adjustment Claim determined under the final and binding written decision of the Independent Expert pursuant to Section 17.1 or the written agreement of Purchaser and Noble (the “Resolved Amount”) is less than or equal to the Adjustment Amount regarding such Deferred Adjustment Claim, then the Resolved Amount withheld in the Defects Escrow (together with interest thereon) shall be promptly released therefrom to Purchaser in accordance with the terms of the Defects Escrow Agreement and, to the extent applicable, the remaining amount withheld in the Defects Escrow with respect to such Deferred Adjustment Claim (the “Overheld Amount”) (together with interest thereon) shall be promptly released to Noble in accordance with the terms of the Defects Escrow Agreement. Notwithstanding anything herein contained to the contrary, (x) in no event shall the Resolved Amount (less any interest earned thereon) be greater than Purchaser’s Estimate and (y) Purchaser shall pay to Noble an amount equal to the Agreed Rate on the Overheld Amount from the Closing Date until the date of payment.      3.6 Option to Cure Title Defects Post-Closing.           (a) Notwithstanding anything herein to the contrary, if Noble is not able to cure a Title Defect on or prior to Closing, Noble shall have the option, by notice in writing to Purchaser on or before Closing, to attempt to cure such Title Defect (other than a Title Defect where a difference in the Net Revenue Interest and/or Working Interest causes Noble to not have Defensible Title) after the Closing (with any such Title Defect being called a “Post-Closing Defect”). In such event, the transactions contemplated hereby will close as provided herein, but an amount equal to the Title Defect Amount for the Title Defect to which the Post-Closing Defect pertains (the “Defects Escrow Amount”) shall be deducted from the Purchase Price otherwise payable at Closing and paid into an escrow account (the “Defects Escrow”) established with a federally insured savings or banking institution mutually acceptable to Purchaser and Noble (the “Defects Escrow Agent”) pursuant to the terms of an escrow agreement in a form acceptable to the Defects Escrow Agent and reasonably acceptable to Purchaser and Noble (the 13 --------------------------------------------------------------------------------   “Defects Escrow Agreement”). The amount deposited into the Defects Escrow with respect to a Post-Closing Defect will remain therein until released as provided in Section 3.6(b).           (b) Purchaser will act in good faith and reasonably cooperate with Noble after the Closing to cure a Post-Closing Defect. If Noble and Purchaser mutually agree that a Post-Closing Defect has been cured, then within two (2) Business Days after such determination, the amount withheld in the Defects Escrow with respect thereto (together with any interest earned thereon) shall be released to Noble in accordance with the terms of the Defects Escrow Agreement. If Noble and Purchaser mutually agree that a Post-Closing Defect has been partially cured, then Noble and Purchaser shall mutually determine the portion of the amount retained in the Defects Escrow with respect thereto (together with any interest earned thereon) that should be paid to Purchaser to compensate it for the uncured portion thereof (together with interest earned thereon) and the remaining portion of such amount shall be released to Noble (together with any interest earned thereon) in accordance with the terms of the Defects Escrow Agreement.           (c) If Noble and Purchaser mutually agree that a Post-Closing Defect has not been cured, then within two (2) Business Days after such determination, the amount withheld in the Defects Escrow with respect thereto (together with any interest earned thereon) shall be released to Purchaser in accordance with the terms of the Defects Escrow Agreement. If, at the end of the 180-day period commencing on the Closing Date (the “Cure Period”), Noble has been unable to cure a Post-Closing Defect (and there is no dispute as to whether or not it has been cured), the amount withheld in the Defects Escrow with respect thereto (together with any interest earned thereon) shall be released to Purchaser in accordance with the terms of the Defects Escrow Agreement. If, at the end of the Cure Period, Noble and Purchaser are unable to agree whether there has been a satisfactory resolution of a Post-Closing Defect, then such disagreement shall be resolved as provided in Section 17.1.      3.7 Limited Warranty of Title. The transfer of the Assets to Purchaser shall be without warranty of title of any kind whatsoever, express, implied or statutory, except that Noble does hereby bind and obligate itself and its successors and assigns to warrant and defend, subject to the terms hereof, to the Permitted Encumbrances and to any Title Defects asserted pursuant to Section 3.1, title to the Leasehold Interests set forth on Exhibit “A” hereto, including the Working Interests and Net Revenue Interests as reflected on Exhibit “A-1” for the particular Wells identified thereon (excluding, however, title to or any representation with respect to the contractual working interests and unit interests as reflected in Exhibit “A” and Exhibit “A-1”), unto Purchaser, its successors and assigns, against all persons lawfully claiming or to claim the same or any part thereof by, through or under Noble or its Affiliates, but not otherwise; provided, however, that Noble may offset any breach by Noble of the forgoing warranty by $100,000 and by any unused portion of the Deductible Amount.      3.8 Notices to Holders of Preferential Purchase Rights. With respect to each party holding a preferential purchase right covering Leasehold Interests (a list of the affected Leasehold Interests is set forth in Schedule 4.12), upon execution of this Agreement, Noble shall promptly send to the holder of such preferential right a notice offering to sell to such holder, in accordance with the contractual provisions applicable to such right, those Leasehold Interests and related Assets covered by such right on the terms hereof and based on the Allocated Value of 14 --------------------------------------------------------------------------------   such affected Leasehold Interests, subject to adjustments in price in the same manner that the Purchase Price is adjusted pursuant to Article 2 and Article 11 of this Agreement.      3.9 Exercise of Preferential Purchase Rights.           (a) Noble shall use the Allocated Value (as set forth in Schedule 3.1(c)) to provide any required preferential right to purchase notifications to third parties based on the form of Preferential Purchase Right Election Letter attached hereto as Schedule 3.9 (the “Pref Right Notice”). If, within the time prescribed in the governing agreements, a holder of a preferential purchase right notifies Noble that it elects to exercise its rights with respect to an Asset to which its preferential purchase right applies (determined by and in accordance with the agreement in which the preferential purchase right arises), the Asset covered by that preferential purchase right will not be sold to the Party originally executing this Agreement as “Purchaser” (subject to the remaining provisions in this Article), and the Purchase Price will be reduced by the Allocated Value for such Asset if the Allocated Value is positive and increased by the Allocated Value for such Asset if the Allocated Value is negative. However, in the event the transactions contemplated by this Agreement should fail to close, the holder of such preferential purchase right shall not be entitled to purchase thereunder.           (b) If on the Closing Date any preferential purchase right applicable to an Asset and the transactions contemplated hereby has not been waived and the time to elect has not elapsed, such Asset(s) affected thereby shall be held back from the Assets to be conveyed to Purchaser at Closing (and the Purchase Price to be paid at Closing shall be reduced by the Allocated Value for such Asset(s) if such Allocated Value is positive and increased by the Allocated Value for such Asset(s) if such Allocated Value is negative) and Closing with respect to the unaffected Assets shall proceed, and the Parties shall conduct a second closing with respect to the Asset(s) affected by such preferential purchase right within ten (10) days (or the next Business Day thereafter if such day is not a Business Day) after any such preferential purchase right has been waived or the time to elect has elapsed. If such preferential purchase right has not been waived and the time to elect has not elapsed or has been exercised but not yet closed, within ninety (90) days after the Closing Date, the Asset(s) affected thereby, automatically and without need to amend this Agreement, shall be removed and excluded from this Agreement and Purchaser shall have no further rights or obligations with respect to the same.      3.10 Consents to Assignment. With respect to each party holding a consent to assign, upon execution of this Agreement, Noble shall promptly notify said parties of this Agreement and seek to obtain their consents to the assignments contemplated hereby. If Noble fails to obtain a material consent set forth on Schedule 4.11, then, unless otherwise mutually agreed by Noble and Purchaser, any Asset or portion thereof subject thereto shall be held back from the Assets to be conveyed to Purchaser at Closing, and the Purchase Price to be paid at Closing shall be reduced by the Allocated Value for such Asset (or portion thereof) if such Allocated Value is positive and increased by the Allocated Value for such Asset (or portion thereof) if such Allocated Value is negative. In the event that such consent (with respect to an Asset or portion thereof excluded pursuant to this Section 3.10 is obtained within sixty (60) days following the Closing then within five (5) days thereafter, Purchaser shall purchase such Asset or portion thereof and pay to Noble the amount by which the Purchase Price was reduced with respect 15 --------------------------------------------------------------------------------   thereto and Noble shall assign to Purchaser such Asset or portion thereof pursuant to the applicable Assignment and Bill of Sale set forth in Section 10.2(a).      3.11 Casualty Loss. Subject to Sections 8.10 and 9.8, if after the date hereof and prior to the Closing any portion of the Assets shall be damaged or destroyed by a Casualty or taken in condemnation or the exercise of eminent domain, Noble shall promptly notify Purchaser of the Assets so affected and, in the event of a Casualty, Noble’s good faith estimate of the time and expense required to repair such damage or destruction. Noble shall also elect by written notice to Purchaser at least five (5) Business Days prior to Closing either (a) in the event of a Casualty, to cause the Assets affected by such Casualty to be repaired or restored, at Noble’s sole cost and expense, as promptly as reasonably practicable (which work may extend after the Closing), (b) in the event of a Casualty, to indemnify Purchaser through a document reasonably acceptable to Purchaser against any costs and expenses that Purchaser reasonably incurs to repair the Assets subject to such Casualty or taking, (c) treat such Casualty or taking as a Title Defect with respect to the affected Assets or (d) exclude any Asset subject to such Casualty or taking from this Agreement and the Purchase Price to be paid at Closing shall be reduced by the Allocated Value for such Asset (or portion thereof) if such Allocated Value is positive and increased by the Allocated Value for such Asset (or portion thereof) if such Allocated Value is negative. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF NOBLE      Noble represents and warrants to Purchaser that:      4.1 Existence. Noble is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly qualified to carry on its business in the states or jurisdictions where the Assets are located.      4.2 Power. Noble has the corporate power and authority to enter into and perform this Agreement and the transactions contemplated hereby. No suit, action or other proceeding by a third party or a Governmental Entity is pending or threatened which seeks substantial damages from Noble in connection with, or seeks to restrain, enjoin or otherwise prohibit, the consummation of the transactions contemplated by this Agreement. Subject to applicable requirements under the HSR Act and to preferential purchase rights and restrictions on assignment of the type generally found in the oil and gas industry, and to rights to consent by, required notices to, and filings with or other actions by Governmental Entities where the same are customarily obtained subsequent to the assignment of oil and gas interests and leases, the execution, delivery and performance of this Agreement by Noble, and the transactions contemplated hereby, will not violate (a) any provision of the certificate of incorporation or bylaws of Noble, (b) any material agreement or instrument to which Noble is a party or by which Noble or any of the Leasehold Interests are bound, (c) any judgment, order, ruling, or decree applicable to Noble as a party in interest, or (d) any law, rule or regulation applicable to Noble.      4.3 Authorization. The execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all requisite corporate action on the part of Noble. This Agreement has been duly executed and delivered on 16 --------------------------------------------------------------------------------   behalf of Noble, and at the Closing all documents and instruments required hereunder to be executed and delivered by Noble shall have been duly executed and delivered. This Agreement does, and such documents and instruments shall, constitute legal, valid and binding obligations of Noble enforceable in accordance with their terms, subject, however, to the effect of bankruptcy, insolvency, reorganization, moratorium and similar laws from time to time in effect relating to the rights and remedies of creditors, as well as to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).      4.4 Brokers. Noble has incurred no obligation or liability, contingent or otherwise, for brokers’ or finders’ fees in respect of the matters provided for in this Agreement that will be the responsibility of Purchaser; and any such obligation or liability that might exist shall be the sole obligation of Noble.      4.5 Foreign Person. Noble is not a “foreign person” within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), Section 1445 and 7701 (i.e., Noble is not a nonresident alien, foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Code and any regulations promulgated thereunder).      4.6 Litigation. Schedule 4.6 sets forth all claims, suits, actions and litigation by any Person pending by or before any Governmental Entity or to Noble’s Knowledge, threatened, in each case, against Noble in connection with the Assets or otherwise relating to the Assets and which are to be assumed by Purchaser.      4.7 Material Contracts.           (a) Exhibit “A-2” sets forth all contracts of the type described below that are included in the Assets (collectively, the “Material Contracts”):                (i) any contract that can reasonably be expected to result in aggregate payments of more than $100,000 (based solely on the terms thereof and without regard to any expected increase in volumes or revenues) that is not terminable without penalty on sixty (60) days or fewer notice during the current or any subsequent calendar year;                (ii) any contract that can reasonably be expected to result in aggregate revenues to Noble of more than $500,000 (based solely on the terms thereof and without regard to any expected increase in volumes or revenues) during the current or any subsequent calendar year;                (iii) any Hydrocarbon purchase and sale, transportation, processing or similar contract relating to or included in the Assets that is not terminable without penalty on sixty (60) days or less notice;                (iv) any contract that is an indenture, mortgage, loan, credit or sale-leaseback or similar financial contract;                (v) any contract that constitutes a lease under which Noble is the lessor or the lessee of real or personal property which lease (A) cannot be terminated by Noble 17 --------------------------------------------------------------------------------   without penalty upon sixty (60) days or less notice and (B) involves an annual base rental of more than $100,000; and                (vi) any Affiliate contract which will not be terminated prior to Closing and/or that is in effect from and after the Effective Date.           (b) Except as set forth on Schedule 4.7 and except for such matters that would not have a Material Adverse Effect, there exist no defaults under any material contract listed on Exhibit “A-2” by Noble or, to Noble’s Knowledge, by any other Person that is a party to such contracts. As soon as possible but in any event no later than June 1, 2006, Noble agrees to deliver or make available to Purchaser for its review copies of each contract to which the Assets are subject, including all contracts listed on Exhibit “A-2” and all amendments thereto.           (c) No Asset shall be transferred to Purchaser at Closing subject to an existing hedge, forward sale, swap or similar contract, nor will the Purchase Price adjustments hereunder take into account the effects of any such contract.           (d) Except for contracts and agreements that are excluded from this Agreement in connection with Assets held back pursuant to Sections 3.9 and Section 3.10, there are no contracts or agreements included in or affecting the Assets (including any contract or agreement listed in Exhibit “A-2”) that (i) could materially restrict the ability of Purchaser to use the Assets as currently used by Noble; or (ii) a reasonable and prudent Person engaged in the business of the ownership, development and operation of oil and gas properties with the knowledge of all the facts and their legal bearing would not be willing to accept and that could result in liability or cost to Purchaser (excluding liabilities or costs arising from actions taken by Purchaser in the ordinary course of business after the Closing) in excess of $1,000,000 in the aggregate.      4.8 No Violation of Laws. Except as set forth on Schedule 4.8, where Noble is the operator, and to Noble’s Knowledge in respect of Assets operated by others, the Assets are being operated in compliance with all laws, rules and regulations of any Governmental Entity applicable to such Assets, except where the failure to be in compliance would not have a Material Adverse Effect.      4.9 Royalties, Etc. Except as set forth on Schedule 4.9 and for such other items that are being held in suspense that will be transferred to Purchaser pursuant to Section 11.2, all royalties, overriding royalties and other burdens on production due with respect to the Assets have been paid. Except for revenues for which Noble has the right to net or offset against costs or expenses owed to Noble, all revenues received by Noble or its Affiliates, in its or their capacity as operator of the Assets, for the sale of Hydrocarbons attributable to any joint working interest owner’s interests in the leases included in the Assets have been paid.      4.10 Personal Property. To Noble’s Knowledge, except as set forth in Schedule 4.10, all personal property equipment and fixtures constituting a part of the Assets are in a state of repair so as to be adequate for normal operations, except where such state of repair would not have a Material Adverse Effect. 18 --------------------------------------------------------------------------------        4.11 Consents. Except for (a) consents set forth in Schedule 4.11, (b) Customary Post-Closing Consents, and (c) consents required to be obtained under contracts that are terminable upon not greater than sixty (60) days notice without payment of any fee, there are no consents required to be obtained by Noble from another Person to any assignment (in each case) that would be applicable in connection with the transfer of the Assets or the consummation of the transactions contemplated by this Agreement by Noble.      4.12 Preferential Rights. Except as set forth in Schedule 4.12, there are no preferential rights to purchase that are applicable to the transfer of the Assets in connection with the transactions contemplated hereby.      4.13 Current Commitments. Schedule 4.13 sets forth all authorities for expenditures (“AFE”) relating to the Assets to drill or rework wells or for other capital expenditures pursuant to any of the Material Contracts or any applicable joint operating agreement that require aggregate expenditures in excess of $250,000 for the particular individual operation or project (net to Noble’s interest) after the Effective Time.      4.14 Environmental Orders/Notices.           (a) Except as set forth in Schedule 4.14(a), with respect to the Assets, Noble has not entered into, or is not subject to, any agreements, consents, orders, decrees, judgments, license or permit conditions, or other directives of any Governmental Entity in existence as of the date of this Agreement based on any Environmental Laws that relate to the future use of any of the Assets and that require any change in the present conditions of any of the Assets.           (b) Except as set forth in Schedule 4.14(b), Noble has not received and to Noble’s Knowledge, no operator of the Assets has received written notice from any Person of any release, disposal or incident concerning hazardous substances with respect to any land, facility, asset or property included in the Assets that: (i) interferes with or prevents compliance by Noble with any Environmental Law or the terms of any license or permit issued pursuant thereto; or (ii) gives rise to or results in any common law or other liability of Noble to any Person which, in the case of either clause (i) or (ii) hereof, would have a Material Adverse Effect.           (c) To Noble’s Knowledge, all material reports, studies, written notices from environmental Governmental Entities, tests, analyses, and other documents specifically addressing environmental matters related to Noble’s ownership or operation of the Assets, which are in Noble’s possession, have been made available to Purchaser.      4.15 Gas Prepayment Arrangements; Take-or-Pay. Except for Imbalances, Noble is not obligated by any gas prepayment arrangement, “take-or-pay” requirement or any other agreement with respect to the Assets to deliver any gas at a future time without then or thereafter receiving payment therefor.      4.16 Production Taxes. Except as disclosed in Schedule 4.16, all ad valorem, property, production, severance, and similar taxes and assessments (including penalties and 19 --------------------------------------------------------------------------------   interest) based on or measured by the ownership of the Assets, the production of Hydrocarbons, or the receipt of proceeds therefrom that have become due and payable have been properly paid.      4.17 Leases. Except as set forth on Schedule 4.17, with respect to the Assets that are oil and gas leases (“Leases”) (but only to Noble’s Knowledge with respect to Leases not operated by Noble):           (a) the Leases have been maintained according to their terms, in compliance with all material agreements to which the Leases are subject;           (b) the Leases are presently in full force and effect; and           (c) to the Knowledge of Noble, no other party to any Lease is in breach or default with respect to any of its material obligations thereunder.      4.18 Well Status. Except as set forth in Schedule 4.18, to Noble’s Knowledge, there are no wells located on the Leasehold Interests that:           (a) Noble is currently obligated by law or contract to plug and abandon; or           (b) have been plugged and abandoned but have not been plugged or reclaimed in accordance with all applicable requirements of each Governmental Entity having jurisdiction over the Assets.      4.19 Suspense. Schedule 4.19 sets forth a list of all proceeds held in suspense by Noble on the date hereof that are attributable to the Leasehold Interests, a description of the source of such funds and the reason they are being held in suspense, the agreement or agreements under which such funds are being held and the name or names of the parties claiming such funds or to whom such funds are owed.      4.20 Additional Representations and Warranties. Noble specifically and expressly includes in its representations and warranties to Purchaser contained in this Article 4, those representations and warranties included in Sections 3.7, 11.9 and 11.11. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER      Purchaser represents and warrants to Noble that:      5.1 Existence. Purchaser is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Delaware and is duly qualified to carry on its business in the states or jurisdictions where the Assets are located.      5.2 Power. Purchaser has the power and authority to enter into and perform this Agreement and the transactions contemplated hereby. No suit, action or other proceeding by a third party or a Governmental Entity is pending or threatened which seeks substantial damages from Purchaser in connection with, or seeks to restrain, enjoin or otherwise prohibit, the 20 --------------------------------------------------------------------------------   consummation of the transactions contemplated by this Agreement. Subject to applicable requirements under the HSR Act, and to rights to consent by, required notices to, and filings with or other actions by Governmental Entities where the same are customarily obtained subsequent to the assignment of oil and gas interests and leases, the execution, delivery and performance of this Agreement by Purchaser, and the transactions contemplated hereby, will not violate (a) any provision of the limited partnership agreement or other formation documents of Purchaser, (b) any material agreement or instrument to which Purchaser is a party or by which Purchaser is bound, (c) any judgment, order, ruling, or decree applicable to Purchaser as a party in interest, or (d) any law, rule or regulation applicable to Purchaser.      5.3 Authorization. The execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all requisite corporate or partnership action (including all necessary approvals of any general partner of Purchaser) on the part of Purchaser. This Agreement has been duly executed and delivered on behalf of Purchaser, and at the Closing all documents and instruments required hereunder to be executed and delivered by Purchaser shall have been duly executed and delivered. This Agreement does, and such documents and instruments shall, constitute legal, valid and binding obligations of Purchaser enforceable in accordance with their terms, subject, however, to the effect of bankruptcy, insolvency, reorganization, moratorium and similar laws from time to time in effect relating to the rights and remedies of creditors, as well as to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).      5.4 Brokers. Purchaser has incurred no obligation or liability, contingent or otherwise, for brokers’ or finders’ fees in respect of the matters provided for in this Agreement which will be the responsibility of Noble; and any such obligation or liability that might exist shall be the sole obligation of Purchaser.      5.5 Further Distribution. Purchaser is not acquiring the Leasehold Interests with a view to, or for offer of resale in connection with, a non-exempt distribution thereof within the meaning of the Securities Act of 1933, as amended, and the rules and regulations pertaining to it or a distribution thereof in violation of any applicable securities laws. Purchaser covenants that if in the future it should decide to dispose of any of its interest in the Assets, subject to any restriction on assignment set forth herein or in the assignments delivered by Noble to Purchaser at the Closing, Purchaser will do so only in compliance with any applicable federal and state securities laws.      5.6 Financial Statements. To the extent available, Purchaser has heretofore delivered to Noble copies of Purchaser’s most recent audited financial statements and such financial statements, if any, present fairly the financial position, results of operations and changes in the financial position of Purchaser as of the dates, or for the periods, as applicable, indicated thereon, and such financial statements, if any, have been prepared in conformity with GAAP (except as otherwise noted therein). Since the date of such financial statements, if any, there has been no material adverse change in the financial condition of Purchaser.      5.7 Matters Affecting United States Minerals Management Service Approval. Purchaser has no Knowledge of any matter or circumstance applicable to Purchaser that would 21 --------------------------------------------------------------------------------   preclude or inhibit unconditional United States Minerals Management Service (“MMS”) approval of the assignment of the Assets from Noble to Purchaser.      5.8 Purchaser Financing. Purchaser has arranged to have available by the Closing, sufficient funds to enable it to pay in full the Purchase Price as herein provided.      5.9 Bankruptcy Proceedings. There are no bankruptcy, reorganization, insolvency, or receivership actions pending, being contemplated by, or, to the Knowledge of Purchaser, threatened against Purchaser.      5.10 Additional Representations and Warranties. Purchaser specifically and expressly includes in its representations and warranties to Noble, those representations and warranties included in Section 17.18 and Section 17.20. ARTICLE 6 PRE-CLOSING OBLIGATIONS OF NOBLE      6.1 Operations. From the date of this Agreement until Closing (the “Interim Period”), except as otherwise approved by Purchaser (which approval shall not be unreasonably withheld), Noble (a) shall permit Purchaser to have access to those Assets operated by Noble and shall use reasonable efforts to provide Purchaser access to those Assets not operated by Noble (which access shall be subject to Section 7.4), (b) shall operate the Assets for which it is the operator in accordance with past practices, (c) shall exercise reasonable diligence in safeguarding and maintaining secure and confidential all geological maps, confidential reports and data in its possession relating to the Assets, (d) shall not transfer, sell, hypothecate, encumber or otherwise dispose of or encumber any of the Assets (other than Hydrocarbons in the ordinary course of business or as required in connection with the exercise by third parties of preferential rights to purchase any of the Assets), (e) shall maintain insurance now in force with respect to the Assets, (f) shall consult with Purchaser in relation to any expenditure regarding the Assets that exceeds $250,000, (g) before undertaking an operation or making a single expenditure in respect of the Assets to be in excess of Two Hundred Fifty Thousand Dollars ($250,000), and before conducting an operation to drill, sidetrack, deepen, complete, or recomplete a well (regardless of the estimated cost) on any of the Leasehold Interests, shall submit an AFE for the operation or expenditure to Purchaser for approval, (h) shall furnish an informational AFE to Purchaser for an operation or single expenditure estimated to cost $250,000 or less, but in excess of $100,000, if Noble prepares the same for its own use, and (i) shall notify Purchaser as soon as reasonably possible when it appears the cost of an operation will exceed the original AFE by more than twenty percent (20%), which notice shall be furnished to Purchaser as a supplemental AFE for informational purposes only and is not subject to Purchaser’s approval. In addition, without the consent of Purchaser (which shall not be unreasonably withheld or delayed), during the Interim Period, Noble shall not (i) except with respect to matters retained by Noble pursuant to this Agreement, waive, compromise or settle any right or claim for an amount in excess of $250,000 regarding the Assets or which may reasonably be expected to have an adverse effect on the value of the Assets as a whole in excess of $250,000, (ii) except in connection with AFEs, incur obligations with respect to the Assets for which Purchaser would be responsible after the Effective Time, other than transactions (x) the costs of which do not exceed $250,000 22 --------------------------------------------------------------------------------   individually and which are of a nature consistent with past practices employed by Noble with respect to the Assets, and/or (y) in connection with situations believed in good faith by Noble to constitute an emergency (in which case Noble’s obligation is limited to notifying Purchaser as soon as reasonably practicable of such emergency and obligations), (iii) except in connection with AFEs, commit to capital expenditures or the acquisition or construction of fixed assets for which Purchaser shall have financial responsibility in connection with the Assets in an amount individually in excess of $250,000, except in connection with situations believed in good faith by Noble to constitute an emergency (in which case Noble’s obligation is limited to notifying Purchaser as soon as reasonably practicable of such emergency and obligations), (iv) enter into a contract with an Affiliate of Noble or a contract with a term of greater than thirty (30) days (which contracts regard the Assets) unless it can be terminated without penalty on no more than thirty (30) days notice, or (v) terminate, or materially amend , or agree to terminate or materially amend, any of the Material Contracts, except renewals or extensions of such contracts on substantially the same terms. If Purchaser fails to provide such approval with respect to the first sentence of this Section 6.1 or consent with respect to the second sentence of this Section 6.1 within ten (10) days (or such shorter period of time as may be reasonably required) of receiving Noble’s written request therefor, then Purchaser shall be deemed to have approved of or consented to the request set forth in such written notice.      6.2 HSR Act. If applicable, Noble shall prepare and submit, in a timely manner, all necessary filings for Noble in connection with the transactions contemplated by this Agreement that may be required under the HSR Act and the rules and regulations thereunder. Noble shall request expedited treatment of such filing by the Federal Trade Commission, shall promptly make any appropriate or necessary subsequent or supplemental filings, and shall cooperate with Purchaser in the preparation of such filings as are necessary and appropriate. ARTICLE 7 PRE-CLOSING OBLIGATIONS OF PURCHASER      7.1 Confidentiality. Purchaser shall cause (a) any information relating to the terms of the transactions contemplated hereunder and (b) the information and data furnished or made available by Noble to Purchaser and its officers, employees, representatives, Affiliates and potential financing sources in connection with this Agreement or Purchaser’s investigation of the Assets, in each case to be maintained in confidence and not to be used for any purpose other than in connection with this Agreement or Purchaser’s investigation of the Assets; provided, however, that the foregoing obligation shall terminate on the earlier to occur of (i) the Closing, (ii) such time as the information or data in question is disclosed to Purchaser by a third party that is not obligated to Noble to maintain same in confidence, or (iii) such time as the information or data in question becomes generally available to the oil and gas industry other than through the breach of the foregoing obligation. The obligations of Purchaser under this Section 7.1 shall be in addition to, and not in lieu of, Purchaser’s obligations under the Confidentiality Agreement previously executed by Noble and First Reserve Corporation. Notwithstanding anything to the contrary contained in the Confidentiality Agreement, Purchaser acknowledges and agrees that the terms and provisions of the Confidentiality Agreement shall not be superseded by the provisions of this Agreement, but shall continue in full force and effect until the Closing of the transactions 23 --------------------------------------------------------------------------------   described herein, at which time, such agreement shall automatically expire and be of no further force and effect.      7.2 Return of Data. Purchaser agrees that if this Agreement is terminated for any reason whatsoever, Purchaser shall, at Noble’s request, promptly return to Noble all information and data furnished by or on behalf of Noble to Purchaser, its officers, employees, representatives, Affiliates and potential financing sources, in connection with the Assets or Purchaser’s investigation of the Assets, and Purchaser shall deliver to Noble or destroy all copies, extracts or excerpts of such information and data and all documents generated by Purchaser that contain any portion of such information or data.      7.3 Notice of Certain Title Matters and Imbalance. Purchaser shall notify Noble promptly (but in no event to exceed five (5) days) upon Purchaser’s discovery prior to Closing of a title benefit of the type described in Section 3.1(f) or of an Imbalance (in each case) resulting in an increase in the Purchase Price hereunder.      7.4 Indemnity Regarding Access. PURCHASER AGREES TO RELEASE, INDEMNIFY, DEFEND AND HOLD HARMLESS NOBLE AND ITS AFFILIATES, AND ITS AND THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND REPRESENTATIVES (COLLECTIVELY, THE “NOBLE INDEMNIFIED PARTIES”) FROM AND AGAINST ANY AND ALL CLAIMS, LIABILITIES, LOSSES, COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, COURT COSTS AND REASONABLE ATTORNEYS’ FEES) (COLLECTIVELY “LOSSES”) IN CONNECTION WITH PERSONAL INJURIES, INCLUDING DEATH, OR PROPERTY DAMAGE, ARISING OUT OF OR RELATING TO THE PRE-CLOSING ACCESS OF PURCHASER, ITS AGENTS, EMPLOYEES, CONTRACTORS, PURCHASER’S ENVIRONMENTAL CONSULTANT AND OTHER REPRESENTATIVES TO THE ASSETS AND TO OTHER INFORMATION RELATING THERETO AS PERMITTED UNDER THIS AGREEMENT, REGARDLESS OF WHETHER SUCH INJURIES, DEATH OR DAMAGES ARE CAUSED IN WHOLE OR PART BY THE SOLE, PARTIAL, CONCURRENT OR OTHER NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF THE NOBLE INDEMNIFIED PARTIES, EXCEPT TO THE EXTENT CAUSED BY ANY OF THE NOBLE INDEMNIFIED PARTIES’ GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IT IS THE EXPRESS INTENTION OF THE PARTIES THAT THE INDEMNITY PROVIDED FOR BY THIS SECTION 7.4 CONSTITUTES AN AGREEMENT BY PURCHASER TO INDEMNIFY AND PROTECT THE NOBLE INDEMNIFIED PARTIES FROM THE CONSEQUENCES OF THEIR OWN NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT, REGARDLESS OF WHETHER SAME IS THE SOLE OR A CONCURRENT CAUSE OF THE INJURY, DEATH OR DAMAGE, EXCEPT AND TO THE EXTENT CAUSED BY ANY NOBLE INDEMNIFIED PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITH RESPECT TO THE NON-OPERATED ASSETS, PURCHASER FURTHER AGREES THAT ACCESS SHALL BE CONDITIONED UPON PURCHASER, ITS AGENTS, EMPLOYEES, CONTRACTORS OR OTHER REPRESENTATIVES EXECUTING APPROPRIATE BOARDING AGREEMENTS AS MAY BE REQUIRED BY THE OPERATOR OF ANY SUCH ASSETS. 24 --------------------------------------------------------------------------------        7.5 HSR Act. If applicable, Purchaser shall prepare and submit, in a timely manner, all necessary filings for Purchaser in connection with the transactions contemplated by this Agreement under the HSR Act and the rules and regulations thereunder. Purchaser shall request expedited treatment of such filing by the Federal Trade Commission, shall promptly make any appropriate or necessary subsequent or supplemental filings, and shall cooperate with Noble in the preparation of such filings as are necessary and appropriate. ARTICLE 8 NOBLE’S CONDITIONS OF CLOSING      Noble’s obligation to consummate the transactions provided for herein is subject to the satisfaction or waiver on or before the Closing Date of the following conditions:      8.1 Representations and Warranties. The representations and warranties of Purchaser contained in Article 5 shall be true and correct, to the extent qualified by materiality, in all respects, and to the extent not so qualified, in all material respects, (in each case) as of the Closing Date as though made on and as of that date.      8.2 Performance. Purchaser shall have performed in all material respects each of the obligations, covenants and agreements required hereunder to be performed by it at or prior to the Closing.      8.3 Officer or Attorney-in-Fact Certificate. Purchaser shall have delivered to Noble a certificate of an officer or attorney-in-fact, dated the date of Closing, certifying on behalf of Purchaser that the conditions set forth in Sections 8.1 and 8.2 have been fulfilled.      8.4 Operatorship Forms. Purchaser shall have executed and delivered to Noble such forms as may be required by any Governmental Entity having jurisdiction to evidence the change of operatorship from Noble to Purchaser on all Leasehold Interests constituting a part of the Assets that are operated by Noble.      8.5 Bonds. Prior to Closing, Purchaser shall have delivered to Noble either: (a)(i) copies of any bonds, in form and substance and issued and executed by a surety satisfactory to Noble and the MMS, covering any Noble operated Leasehold Interests for which bonding is required under any Applicable Laws of any Governmental Entities having jurisdiction over the Assets; or (ii) a commitment by a surety satisfactory to Noble and the MMS to issue such bonds simultaneously with Closing; and (b) copies of any supplemental bonds required by the MMS, in form and substance and issued and executed by a surety satisfactory to Noble, sufficient to satisfy all plugging, abandonment and restoration obligations relating to the Assets.      8.6 Insurance. Purchaser shall have procured insurance policies providing the coverage set forth in Schedule 8.6.      8.7 Certificate of Authority. Purchaser shall deliver to Noble a Certificate of Authority dated as of the Closing Date, certifying that the execution, delivery and performance of the transactions contemplated hereby have been duly and validly authorized by all requisite action on the part of Purchaser and that the individual(s) executing the documents contemplated 25 --------------------------------------------------------------------------------   hereby have been duly and validly authorized to represent and bind the Purchaser in connection therewith.      8.8 Exemption Certificates. If applicable, Purchaser shall provide Noble with properly executed exemption certificates or other documentation evidencing that the transfer of the Assets to Purchaser is exempt from applicable sales or similar taxes.      8.9 HSR Act. The Closing shall be permitted to occur without violation of the HSR Act.      8.10 Casualty Loss or Condemnation. No portion of the Assets shall have been damaged or destroyed by a Casualty or taken in condemnation or under right of eminent domain where, in the event of a Casualty, the cost to repair, replace or restore the affected Assts (such cost not to exceed the Allocated Value of such affected Assets) to at least their condition prior to such Casualty exceeds 40% of the Purchase Price or, in the case of such taking, the Allocated Value of the affected Assets exceeds 40% of the Purchase Price.      8.11 Purchase Price Adjustments. The sum of the amounts by which the Purchase Price will be decreased pursuant to Section 2.2(b)(ii) and Section 2.2(b)(iii) (excluding any amounts attributable to a Casualty or taking described in Section 3.11 for which Purchaser is entitled to receive a Purchase Price reduction pursuant to Section 3.11) shall not be in excess of 25% of the Purchase Price. ARTICLE 9 PURCHASER’S CONDITIONS OF CLOSING      Purchaser’s obligation to consummate the transactions provided for herein is subject to the satisfaction or waiver on or before the Closing Date of the following conditions:      9.1 Representations and Warranties. The representations and warranties of Noble contained in Article 4 shall be true and correct, to the extent qualified by materiality, in all respects, and to the extent not so qualified, in all material respects, (in each case) as of Closing as though made on and as of that date.      9.2 Performance. Noble shall have performed in all material respects each of the obligations, covenants and agreements required hereunder to be performed by it at or prior to the Closing.      9.3 Officer or Attorney-in-Fact Certificate. Noble shall have delivered to Purchaser a certificate of a corporate officer or attorney-in-fact, dated the date of Closing, certifying on behalf of Noble that the conditions set forth in Sections 9.1 and 9.2 have been fulfilled.      9.4 Litigation. There shall be no legal or arbitration proceedings against Noble or involving the Assets, in either case with respect to which Noble has received service of process or other written notice, that reasonably is expected to materially and adversely affect the value of the Assets taken as a whole after the Effective Time. 26 --------------------------------------------------------------------------------        9.5 Certificate of Authority. Noble shall have delivered to Purchaser a Certificate of Authority dated as of the Closing Date certifying that the execution, delivery and performance of the transactions contemplated hereby have been duly and validly authorized by all requisite action on the part of Noble and that the individuals executing the documents contemplated hereby have been duly and validly authorized to represent and bind Noble in connection therewith.      9.6 Operatorship Forms. Noble shall have executed and delivered to Purchaser such forms as may be required by any governmental authority having jurisdiction to evidence the change of operatorship from Noble to Purchaser on all Leasehold Interests constituting a part of the Assets that are operated by Purchaser.      9.7 HSR Act. The Closing shall be permitted to occur without violation of the HSR Act.      9.8 Casualty Loss. No portion of the Assets shall have been damaged or destroyed by a Casualty or taken in condemnation or under right of eminent domain where, in the event of a Casualty, the cost to repair, replace or restore the affected Assts (such cost not to exceed the Allocated Value of such affected Assets) to at least their condition prior to such Casualty exceeds 40% of the Purchase Price or, in the case of such taking, the Allocated Value of the affected Assets exceeds 40% of the Purchase Price.      9.9 Purchase Price Adjustments. The sum of the amounts by which the Purchase Price will be decreased pursuant to Section 2.2(b)(ii) and Section 2.2(b)(iii) (excluding any amounts attributable to a Casualty or taking described in Section 3.11 for which Purchaser is entitled to receive a Purchase Price reduction pursuant to Section 3.11) shall not be in excess of 25% of the Purchase Price. ARTICLE 10 CLOSING      10.1 Time and Place of Closing. Subject to the conditions stated in this Agreement, the consummation of the transactions contemplated hereby (the “Closing”) shall occur on June 30, 2006; provided, however, that if all of the conditions to Closing set forth in Articles 8 and 9 have not been satisfied or waived by such Time or any extended Time for Closing, the Party whose obligations are subject to the conditions that have not been satisfied or waived shall have the right to extend the Time of Closing for successive periods of up to seven (7) days each until such conditions shall have been satisfied or waived, subject to Section 12.1(d). The Time Closing actually occurs is herein called the “Closing Date.” The Closing shall be held at Fulbright & Jaworski L.L.P.’s offices in Houston, Texas, or at such other location as may be mutually agreed upon by Noble and Purchaser.      10.2 Closing Obligations. At the Closing, the following events shall occur:           (a) Noble shall execute, acknowledge and deliver to Purchaser the Assignment and Bill of Sale in the form of (i) Schedule 10.2(a)(1) for the Assets located in the 27 --------------------------------------------------------------------------------   State of Texas, (ii) Schedule 10.2(a)(2) for the Assets located in the State of Louisiana, (iii) Schedule 10.2(a)(3) for the Assets located in the State of Mississippi, (iv) Schedule 10.2(a)(4) for the Assets located in the State of Alabama, (v) Schedule 10.2(a)(5) for the offshore Assets in which Noble has record title, and (vi) Schedule 10.2(a)(6) for the offshore Assets in which Noble has operating rights.           (b) Noble and Purchaser shall execute, acknowledge and deliver transfer orders or letters in lieu thereof directing all parties paying for production to make payment to Purchaser of proceeds attributable to production after the Closing Date from the Leasehold Interests;           (c) Purchaser shall make the payment(s) described in Section 2.3;           (d) Noble shall execute and deliver a certificate certifying its non-foreign status in accordance with Treasury Regulations §1.1445-2(b);           (e) Purchaser shall deliver the certificates referenced in Section 8.3, Section 8.7 and Section 8.8 and deliver a copy of the insurance coverage referenced in Section 8.6;           (f) Noble shall deliver the certificates referenced in Section 9.3 and Section 9.5;           (g) Purchaser and Noble shall execute and deliver the Transition Agreement described in Section 11.6; and           (h) Purchaser and Noble shall execute such other instruments and take such other action as may be necessary to carry out their obligations under this Agreement.      10.3 Post Closing Obligations. Noble shall, as soon as is reasonably possible after the Closing, but in event within 30 Business Days thereafter, deliver to Purchaser, at Noble’s offices, the Records (it being understood and agreed that Noble shall be entitled to retain a copy of the Records and shall grant access to the Records to Purchaser until same are delivered to Purchaser). ARTICLE 11 ADDITIONAL AGREEMENTS      11.1 Calculation of Adjusted Purchase Price. Within ninety (90) days after the Closing Date, Noble shall prepare in good faith, in accordance with this Agreement and with GAAP, and deliver to Purchaser a statement setting forth each adjustment to the Purchase Price required pursuant to Section 2.2 and showing the calculation of each such adjustment. Within thirty (30) days after receipt of such statement from Noble, Purchaser shall deliver to Noble a written report containing all changes with explanations therefor that Purchaser proposes be made to such statement, it being agreed that Purchaser’s failure to deliver such report to Noble within such time period shall constitute acceptance by Purchaser of Noble’s statement. From and after the expiration of such 30-day period, no additional changes to the statement provided by Noble shall be considered by the Parties. If Purchaser has timely delivered such written report to Noble, the 28 --------------------------------------------------------------------------------   Parties shall then undertake to agree on the items in dispute and the final Adjusted Purchase Price no later than thirty (30) days after the receipt by Noble of Purchaser’s statement of proposed changes. Following the final determination of the Adjusted Purchase Price pursuant to this Section 11.1, Noble or Purchaser, as the case may be, shall make the payment required pursuant to Section 2.5.      11.2 Suspended Funds. Noble has provided to Purchaser a listing showing all proceeds from production attributable to the Leasehold Interests that are currently held in suspense and at the Closing Noble shall transfer to Purchaser such suspended proceeds. Purchaser shall be responsible for proper distribution of all such suspended proceeds to the parties lawfully entitled to them, and hereby agrees to indemnify, defend and hold harmless Noble from and against any and all Losses arising out of or relating to such suspended proceeds.      11.3 Receipts and Credits. Subject to the terms hereof and except to the extent same have already been taken into account as an adjustment to the Purchase Price, all monies, proceeds, receipts, credits and income attributable to the Assets (a) for all periods of time subsequent to the Effective Time, shall be the sole property and entitlement of Purchaser, and, to the extent received by Noble, Noble shall fully disclose, account for and transmit same to Purchaser promptly and (b) for all periods of time prior to the Effective Time, shall be the sole property and entitlement of Noble and, to the extent received by Purchaser, Purchaser shall fully disclose, account for and transmit same to Noble promptly. Subject to the terms hereof and except to the extent same have already been taken into account as an adjustment to the Purchase Price, all costs and operational expenses, attributable to the Assets (i) for periods of time prior to the Effective Time, regardless of when due or payable, shall be the sole obligation of Noble and Noble shall promptly pay, or if paid by Purchaser, promptly reimburse Purchaser for and hold Purchaser harmless from and against same and (ii) for periods of time subsequent to the Effective Time, regardless of when due or payable, shall be the sole obligation of Purchaser and Purchaser shall promptly pay, or if paid by Noble, promptly reimburse Noble for and hold Noble harmless from and against same. Except to the extent same have already been taken into account as an adjustment to the Purchase Price, all uncollected accounts receivable as of the Closing Date attributable to the Assets after the Effective Time shall be assigned to Purchaser, and all uncollected accounts receivable as of the Closing Date attributable to the Assets prior to the Effective Time shall be retained by Noble. It is understood and agreed that this Section 11.3 shall govern only the handling of revenues and expenses of operations.      11.4 Assumption of Liabilities; Cross Indemnity. If the Closing occurs, Noble and Purchaser agree as follows:           (a) Subject to the other express terms and conditions of this Agreement, Purchaser hereby assumes and agrees to pay, perform and discharge the following liabilities and obligations (collectively, the “Assumed Obligations”):                (i) Except for the matters covered by the terms of Section 11.4(a)(ii), Section 11.4(c) and Article 16, which shall control with respect to the matters covered thereby, Purchaser, from and after the Closing Date, hereby assumes and shall be responsible for and agrees to release, indemnify, defend and hold harmless the Noble Indemnified Parties from and 29 --------------------------------------------------------------------------------   against any and all Losses attributable to or arising out of the condition or operation of the Assets before, on or after the Closing Date (including, without limitation, with respect to damage to property, or injury to or death of persons, in each case occurring after the Closing Date but attributable in whole or in part to conditions or operations that existed or occurred before the Closing Date) including but not limited to Losses that are determined to be a result of or caused in whole or in part by any of the Noble Indemnified Parties’ violation of, failure to fulfill duties imposed by or incurrence of liability under Applicable Law, WITHOUT REGARD TO CAUSE OR ANY NEGLIGENT ACTS OR OMISSIONS (INCLUDING SOLE NEGLIGENCE, CONCURRENT NEGLIGENCE OR STRICT LIABILITY), BREACH OF DUTY (STATUTORY OR OTHERWISE), VIOLATION OF LAW, OR OTHER FAULT OF ANY OF THE NOBLE INDEMNIFIED PARTIES, OR ANY PREEXISTING DEFECT; provided however, that Noble shall release, indemnify, defend and hold harmless the Purchaser Indemnified Parties from and against any Losses arising out of or attributable to, either directly or indirectly, the condition or operation of the Assets at any time before the Closing Date to the extent and only to the extent that same are determined to be the result of or caused by Noble’s violation of, failure to fulfill duties imposed by or incurrence of liability under Applicable Law and further to the extent only that such Losses are the result of a Third-Party (“Third-Party” shall not include Purchaser’s officers, Affiliates, employees, contractors, agents, representatives or potential financing sources) claim, lawsuit or administrative proceeding that is filed, issued or commenced against Purchaser within three hundred sixty-five (365) days following the Closing Date.                (ii) With respect to any and all Wells and facilities included in the Assets, including without limitation, wells and facilities currently in use, and wells and facilities that have been temporarily or permanently abandoned, Purchaser, from and after Closing, accepts sole responsibility for same and agrees to pay all costs and expenses associated with plugging and abandonment of all wells, decommissioning of all facilities included in the Assets, and clearing of sites and restoring seabeds associated with the Assets, and may not claim the fact that plugging and abandonment, decommissioning, site clearance or seabed restoration operations are not complete or that additional costs and expenses are required to complete plugging and abandonment, decommissioning, site clearance or seabed restoration operations as a breach of Noble’s representations and warranties under this Agreement or the basis for any other redress against Noble, and Purchaser (on behalf of Purchaser and its successors and assigns) irrevocably waives any and all claims they may have against Noble associated with the same. PURCHASER, FROM AND AFTER THE CLOSING DATE, HEREBY RELEASES THE NOBLE INDEMNIFIED PARTIES FROM AND SHALL FULLY PROTECT, DEFEND, INDEMNIFY, AND HOLD THE NOBLE INDEMNIFIED PARTIES HARMLESS FROM AND AGAINST ANY AND ALL LOSSES RELATING TO, ARISING OUT OF, OR CONNECTED WITH, DIRECTLY OR INDIRECTLY, PLUGGING AND ABANDONMENT OF WELLS, DECOMMISSIONING OF FACILITIES, AND CLEARING OF SITES AND RESTORING SEABEDS ASSOCIATED WITH THE ASSETS, NO MATTER WHETHER ARISING BEFORE OR AFTER THE EFFECTIVE TIME. THIS INDEMNITY AND DEFENSE OBLIGATION WILL APPLY REGARDLESS OF CAUSE OR OF ANY NEGLIGENT ACTS OR OMISSIONS (INCLUDING SOLE NEGLIGENCE, CONCURRENT NEGLIGENCE OR STRICT LIABILITY), BREACH OF DUTY (STATUTORY OR 30 --------------------------------------------------------------------------------   OTHERWISE), VIOLATION OF LAW, OR OTHER FAULT OF ANY OF THE NOBLE INDEMNIFIED PARTIES, OR ANY PREEXISTING DEFECT.                (iii) Any and all obligations to make up, deliver or pay for Hydrocarbons under any gas balancing or similar arrangements affecting the Assets in respect of amounts owed thereunder by Noble as of the Effective Time.           (b) EXCEPT FOR THE MATTERS COVERED BY SECTION 11.4(C) AND ARTICLE 16 (WHICH SHALL CONTROL WITH RESPECT TO THE MATTERS COVERED THEREBY), PURCHASER AGREES, FROM AND AFTER THE CLOSING DATE, TO RELEASE, INDEMNIFY, DEFEND AND HOLD HARMLESS THE NOBLE INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES THAT ARE ATTRIBUTABLE TO (I) THE ASSUMED OBLIGATIONS OR (II) A BREACH BY PURCHASER OF ANY OF ITS REPRESENTATIONS, WARRANTIES, COVENANTS OR AGREEMENTS HEREUNDER.           (c) EXCEPT FOR THE MATTERS COVERED BY ARTICLE 16 (WHICH SHALL CONTROL WITH RESPECT TO THE MATTERS COVERED THEREBY), NOBLE AGREES TO RELEASE, INDEMNIFY, DEFEND AND HOLD HARMLESS PURCHASER AND ITS AFFILIATES, AND ITS AND THEIR, MEMBERS, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND REPRESENTATIVES (THE “PURCHASER INDEMNIFIED PARTIES”) FROM AND AGAINST ANY AND ALL LOSSES THAT ARE ATTRIBUTABLE TO (I) A BREACH BY NOBLE OF ANY OF ITS REPRESENTATIONS, WARRANTIES, COVENANTS OR AGREEMENTS HEREUNDER, (II) ANY LAWSUIT, CAUSE OF ACTION OR CLAIM, INCLUDING THE FIRST ITEM LISTED ON SCHEDULE 4.9, ASSERTED BY A THIRD-PARTY RELATING TO THE ASSETS THAT IS RECEIVED BY, OR FILED, ISSUED OR COMMENCED AGAINST, NOBLE OR ANY OF ITS AFFILIATES ON OR BEFORE THE CLOSING DATE, (III) THE OWNERSHIP OR OPERATION OF THE ASSETS BEFORE THE EFFECTIVE TIME OR (IV) THE EXCLUDED ASSETS, TO THE EXTENT ONLY THAT (A) PURCHASER PROVIDES NOBLE WITH A CLAIM NOTICE PRIOR TO THE EXPIRATION OF THE SURVIVAL PERIOD FOR THE APPLICABLE REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT, AND (B) SUCH LOSSES UNDER (III) ABOVE ARE DETERMINED TO BE THE RESULT OF OR CAUSED BY NOBLE’S VIOLATION OF APPLICABLE LAW OR FAILURE TO FULFILL DUTIES IMPOSED BY APPLICABLE LAW AND ONLY TO THE EXTENT THAT SUCH LOSSES ARE THE RESULT OF A THIRD-PARTY CLAIM, LAWSUIT OR ADMINISTRATIVE PROCEEDING THAT IS RECEIVED BY, OR FILED, ISSUED OR COMMENCED AGAINST, PURCHASER ON OR BEFORE THREE HUNDRED SIXTY-FIVE (365) DAYS AFTER THE CLOSING DATE.           (d) The indemnity, defense and hold harmless obligations set forth in Sections 11.4(b) and (c) above shall not apply to (i) a claim for indemnification by a Party that relates to any amount or item for which such Party received credit as an adjustment to the Purchase Price pursuant to the provisions hereof and (ii) either Party’s costs and expenses with respect to the negotiation and consummation of this Agreement and the transactions contemplated hereby. 31 --------------------------------------------------------------------------------             (e) All claims for indemnification under this Agreement shall be asserted and resolved as follows:                (i) To make claim for indemnification under this Agreement, the Party having the right to be indemnified (the “Indemnified Party”) shall notify the Party having the obligation to indemnify another Party or parties (the “Indemnifying Party”) of its claim, including the specific basis for its claim (the “Claim Notice”). In the event that the claim for indemnification is based upon a claim by a Third Party against the Indemnified Party (a “Third Party Claim”), the Indemnified Party shall provide its Claim Notice promptly after the Indemnified Party has actual knowledge of the Third Party Claim and shall enclose a copy of all papers (if any) served with respect to the Third Party Claim; provided that the failure of any Indemnified Party to give notice of a Claim as provided in this Section 11.4(e) shall not relieve the Indemnifying Party of its obligations hereunder except to the extent such failure materially prejudices the Indemnifying Party’s ability to defend against the claim and then only to extent of such prejudice. If the claim for indemnification is based upon an inaccuracy or breach of a representation, warranty, covenant or agreement, the Claim Notice shall specify the representation, warranty, covenant or agreement that was inaccurate or breached.                (ii) In the case of a claim for indemnification based upon a Third Party Claim, the Indemnifying Party shall have thirty (30) days from its receipt of the Claim Notice to notify the Indemnified Party whether it admits or denies its liability to defend the Indemnified Party against such Third Party Claim. The Indemnified Party is authorized, prior to and during such thirty (30) day period, at the expense of the Indemnifying Party, to file any motion, answer or other pleading that it shall deem necessary to protect its interests or those of the Indemnifying Party and that is not prejudicial to the Indemnifying Party.                (iii) If the Indemnifying Party admits its liability, it shall have the right and obligation to diligently defend, at its sole cost, the Third Party Claim and the Indemnified Party may participate in any defense or settlement of such Third Party Claim. An Indemnifying Party shall not, without the written consent of the Indemnified Party, (A) settle any Third Party Claim or consent to the entry of any judgment with respect thereto which does not include an unconditional written release of the Indemnified Party from all liability in respect of such Third Party Claim or (B) settle any Third Party Claim or consent to the entry of any judgment with respect thereto in any manner that may materially and adversely affect the Indemnified Party (other than as a result of money damages paid by the Indemnifying Party).                (iv) If the Indemnifying Party does not admit its liability or admits its liability but fails to diligently prosecute or settle the Third Party Claim, then the Indemnified Party shall have the right to defend against the Third Party Claim at the sole cost of the Indemnifying Party. In such a case, the Indemnified Party shall send written notice to the Indemnifying Party of any proposed settlement of such Third Party Claim and the Indemnifying Party shall have the option for ten (10) days following receipt of such notice to (A) admit in writing its liability for such Third Party Claim and (B) if liability is so admitted, reject, in its reasonable judgment, the proposed settlement. 32 --------------------------------------------------------------------------------                  (v) In the case of a claim for indemnification not based upon a Third Party Claim, the Indemnifying Party shall have thirty (30) days from its receipt of the Claim Notice to (A) cure the Losses complained of, (B) admit its liability for such Losses or (C) dispute the claim for such Losses. If the Indemnifying Party does not notify the Indemnified Party within such thirty (30) day period that it has cured the Losses or that it disputes the claim for such Losses, the amount of such Losses shall conclusively be deemed a liability of the Indemnifying Party hereunder.           (f) Notwithstanding anything hereinabove to the contrary, at all times Noble expressly assumes and shall be responsible for and agrees to release, indemnify, defend and hold harmless Purchaser from and against any and all Losses attributable to interests in the nature of an overriding royalty interest, production payment, net profits interest or any other beneficial interest in oil and or gas production or proceeds or the Leasehold Interests which is or may be claimed by any individual that was or is an employee, officer, or director of Noble, its Affiliates, successors or predecessors (“Noble Internal ORRIs”); if the net cumulative effect of such burdens operates to reduce the Net Revenue Interest of Noble below the “Net Revenue Interest” or “NRI” set forth in Exhibit “A” and Exhibit “A-1” for such Leasehold Interest or Well.      11.5 Imbalances.           (a) All Imbalances (whether for overproduction by Noble or underproduction by Noble) shall pass to Purchaser as of the Effective Time, and except as provided in Section 2.2 and Section 11.5(b), Purchaser shall thereupon be entitled to and assumes all rights and obligations with respect to any and all such Imbalances. Except as provided in Section 2.2 and Section 11.5(b), there shall be no amounts paid to or from either Party to the other as a Purchase Price adjustment or otherwise based on Imbalances. Except as provided in Section 2.2 and Section 11.5(b), Purchaser from and after Closing accepts sole responsibility for and agrees to pay all costs and expenses associated with Imbalances associated with the Assets, and Purchaser (on behalf of Purchaser and its successors and assigns) irrevocably waives any and all claims it and they may have against Noble associated with the same; and PURCHASER FROM AND AFTER THE CLOSING DATE RELEASES NOBLE FROM AND SHALL FULLY PROTECT, DEFEND, INDEMNIFY AND HOLD NOBLE HARMLESS FROM AND AGAINST ANY AND ALL LOSSES RELATING TO, ARISING OUT OF, OR CONNECTED WITH, DIRECTLY OR INDIRECTLY, IMBALANCES ASSOCIATED WITH THE ASSETS, NO MATTER WHETHER ARISING BEFORE OR AFTER THE EFFECTIVE TIME. THIS INDEMNITY AND DEFENSE OBLIGATION WILL APPLY REGARDLESS OF CAUSE OR OF ANY NEGLIGENT ACTS OR OMISSIONS (INCLUDING SOLE NEGLIGENCE, CONCURRENT NEGLIGENCE OR STRICT LIABILITY), BREACH OF DUTY (STATUTORY OR OTHERWISE), VIOLATION OF LAW, OR OTHER FAULT OF NOBLE, OR ANY PRE-EXISTING DEFECT.           (b) In the event Purchaser shall determine prior to Closing that Imbalances under Section 2.2(a)(iii) are in the excess of 2.1 bcf of gas or that Imbalances under Section 2.2(b)(vii) are in excess of .1 bcf of gas, then Purchaser shall promptly notify Noble of the amount of such excess. Noble and Purchaser prior to the Closing Date shall endeavor to agree upon the amount of such excess Imbalances. If the Parties shall have failed to agree thereupon 33 --------------------------------------------------------------------------------   by the Closing Date, the Purchase Price shall not be adjusted therefor and the matter shall be resolved by arbitration pursuant to Section 17.1.      11.6 Transition Agreement. Purchaser and Noble shall execute and deliver the Transition Agreement (in substantially the same form as Schedule 11.6) and Letters-in-Lieu as provided in the Transition Agreement on the Closing Date.      11.7 Further Assurances. After Closing, Noble and Purchaser agree to take such further actions and to execute, acknowledge and deliver such additional documents and instruments as may be necessary or useful in carrying out the purposes of this Agreement or of any document delivered pursuant hereto.      11.8 Material Contracts. If Closing occurs, Purchaser agrees to assume all of Noble’s obligations from and after the Effective Time relating to the Orders and Contracts, as well as Noble’s obligations under all leases, agreements, orders, instruments and documents relating to the Assets which are : (a) of record or which are referenced in documents of record or in any of the materials set forth on Exhibit “A-2” or (b) listed on an exhibit or schedule to this Agreement.      11.9 Marketing Contracts and Calls on Production. Except as disclosed on Schedule 11.9, Noble represents that (a) to Noble’s Knowledge, Noble is not a party to any contract for the sale and marketing of hydrocarbons produced from or attributable to the Assets which has a term in excess of thirty (30) days; and (b) there are no calls on, or other rights to purchase, Hydrocarbons produced from or attributable to the Assets, whether or not the same are currently being exercised.      11.10 Gas Processing Arrangement. Notwithstanding anything to the contrary contained herein, Noble shall retain its present ownership interest in all gas processing plants and facilities.      11.11 Payout Balances. Noble represents that the payout balances on Wells in which a reversionary interest is applicable are set forth on Schedule 11.11.      11.12 Employee and Benefit Matters.           (a) Prior to the expiration of fifteen (15) Business Days after the date hereof, Noble shall deliver to Purchaser a list of certain employees of Noble or its Affiliates who provide services primarily in connection with the Assets (such employees being collectively the “Business Employees”). At the request of Purchaser, from and after the date Purchaser receives such list from Noble until five (5) Business Days prior to the Closing Date, Noble and such Affiliates shall make the Business Employees available to Purchaser at reasonable times to discuss potential employment with Purchaser or an Affiliate of Purchaser. Purchaser or an Affiliate may offer employment (which shall be effective as of and contingent on the occurrence of the Closing) to each Business Employee at a base salary or hourly rate and employee benefits that are substantially similar to the current base salary or hourly rate of Purchaser or its Affiliate’s similarly situated employees and, unless otherwise agreed by the employee, to provide 34 --------------------------------------------------------------------------------   the same or substantially similar services and at the same location or locations of employment. Each offer of employment to a Business Employee shall be consistent with the provisions of this Section 11.12(a). On or before the date that is five (5) Business Days prior to the Closing Date, Purchaser shall notify Noble which Business Employees have accepted offers of employment with Purchaser or its Affiliate, and which Business Employees have rejected such offers of employment. The employment with Purchaser or an Affiliate of Purchaser of each Business Employee who accepts such employment shall be effective as of the Closing Date.           (b) To the extent that any obligations or liabilities under the Worker Adjustment and Retraining Notification Act or other similar state laws relating to plant or facility closings or otherwise regulating the termination of employment of employees arise as a consequence of the Transactions contemplated by this Agreement (collectively, “WARN Obligations”), the Parties hereby agree that Noble and its Affiliates shall be responsible for any WARN Obligations arising as a result of any employment losses of Business Employees occurring on or prior to the Closing Date, and Purchaser and its Affiliates shall be responsible for any WARN Obligations arising as a result of any employment losses of Business Employees occurring after the Closing Date. Notwithstanding the foregoing, Purchaser shall make a sufficient number of offers of employment pursuant to Section 11.12(a) above such that if all such offers are accepted, the WARN Obligations would not apply to the transactions contemplated by this Agreement.           (c) Purchaser shall cause each Business Employee who accepts an offer of employment made pursuant to Section 11.12(a) (a “Continuing Employee”) and such Continuing Employee’s eligible dependents (including all such Continuing Employee’s dependents covered immediately prior to the Closing Date by a group health plan maintained by Noble or its Affiliates) to be eligible to be covered under group health, prescription drug, dental and similar type welfare benefit plans maintained by Purchaser or an Affiliate of Purchaser for the benefit of its similarly situated employees that (i) provide benefits to the Continuing Employee and such eligible dependents effective immediately upon the Closing Date and (ii) credit such Continuing Employee, for the calendar year during which such coverage under such plans begin, with any deductibles and co-payments already incurred during such calendar year under plans that provide similar benefits maintained by Noble or its Affiliates. Purchaser shall cause each group health plan sponsored by Purchaser or one of its Affiliates that a Continuing Employee may be eligible to participate in on or after the Closing Date to waive any preexisting condition exclusions applicable to such Continuing Employee and his eligible dependents.           (d) Purchaser shall cause the employee benefit plans and programs maintained after the Closing by Purchaser and its Affiliates for the benefit of its similarly situated employees to recognize and give credit for each Continuing Employee’s years of service and level of seniority prior to the Closing Date with Noble and its Affiliates (including service and seniority with any other employer that was recognized by Noble or its Affiliates) for purposes of terms of employment and eligibility, vesting, benefit accrual (other than benefit accrual under a defined benefit pension plan) and benefit determination under such plans and programs, including paid vacation, paid sick time, severance benefits and employer contribution rates under retirement plans. 35 --------------------------------------------------------------------------------        11.13 Amendment of Schedules. Noble may, from time to time, prior to the Closing, by written notice to Purchaser, supplement or amend the schedules and exhibits attached hereto (other than Exhibit “B” and Schedules 2.4(a), 3.1(c), 8.6, 10.2(a)(1)-(6) and 11.6) to include matters relating to Noble or the Assets that arises or occurs after the date hereof and does not result from a breach by Noble of Section 6.1; provided that such amendment shall be disregarded for the purposes of Section 9.1 and Section 12.1(c) to the extent that (a) the same would materially adversely affect Purchaser’s rights under this Agreement, or (b) result in an adjustment to the Purchase Price pursuant to Section 2.2.      11.14 Gas Processing. As a condition to Closing, at the Closing, Purchaser and Noble will enter into an agreement pursuant to which Noble or its Affiliates will provide to Purchaser (a) at no economic burden to Purchaser or its Affiliates (as the case may be) beyond that which Noble or its Affiliate bears as of the Effective Time, the right to process all the gas produced from the Assets at gas processing plants owned by Noble or its Affiliates or to which Noble or its Affiliates have the right to use (in each case) as of the Effective Time that were processing gas produced from the Assets as of the Effective Time, such right being subject to the processing capacity at such plants in existence as of the Effective Time (subject further to annual equity re-determination at such plants) and to all obligations to process gas at such plants under commitments or agreements in existence as of the Effective Time, (b) at no economic burden to Purchaser or its Affiliates (as the case may be) beyond that which Noble or its Affiliate bears as of the Effective Time, the right to cause all the gas produced from the Assets to be separated at separation facilities owned by Noble or its Affiliates or to which Noble or its Affiliates have the right to use (in each case) as of the Effective Time that were separating gas produced from the Assets as of the Effective Time, such right being subject to the capacity at such facilities as of the Effective Time (subject further to annual equity re-determination at such plants) and to all obligations to separate gas at such facilities under commitments or agreements in existence as of the Effective Time, and (c) the right to use shore-based facilities supporting the operations of the Assets at market rates. Such agreement shall also contain such other terms and conditions as the Parties may mutually agree.      11.15 Description of Parties’ Intent. The Parties acknowledge that (a) it is the intent of the Parties that Noble sell to Purchaser and that Purchaser purchase all of the assets owned by Noble for the ownership and operation of the Leasehold Interests except for the Excluded Assets, and (b) the exhibits attached to this Agreement describing the Assets may incorrectly describe or omit to describe such assets. The Parties acknowledge that such exhibits (and subject to Section 11.13, the schedules) will be updated from time to time in connection with Purchaser’s due diligence and so as to correctly reflect the Parties’ intent as stated above. ARTICLE 12 TERMINATION      12.1 Right of Termination. This Agreement and the transactions contemplated hereby may be terminated:           (a) At any time at or prior to Closing by mutual consent of Noble and Purchaser; 36 --------------------------------------------------------------------------------             (b) by Noble, at Noble’s option, if any of the conditions set forth in Article 8 have not been satisfied on or before the Closing Date and such conditions remain unsatisfied for a period of ten (10) days following written notice thereof from Noble to Purchaser (with the Closing Date being extended until the expiration of such cure period or the satisfaction of such conditions, whichever is earlier);           (c) by Purchaser, at Purchaser’s option, if any of the conditions set forth in Article 9 have not been satisfied on or before the Closing Date and such conditions remain unsatisfied for a period of ten (10) days following written notice thereof from Purchaser to Noble (with the Closing Date being extended until the expiration of such cure period or the satisfaction of such conditions, whichever is earlier); or           (d) by Noble or Purchaser if the Closing shall not have occurred on or before July 31, 2006; provided, however, that no Party shall have the right to terminate this Agreement pursuant to clause (b), (c) or (d) above if such Party or its Affiliates are at such time in material breach of any provision of this Agreement.      12.2 Effect of Termination. If this Agreement is terminated pursuant to Section 12.1, this Agreement shall become void and of no further force or effect, except for the provisions of Sections 7.1, 7.2, 7.3, 7.4, 12.2, 17.2 through 17.10, 17.12, 17.13 and 17.15, which shall survive such termination and continue in full force and effect and the Parties shall have no liability or obligation hereunder except and to the extent such termination results from the material breach by a Party of this Agreement; provided that if Noble is entitled to the Deposit as liquidated damages pursuant to Article 2, then such retention shall constitute full and complete satisfaction of any and all damages and remedies Noble may have against Purchaser. ARTICLE 13 TAXES      13.1 Apportionment of Ad Valorem and Property Taxes. All ad valorem taxes, real property taxes, personal property taxes and similar obligations (“Property Taxes”) attributable to the Assets with respect to the tax period in which the Effective Time occurs shall be apportioned as of the Effective Time between Noble and Purchaser. The owner of record on the assessment date shall file or cause to be filed all required reports and returns incident to the Property Taxes and shall pay or cause to be paid to the taxing authorities all Property Taxes relating to the tax period on which the Effective Time occurs. If Noble is the owner of record on the assessment date, then Purchaser shall pay to Noble Purchaser’s pro rata portion of Property Taxes within thirty (30) days after receipt of Noble’s invoice therefor, except to the extent taken into account as an adjustment to the Purchase Price pursuant to Section 2.2. If Purchaser is the owner of record as of the assessment date then Noble shall pay to Purchaser Noble’s pro rata portion of Property Taxes within thirty (30) days after receipt of Purchaser’s invoice therefor.      13.2 Sales Taxes. The Purchase Price provided for hereunder excludes any sales taxes or other taxes required to be paid in connection with the sale of the Assets pursuant to this 37 --------------------------------------------------------------------------------   Agreement. Purchaser, however, shall be liable for any sales and use taxes, conveyance, transfer and recording fees and real estate transfer stamps or taxes that may be imposed on any transfer of the Assets pursuant to this Agreement. Noble shall, in accordance with Applicable Law, collect and remit any sales, gross receipts and similar taxes that are required to be paid as a result of the transfer of the Assets by Noble to Purchaser.      13.3 Other Taxes. All taxes (other than income and franchise taxes) attributable to the Assets that are imposed on or with respect to the production of Hydrocarbons or the receipt of proceeds therefrom (including but not limited to severance, production, and excise taxes) shall be apportioned between the Parties based upon the respective shares of production taken by the Parties. All such taxes that have accrued with respect to the period prior to the Closing Date have been or will be properly paid or withheld by Noble (although such taxes for the period between the Effective Time and the Closing Date will be taken into account as an adjustment to the Purchase Price pursuant to Section 2.2(a)) and all statements, returns, and documents pertinent thereto have been or will be properly filed. Purchaser shall be responsible for paying or withholding or causing to be paid or withheld all such taxes which have accrued after the Closing Date and for filing all statements, returns, and documents incident thereto.      13.4 Cooperation. Each Party shall provide the other Party with reasonable access to all relevant documents, data and other information (other than that which is subject to an attorney-client privilege) which may be required by the other Party for the purpose of preparing tax returns, filing refund claims and responding to any audit by any taxing jurisdiction. Each Party shall cooperate with all reasonable requests of the other Party made in connection with contesting the imposition of taxes. Notwithstanding anything to the contrary in this Agreement, neither Party shall be required at any time to disclose to the other Party any tax return or other confidential tax information. Except where disclosure is required by Applicable Law, any information obtained by a Party pursuant to this Section 13.4 shall be kept confidential by such Party, except to the extent disclosure is required in connection with the filing of any tax returns or claims for refund or in connection with the conduct of an audit, or other proceedings in response to an audit, by a taxing jurisdiction. ARTICLE 14 DOCUMENT RETENTION      14.1 Inspection. As used in this Article 14, “Documents” shall mean all files, documents, books, data and records delivered to Purchaser by Noble pursuant to the provisions of this Agreement, including, but not limited to: financial and tax accounting records; land, title and division of interest files; contracts; engineering and well files; and books and records related to the operation of the Assets during the Interim Period. Subject to the provisions of Section 14.2, Purchaser agrees that the Documents shall be open for inspection by representatives of Noble at reasonable times and upon reasonable notice during regular business hours for a period of 10 years following the date of Closing (or for such longer period as may be required by law or governmental regulation), and that Noble may during such period at its expense make such copies thereof as it may reasonably request. 38 --------------------------------------------------------------------------------        14.2 Destruction. For a period of 10 years after the date of Closing (or for such longer period as may be required by Applicable Law), Purchaser shall not destroy or give up possession of any original or final copy of the Documents without first offering Noble the opportunity (by delivery of written notice to Noble as provided in Section 17.7, with an additional copy of such notice delivered to the attention of Noble’s Tax Department), at Noble’s expense (without any payment to Purchaser), to obtain such original or final copy or a copy thereof. After the conclusion of such period, Purchaser shall offer to deliver to Noble, at Noble’s expense (without any payment to Purchaser), the Documents prior to destroying same. ARTICLE 15 INDEPENDENT INVESTIGATION AND DISCLAIMER      15.1 Independent Investigation and Disclaimer. Purchaser acknowledges that (a) it has had access to the Assets and the employees of Noble and (b) in making the decision to enter into this Agreement and consummate the transactions contemplated hereby, Purchaser has relied solely on the basis of its own independent investigation of the Assets and upon the express representations, warranties, covenants and agreements set forth in this Agreement. Accordingly, Purchaser acknowledges that, except as expressly set forth herein, Noble has not made, AND NOBLE HEREBY EXPRESSLY DISCLAIMS AND NEGATES, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT, ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE, OR OTHERWISE RELATING TO (i) THE CONDITION OF, OR FIELD OR ADMINISTRATIVE PRACTICES INVOLVING, THE ASSETS (INCLUDING WITHOUT LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, OR ENVIRONMENTAL CONDITION, OR THE CALCULATION OR PAYMENT OF ROYALTY OR SIMILAR OBLIGATIONS), (ii) ANY INFRINGEMENT OF ANY PATENT OR PROPRIETARY RIGHT OF ANY THIRD PARTY, OR (iii) ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED TO PURCHASER BY OR ON BEHALF OF NOBLE (INCLUDING, WITHOUT LIMITATION, IN RESPECT OF GEOLOGICAL, GEOPHYSICAL AND SEISMIC DATA, THE EXISTENCE OR EXTENT OF OIL, GAS OR OTHER MINERAL RESERVES, THE RECOVERABILITY OF OR THE COST OF RECOVERING ANY SUCH RESERVES, THE VALUE OF SUCH RESERVES, ANY PRODUCT PRICING ASSUMPTIONS, AND THE ABILITY TO SELL OIL OR GAS PRODUCTION AFTER THE EFFECTIVE TIME AND THE ABILITY OF PURCHASER TO BECOME OPERATOR OF THE ASSETS UNDER THE APPLICABLE OPERATING AGREEMENT); AND PURCHASER WILL HAVE SOLE RESPONSIBILITY FOR ANY ACTION TAKEN BY PURCHASER, OR BY OTHERS RELYING ON PURCHASER’S ADVICE, IN CONNECTION WITH THE OWNERSHIP OR OPERATION OF THE ASSETS AFTER THE CLOSING DATE OR BASED ON THE GEOLOGICAL MAPS, RECORDS, LOGS AND OTHER DATA, IF ANY, TRANSFERRED OR MADE AVAILABLE UNDER THIS AGREEMENT; provided, however, that the foregoing disclaimer and negation of representations and warranties shall not affect or impair the representations and warranties of Noble set forth in Article 4 hereof. As used in this Section 15.1, “Noble” shall include Noble’s agents and representatives. 39 --------------------------------------------------------------------------------   ARTICLE 16 ENVIRONMENTAL INDEMNITY      16.1 Physical and Environmental Conditions. Purchaser agrees and acknowledges that (a) it has had, access to and the opportunity to inspect the Assets for all purposes, including, without limitation, the purposes of determining environmental compliance and detecting the presence of hazardous or toxic substances, pollutants or other contaminants, environmental hazards, naturally occurring radioactive materials (NORM) and produced water contamination of the surface and/or subsurface, (b) subject to Purchaser’s remedies hereunder, it has satisfied itself as to the physical and environmental condition of the Assets, both surface and subsurface, and their method of operation and environmental compliance and except as set forth herein, and Purchaser agrees to accept an assignment of the Assets at Closing on an “AS IS, WHERE IS” basis, “WITH ALL FAULTS” and (c) except for Noble’s representations and warranties set forth in this Agreement, in making the decision to enter in this Agreement and consummate the transactions contemplated hereby, Purchaser has relied solely on the basis of its own independent investigation of the Assets and the records related thereto.      16.2 General Environmental Indemnity. If the Closing occurs, except as provided in the last clause of this Section 16.2 and without limiting Noble’s representations and warranties set forth in this Agreement or Purchaser’s obligations under Section 11.4, Purchaser from and after the Closing Date hereby assumes and shall be responsible for and agrees to RELEASE, INDEMNIFY, DEFEND AND HOLD HARMLESS THE NOBLE INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES ATTRIBUTABLE TO ENVIRONMENTAL COMPLIANCE, DAMAGE TO PROPERTY, INJURY TO OR DEATH OF PERSONS OR OTHER LIVING THINGS, NATURAL RESOURCE DAMAGES, CERCLA RESPONSE COSTS, ENVIRONMENTAL REMEDIATION AND RESTORATION COSTS, OR FINES OR PENALTIES (COLLECTIVELY, “ENVIRONMENTAL CLAIMS”) ARISING OUT OF OR ATTRIBUTABLE TO, IN WHOLE OR IN PART, EITHER DIRECTLY OR INDIRECTLY, THE ENVIRONMENTAL CONDITION OR COMPLIANCE OF THE ASSETS AT ANY TIME BEFORE, AT OR AFTER THE CLOSING DATE (INCLUDING, WITHOUT LIMITATION, ANY CLAIMS RELATING TO ANY CONDITION EXISTING ON, IN OR UNDER, OR RESULTING FROM OPERATION OF, THE ASSETS AT ANY TIME BEFORE, AT OR AFTER THE CLOSING DATE) THAT IS DETERMINED TO BE A RESULT OF OR CAUSED IN WHOLE OR IN PART BY NOBLE’S VIOLATION OF, FAILURE TO FULFILL DUTIES IMPOSED BY OR INCURRENCE OF LIABILITY UNDER, ANY ENVIRONMENTAL LAWS OR UNDER ANY PRINCIPLE OF COMMON LAW RELATING TO DUTIES TO PROTECT OR NOT UNDULY DISTURB HUMAN HEALTH OR ENVIRONMENTAL QUALITY; PROVIDED, HOWEVER, THAT NOBLE SHALL RELEASE, INDEMNIFY, DEFEND AND HOLD HARMLESS THE PURCHASER INDEMNIFIED PARTIES FROM AND AGAINST ANY CLAIM ARISING OUT OF OR ATTRIBUTABLE TO, IN WHOLE OR IN PART, EITHER DIRECTLY OR INDIRECTLY, THE ENVIRONMENTAL CONDITION OR COMPLIANCE OF THE ASSETS AT ANY TIME BEFORE THE CLOSING DATE THAT IS DETERMINED TO BE THE RESULT OF OR CAUSED IN WHOLE OR IN PART BY NOBLE’S VIOLATION OF, FAILURE TO FULFILL DUTIES IMPOSED BY OR INCURRENCE OF LIABILITY UNDER, ANY ENVIRONMENTAL LAWS (AS IN EFFECT ON THE EFFECTIVE TIME) OR UNDER ANY 40 --------------------------------------------------------------------------------   PRINCIPLE OF COMMON LAW (AS IN EFFECT ON THE EFFECTIVE TIME) RELATING TO DUTIES TO PROTECT OR NOT UNDULY DISTURB HUMAN HEALTH OR ENVIRONMENTAL QUALITY (OTHER THAN ANY SUCH CLAIMS RESULTING FROM OR ATTRIBUTABLE IN WHOLE OR IN PART TO CONDITIONS OR OPERATIONS DISCLOSED IN THE ENVIRONMENTAL REPORTS OR KNOWN TO PURCHASER AS OF THE DATE HEREOF), TO THE EXTENT THAT (A) SUCH CLAIM HAS BEEN FINALLY DETERMINED IN A THIRD-PARTY LAWSUIT OR ADMINISTRATIVE PROCEEDING OR ORDER THAT IS RECEIVED BY, OR FILED, ISSUED OR COMMENCED AGAINST, PURCHASER WITHIN SIXTY (60) DAYS FOLLOWING THE CLOSING DATE AND (B) THE LOSSES RESULTING FROM SUCH CLAIM EXCEED $100,000 AND ANY UNUSED PORTION OF THE DEDUCTIBLE AMOUNT. ARTICLE 17 MISCELLANEOUS      17.1 Dispute Resolution.           (a) Each Party shall have the right to submit claims, disputes, controversies or other matters in question arising out of the matters covered by Article 3 (including the existence of Title Defects or the Title Defect Amounts attributable thereto, or Environmental Defects, or the Environmental Defect Value attributable thereto, as applicable) (“Disputes”), to an independent expert appointed in accordance with this Section 17.1(a) (the “Independent Expert”), who shall serve as sole arbitrator. The Independent Expert shall be appointed by mutual agreement of Noble and Purchaser from among candidates with experience and expertise in the area that is the subject of such Dispute, and failing such agreement, such Independent Expert for such Dispute shall be selected in accordance with the Rules. Disputes to be resolved by an Independent Expert (other than those relating to the existence of Title Defects or the Title Defect Amounts attributable thereto, or Environmental Defects, or the Environmental Defect Value attributable thereto, as applicable, which shall be resolved in accordance with the procedures set forth in Section 17.1(c)) shall be resolved in accordance with mutually agreed procedures and rules and failing such agreement, in accordance with the rules and procedures for arbitration provided in Section 17.1(b). The Independent Expert shall be instructed by the Parties to resolve such Dispute as soon as reasonably practicable in light of the circumstances. The decision and award of the Independent Expert shall be binding upon the Parties as an award under the Federal Arbitration Act and final and nonappealable to the maximum extent permitted by Applicable Law, and judgment thereon may be entered in a court of competent jurisdiction and enforced by any Party as a final judgment of such court.           (b) Any Dispute that is not resolved pursuant to other mutually agreed procedures and rules pursuant to Section 17.1(a) (other than those relating to the existence of Title Defects or the Title Defect Amounts attributable thereto, or Environmental Defects, or the Environmental Defect Value attributable thereto, as applicable, which shall be resolved in accordance with the procedures set forth in Section 17.1(c)) shall be settled exclusively and finally by arbitration in accordance with the procedures set forth in this Section 17.1(b). 41 --------------------------------------------------------------------------------                  (i) Such arbitration shall be conducted pursuant to the Federal Arbitration Act, except as expressly provided otherwise in this Agreement. The validity, construction, and interpretation of this Section 17.1(b), and all procedural aspects of the arbitration conducted pursuant hereto, including the determination of the issues that are subject to arbitration (i.e., arbitrability), the scope of the arbitrable issues, allegations of “fraud in the inducement” to enter into this Agreement or this arbitration provision, allegations of waiver, laches, delay or other defenses to arbitrability, and the rules governing the conduct of the arbitration (including the time for filing an answer, the time for the filing of counterclaims, the times for amending the pleadings, the specificity of the pleadings, the extent and scope of discovery, the issuance of subpoenas, the times for the designation of experts, whether the arbitration is to be stayed pending resolution of related litigation involving third parties not bound by this Agreement, the receipt of evidence, and the like), shall be decided by the Independent Expert. The arbitration administered by the Independent Expert shall be conducted pursuant to the Commercial Arbitration Rules of the American Arbitration Association (the “Rules”), except as expressly provided otherwise in this Agreement. The arbitration proceedings shall be subject to any optional rules contained in the Rules for emergency measures and, in the case of Disputes with respect to amounts in excess of $1,000,000, optional rules for large and complex cases.                (ii) The Independent Expert shall permit and facilitate such discovery as he/she determines is appropriate in the circumstances, taking into account the needs of the parties and the desirability of making discovery expeditious and cost-effective. Such discovery may include pre-hearing depositions, particularly depositions of witnesses who will not appear personally to testify, if there is a demonstrated need therefor. The Independent Expert may issue orders to protect the confidentiality of proprietary information, trade secrets and other sensitive information disclosed in discovery.                (iii) All arbitration proceedings hereunder shall be conducted in Houston, Texas or such other mutually agreeable location.                (iv) In deciding the substance of the Dispute, the Independent Expert shall refer to the substantive laws of the State of Texas for guidance (excluding choice-of-law principles that might call for the application of the laws of another jurisdiction). Matters relating to arbitration shall be governed by the Federal Arbitration Act.                (v) The Parties shall request the Independent Expert to conduct a hearing as soon as reasonably practicable after appointment and to render a final decision completely disposing of the Dispute that is the subject of such proceedings as soon as reasonably practicable after the final hearing. The Parties shall instruct the Independent Expert to impose time limitations he/she considers reasonable for each phase of such proceeding, including, without limitation, limits on the time allotted to each Party for the presentation of its case and rebuttal. The Independent Expert shall actively manage the proceedings as he/she deems best so as to make the proceedings fair, expeditious, economical and less burdensome than litigation. To provide for speed and efficiency, the Independent Expert may: (A) limit the time allotted to each Party for presentation of its case; and (B) exclude testimony and other evidence they deem irrelevant or cumulative. 42 --------------------------------------------------------------------------------                  (vi) Notwithstanding any other provision in this Agreement to the contrary, the Parties expressly agree that the Independent Expert shall have absolutely no authority to award consequential, incidental, special, treble, exemplary or punitive damages of any type under any circumstances regardless of whether such damages may be available under Texas law, or any other laws, or under the Federal Arbitration Act or the Rules.                (vii) The Parties shall request that final decision of the Independent Expert be in writing, be as brief as possible, set forth the reasons for such final decision, and if the Independent Expert awards monetary damages to either Party, contain a certification by the Independent Expert that they have not included any consequential, incidental, special, treble, exemplary or punitive damages. To the fullest extent permitted by Applicable Law, the arbitration proceeding and the Independent Expert’s decision and award shall be maintained in confidence by the Parties and the Parties shall instruct the Independent Expert to likewise maintain such matters in confidence.           (c) In the event of any dispute relating to the existence of Title Defects or the Title Defect Amounts attributable thereto, or Environmental Defects, or the Environmental Defect Value attributable thereto, the Parties shall promptly negotiate in good faith in attempt to resolve such Dispute. In the event the Parties are unable to resolve such Dispute the parties shall promptly select an Independent Expert and each Party shall present a written statement of its position with respect to such Dispute and any supporting documentation to the Independent Expert within ten (10) days after the Independent Expert is selected. The Independent Expert shall conduct such investigation as he deems reasonably necessary or appropriate and make a determination with respect to such Dispute within twenty (20) days of receipt of such position statements.           (d) The fees and expenses of the Independent Expert shall be borne equally by Noble and Purchaser, but the decision of the Independent Expert may include such award of the Independent Expert’s fees and expenses and of other costs and attorneys’ fees as the Independent Expert determines appropriate (provided that such award of costs and fees may not exceed the amount of such costs and fees incurred by the losing Party in the arbitration).           (e) The decision and award of the Independent Expert shall be binding upon the Parties and final and nonappealable to the maximum extent permitted by Applicable Law, and judgment thereon may be entered in a court of competent jurisdiction and enforced by any Party as a final judgment of such court.      17.2 Governing Law. This Agreement and all instruments executed in accordance with it shall be governed by and interpreted in accordance with the laws of the State of Texas, excluding any conflicts of law rule or principle that might refer construction of such provisions to the laws of another jurisdiction.      17.3 Entire Agreement. This Agreement, including all exhibits attached hereto and made a part hereof, together with the Confidentiality Agreement, the Defects Escrow Agreement and the Deposit Escrow Agreement, constitute the entire agreement between the Parties with respect to the subject matter hereof and thereof and supersede all prior agreements, 43 --------------------------------------------------------------------------------   understandings, negotiations and discussions, whether oral or written, of the Parties with respect to same. No supplement, amendment, alteration, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the Parties.      17.4 Waiver. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.      17.5 Captions. The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.      17.6 Assignment.           (a) Noble hereby consents to an assignment or other transfer by Purchaser of its rights under this Agreement or any of the Assets, it being understood, however, that any such transfer by Purchaser shall not relieve Purchaser of any accrued and/or future liabilities or obligations hereunder or arising out of or incident to this Agreement and the transactions contemplated hereby unless Noble has discharged Purchaser expressly and in writing, and Purchaser shall be and shall remain jointly and severally (or solidarily if Louisiana law is determined to apply) liable with its transferee for the full and faithful performance of all accrued and/or future obligations and satisfaction of all accrued and/or future liabilities under this Agreement and/or arising out of or incident to the transactions contemplated hereby.           (b) Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.      17.7 Notices. Any notice provided or permitted to be given under this Agreement shall be in writing, and may be served by personal delivery, facsimile or by depositing same in the mail, addressed to the Party to be notified, postage prepaid, and registered or certified with a return receipt requested. Notice deposited in the mail in the manner hereinabove described shall be deemed to have been given and received on the date of the delivery as shown on the return receipt. Notice served in any other manner shall be deemed to have been given and received only if and when actually received by the addressee (except that notice given by facsimile shall be deemed given and received upon receipt only if received during normal business hours and if received other than during normal business hours shall be deemed received as of the opening of business on the next Business Day). For purposes of notice, the addresses of the parties shall be as follows: For Noble: Noble Energy, Inc. 100 Glenborough, Suite 100 Houston, Texas 77067 Attn: Shawn E. Conner Telecopy No.: 281/872-3358 Telephone No.: 281/872-3138 44 --------------------------------------------------------------------------------   With a copy to: Noble Energy, Inc. 100 Glenborough, Suite 100 Houston, Texas 77067 Attn: Aaron G. Carlson Telecopy No.: 281/872-3115 Telephone No.: 281/872-3354 For Purchaser: Coldren Resources LP 228 St. Charles Ave., Suite 724 New Orleans, LA 70130 Attn: Clint Coldren Telecopy No.: 504-569-3331 Telephone No.:504-569-3300 With a copy to: First Reserve Corporation 600 Travis, Suite 6000 Houston, Texas 77002 Attn: Hardy Murchison and Craig Jarchow Telecopy No.: (713) 224-0771 Telephone No.:(713) 227-7890 First Reserve Corporation One Lafayette Place Greenwich, CT 06830 Attn: Thomas R. Denison Telecopy No.: (203) 625-8520 Telephone No.:(203) 625-2520 and SPN Resources, L.L.C. 2202 Oil Center Court, Suite 200 Houston, TX 77073-3333 Attn: Greg Miller Telecopy No.: 281-784-7949 Telephone No.: 281-784-7948 45 --------------------------------------------------------------------------------        Each Party shall have the right, upon giving ten (10) days’ prior notice to the other in the manner hereinabove provided, to change its address for purposes of notice.      17.8 Expenses. Except as otherwise provided herein, each Party shall be solely responsible for all expenses incurred by it in connection with the transactions contemplated hereunder (including, without limitation, fees and expenses of its own counsel and consultants). Purchaser shall pay for all documentary, filing and recording fees required in connection with the filing and recording of the Assignments and Bills of Sale, Assignments of Record Title and Assignments of Operating Rights delivered by Noble to Purchaser at Closing. Within forty-five (45) days following Closing, Purchaser shall furnish Noble with a statement setting forth the recording information for each county or parish wherein such Assignments and Bills of Sale were recorded.      17.9 Severability. If any term, phrase or other provision of this Agreement is invalid, illegal or incapable of being enforced under any rule of law or public policy, all other terms, phrases and provisions of this Agreement shall nevertheless remain in full force and effect and this Agreement shall be interpreted so as to give effect to the original intent of the Parties as closely as possible so long as the economic or legal substance of the transactions contemplated hereby is not affected in a materially adverse manner with respect to either Party.      17.10 Publicity. Noble and Purchaser shall consult with each other with regard to all publicity and other releases concerning this Agreement and the transactions contemplated hereby and, except as required by, or pursuant to, Applicable Law or the applicable rules or regulations of any Governmental Entity or stock exchange on which shares of such Party or any of its Affiliates are listed, neither Party shall issue any publicity or other release without the prior written consent of the other Party.      17.11 Use of Noble’s Name. As soon as practicable after the Closing, Purchaser shall remove or cause to be removed the names and marks used by Noble and all variations and derivatives thereof and logos relating thereto from the Assets and shall not thereafter make any use whatsoever of those names, marks and logos. In the event Purchaser has not completed such removal within sixty (60) days after Closing, Noble shall have the right but not the obligation to complete such removal or cause such removal to be completed at Purchaser’s cost and expense.      17.12 Consequential Damages. The Parties waive any rights to incidental or consequential damages resulting from a breach of this Agreement, including, without limitation, loss of profits.      17.13 No Third-Party Beneficiary. Except as expressly provided herein, this Agreement is not intended to create, nor shall it be construed to create, any rights in any third party under doctrines concerning third-party beneficiaries.      17.14 Survival; Limitation of Liability.           (a) Except as otherwise set forth in this Agreement, the representations and warranties contained in this Agreement (other than those in Section 4.6 and Section 4.10), and 46 --------------------------------------------------------------------------------   the covenants and obligations of the Parties under this Agreement to be performed prior to the Closing, shall survive the Closing for a period of three hundred sixty-five (365) days. Except as otherwise set forth in this Agreement, (i) the representations and warranties contained in Section 4.10 shall survive the Closing for a period of sixty (60) days, (ii) the representations and warranties contained in Section 4.6 and the other covenants and obligations of the Parties under this Agreement shall survive the Closing without any time limitation, and any claim with respect to the breach thereof may be made at any time and (iii) the representation and warranty contained in Section 4.7(d) shall terminate as of Closing. Representations, warranties, covenants and obligations hereunder shall be of no further force or effect after the date of their expiration; provided, however, that there shall be no termination of any bona fide claim asserted pursuant to this Agreement with respect to such a representation, warranty, covenant or obligation prior to its expiration date. The indemnity obligations set forth in Sections 11.4(b)(ii) and 11.4(c)(i) shall terminate as of the date of each respective representation, warranty, covenant or obligation that is subject to indemnification, except in each case as to matters for which a specific written claim for indemnity has been delivered to the Indemnifying Party on or before such termination date.           (b) In no event shall Noble’s aggregate liability under this Agreement, including liability for (i) title defects pursuant to its limited “by, through or under” warranty, (ii) general indemnities under Article 11 and (iii) environmental indemnities pursuant to Section 16.2 exceed, in the aggregate, twenty-five percent (25%) of the Purchase Price; provided that (x) the covenants of the parties under Sections 2.3, 2.5, 11.1 and 11.3 shall not be limited by this Section 17.14(b), and (y) Noble’s indemnities under Sections 11.4(c)(ii) and (iv) shall not be limited by this Section 17.14(b).      17.15 Counterparts and Exhibits. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. All exhibits attached hereto are hereby made a part of this Agreement and incorporated herein by this reference.      17.16 Operatorship Matters.           (a) Notwithstanding anything herein to the contrary, Noble does not represent to Purchaser that Purchaser will succeed to Noble’s operatorship of any unit or well constituting a part of the Assets. Purchaser acknowledges and agrees that Purchaser will be required to comply with the terms of any applicable operating agreement, unit operating agreement or other contract relating to any elections or other selection procedures in order to succeed Noble as operator thereunder.           (b) Concerning Noble-operated Assets, Purchaser shall provide Noble with evidence of the acceptance by the applicable government authority of any such change of operatorship prior to the time Noble transfers operations to Purchaser. Where practicable, transfer of operations under this paragraph shall be performed on the first day of the month immediately following the date of receipt of approval of the applicable government authority for successor operations by Purchaser, subject to the terms and provisions of the Transition Agreement referenced in Section 11.6 where applicable. 47 --------------------------------------------------------------------------------        17.17 Conflict With Assignment. Noble and Purchaser acknowledge and agree that in the event of any conflict or inconsistency between the terms and provisions of this Agreement and the terms and provisions of the assignments executed and delivered at Closing by Noble and Purchaser, the terms and provisions of this Agreement shall control.      17.18 DTPA Waiver. TO THE EXTENT APPLICABLE TO THE ASSETS OR ANY PORTION THEREOF, PURCHASER HEREBY WAIVES THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES ACT, CHAPTER 17, SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED), TEX. BUS. & COM. CODE. IN ORDER TO EVIDENCE ITS ABILITY TO GRANT SUCH WAIVER, PURCHASER HEREBY REPRESENTS AND WARRANTS TO NOBLE THAT PURCHASER (A) IS IN THE BUSINESS OF SEEKING OR ACQUIRING, BY PURCHASE OR LEASE, GOODS OR SERVICES FOR COMMERCIAL OR BUSINESS USE, (B) HAS ASSETS OF $5,000,000 OR MORE ACCORDING TO ITS MOST RECENT FINANCIAL STATEMENT PREPARED IN ACCORDANCE WITH GAAP, (C) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE IT TO EVALUATE THE MERITS AND RISKS OF THE TRANSACTION CONTEMPLATED HEREBY, AND (D) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION.      17.19 Redhibition Waiver. PURCHASER: (A) WAIVES ALL RIGHTS IN REDHIBITION PURSUANT TO LOUISIANA CIVIL CODE ARTICLE 2475 AND ARTICLES 2520 THROUGH 2548; (B) ACKNOWLEDGES THAT THIS EXPRESS WAIVER SHALL BE CONSIDERED A MATERIAL AND INTEGRAL PART OF THIS SALE AND THE CONSIDERATION THEREOF; AND (C) ACKNOWLEDGES THAT THIS WAIVER HAS BEEN BROUGHT TO THE ATTENTION OF PURCHASER, HAS BEEN EXPLAINED IN DETAIL AND THAT PURCHASER HAS VOLUNTARILY AND KNOWINGLY CONSENTED TO THIS WAIVER OF WARRANTY OF FITNESS AND WARRANTY AGAINST REDHIBITORY VICES AND DEFECTS FOR THE ASSETS.      17.20 UTPCPL Waiver. TO THE EXTENT APPLICABLE TO THE PROPERTIES OR ANY PORTION THEREOF, PURCHASER HEREBY WAIVES THE PROVISIONS OF THE LOUISIANA UNFAIR TRADE PRACTICES AND CONSUMER PROTECTION LAW (LA. R.S. 51:1402, ET SEQ.). PURCHASER WARRANTS AND REPRESENTS THAT IT: (A) IS EXPERIENCED AND KNOWLEDGEABLE WITH RESPECT TO THE OIL AND GAS INDUSTRY GENERALLY AND WITH TRANSACTIONS OF THIS TYPE SPECIFICALLY; (B) POSSESSES AMPLE KNOWLEDGE, EXPERIENCE AND EXPERTISE TO EVALUATE INDEPENDENTLY THE MERITS AND RISKS OF THE TRANSACTIONS HEREIN CONTEMPLATED; AND (C) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION.      17.21 Recordation. The Assignment and Bill of Sale form attached as Schedule 10.2(a)(1) for Leasehold Interests located in or adjacent to the State of Texas and, Schedule 10.2(a)(2) for Leasehold Interests located in or adjacent to the State of Louisiana, Schedule 10.2(a)(3) for Leasehold Interests located in or adjacent to the State of Mississippi and Schedule 10.2(a)(4) for Leasehold Interests located in or adjacent to the State of Alabama are intended to 48 --------------------------------------------------------------------------------   convey all of the Assets being conveyed pursuant to this Agreement. Certain Assets or specific portions of the Assets that are leased from, or require the approval to transfer by, a Governmental Entity are conveyed under the Assignment and Bill of Sale and also are described and covered by Assignments of Record Title Interest and Assignments of Operating Rights, and other separate assignments made by Noble to Purchaser on officially approved forms, or forms acceptable to such entity, in sufficient multiple originals to satisfy applicable statutory and regulatory requirements. The interests conveyed by such separate assignments are the same, and not in addition to, the interests conveyed in any of such Assignments and Bill of Sale. Further, such assignments shall be deemed to contain the special limited title warranty of Noble and all of the exceptions, reservations, rights, titles, power and privileges set forth herein as fully and only to the extent as though they were set forth in each such separate assignment. Should the law of a state other than Texas or Louisiana be deemed applicable under the OCSLA, then any provisions of Applicable Law of such state parallel to those referenced in Sections 17.18, 17.19 and 17.20 above shall also be deemed waived to the maximum extent allowed by Applicable Law.      17.22 MMS Approval. Purchaser promptly after the Closing Date shall actively pursue MMS unconditional approval of the assignments of the Assets situated on the Outer Continental Shelf, and ownership thereof, from Noble to Purchaser. Purchaser obligates itself to take any and all reasonable action required by the MMS in order to obtain such approval and shall provide Noble with evidence that the MMS has determined that Purchaser (a) is exempt from any supplemental bonding requirements or (b) has satisfied any supplemental bonding requirements in accordance with Section 8.5(b), in either case involving the Assets. Until such time as Purchaser has provided Noble with such evidence satisfactory to Noble of compliance with this Section 17.22, Noble shall have the right to refuse to transfer operations of the Assets and Noble will continue to operate the Assets pursuant to the terms of the Transition Agreement.      17.23 Additional Documents and Actions. The Parties agree to execute such additional documents or take such additional actions as may be required to give effect to the intent of the Parties.      17.24 Cooperation in Connection with Regulatory Filings. For a period of three years following the Closing, Noble shall, and shall cause its Affiliates and their respective officers, employees, advisors and auditors to, provide reasonable cooperation to Purchaser, and its Affiliates and their respective accounting firms and representatives (collectively, the “Purchaser Party”) in connection with the preparation of financial statements and other documents to meet the disclosure and filing requirements under the Securities Act of 1933 as amended, or the Securities Exchange Act of 1934, as amended, associated with the registration of any securities or debt of Purchaser or any of its Affiliates (collectively, the “Filings”). Further, for a period of three years following the Closing, Noble agrees to retain and make available, subject to Noble’s presently existing records retention policy, to Purchaser Party any and all books, records, information and documents that are attributable to the Assets in Noble’s possession reasonably required by a Purchaser Party in order to prepare any Filings and documents associated therewith. Purchaser will reimburse Noble, within five (5) Business Days after demand in writing therefor, for any reasonable out-of-pocket costs incurred by Noble and its Affiliates and their respective representatives in complying with the provisions of this Section 17.24. 49 --------------------------------------------------------------------------------   ARTICLE 18 DEFINITIONS AND REFERENCES      18.1 Certain Defined Terms. When used in this Agreement, the following terms shall have the respective meanings assigned to them in this Section 18.1 or in the section, subsections or other subdivisions referred to below:      “Affiliate” means, with respect to any specified Person, any Person that directly or indirectly controls, is controlled by or is under common control with such specified Person. For the purpose of the immediately preceding sentence, the term “control” means the power to direct or cause the direction of the management of such Person, whether through the ownership of voting securities or by contract or agency or otherwise.      “Agreed Rate” means, at the time of any determination thereof is to be made, the fluctuating per annum rate of interest then most recently reported in the Wall Street Journal as the “Prime Rate” (the base rate on corporate loans at large U.S. money center commerce banks).      “Applicable Law” means any statute, law, principle of common law, rule, regulation, judgment, order, ordinance, requirement, code, writ, injunction, or decree of any Governmental Entity.      “Casualty” means any casualty event, including any fire, explosion, lightening, flood, hurricane or other casualty.      “Confidentiality Agreement” means that certain agreement dated February 21, 2006, by and between Noble and First Reserve Corporation.      “Customary Post-Closing Consents” means consents required to be obtained in connection with assignment of any Asset in connection with the transactions contemplated hereby of a nature that would customarily be obtained after the Closing in transactions similar to the transactions contemplated hereby (including any consent or approval of or filing with any Governmental Entity in connection with the assignment of any Asset), but excluding the consents listed on Schedule 4.11.      “Damages” means all claims, actions, causes of action, demands, assessments, losses, damages, liabilities, judgments, settlements, penalties, costs, and expenses (including reasonable attorney’s fees and expenses) of any nature whatsoever.      “Environmental Laws” means any and all federal, state and local laws, statutes, regulations, rules, orders, ordinances, permits or determinations of any governmental authority pertaining to health, the environment, wildlife or natural resources in effect in any and all jurisdictions in which the Assets are located, including, without limitation, the Clean Air Act, as amended, and the Federal Water Pollution Control Act, as amended, the Rivers and Harbors Act of 1899, as amended, the Safe Drinking Water Act, as amended, the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Resource Conservation and Recovery Act (“RCRA”), as amended, The Hazardous and Solid Waste 50 --------------------------------------------------------------------------------   Amendments Act of 1984, as amended, the Toxic Substances Control Act, as amended, the Occupational Safety and Health Act, as amended, and the Hazardous Materials Transportation Act, as amended. The terms “hazardous substance,” “release” and “threatened release” shall have the meanings specified in CERCLA, and the terms “solid waste,” “hazardous waste,” and “disposal” (or “disposed”) shall have the meanings specified in RCRA; provided, however, that (a) to the extent the laws of the state in which the Assets are located, or adjacent, are applicable and have established a meaning for “hazardous substance,” “release,” “threatened release,” “solid waste,” “hazardous waste,” and “disposal” that is broader than that specified in CERCLA or RCRA, such broader meaning shall apply with respect to the matters covered by such laws, and (b) the term “solid waste” shall include all oil and gas exploration, development, and production wastes, even if such wastes are specifically exempt from classification as hazardous substances or hazardous wastes pursuant to CERCLA or RCRA, or the state analogues to those statutes.      “Environmental Liabilities” means any and all Damages (including any remedial, removal, response, abatement, clean-up, investigation and/or monitoring costs and associated legal costs) incurred or imposed (a) pursuant to any agreement, order, notice of responsibility, directive (including directives embodied in Environmental Laws), injunctions, judgment or similar documents (including settlements) arising out of, in connection with, or under Environmental Laws, or (b) pursuant to any claim by a Governmental Entity or any other Person for personal injury, property damage, damage to natural resources, remediation, or payment or reimbursement of response costs incurred or expended by such Governmental Entity or other Person pursuant to common law or statute and related to the use or release of hazardous substances.      “GAAP” means generally accepted accounting principles in the United States of America from time to time, applied on a consistent basis throughout the periods involved.      “Governmental Entity” means any court or tribunal in any jurisdiction (domestic or foreign) or any federal, state, county, municipal, or other governmental or quasi-governmental body, agency, authority, department, commission, board, bureau, or instrumentality (domestic or foreign).      “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.      “Hydrocarbons” means oil and gas and other hydrocarbons produced or processed in association therewith.      “Imbalance” means all gas imbalances and make-up obligations related to the Assets regardless of whether such imbalances or make-up obligations arise at the wellhead, pipeline, gathering system or other level, and regardless of whether the same arise under contract or otherwise.      “Knowledge” of a specified Person (or similar references to a Person’s knowledge) means all information actually or constructively known to (a) in the case of a Person who is an 51 --------------------------------------------------------------------------------   individual, such Person, (b) in the case of a Person which is corporation or other entity, an executive officer or employee who devoted substantive attention to matters of such nature during the ordinary course of his employment by such Person, or (c) in the case of Noble, of the following: Bob Bemis, Director of Environmental, Health and Safety; Mike Brown, Business Development Advisor, North America; Aaron Carlson, Senior Attorney; Shawn Conner, Director of Business Development; Roger Souders, Senior Landman; Joe Zimmerman, Shelf Operations Manager; Ted Price, Vice President, Exploration/Exploitation; Pam Tuilos, Regulatory/Environmental Coordinator, GOM/South; Shelly Goddard, Lease Records Supervisor; Janice Spruill, Division Order Supervisor; Rodney Cook, Vice President, Southern Region; Bill Sharp, Asset Manager, Gulf Coast Shelf; Stan Doiron, Offshore Production Supervisor; and Jack Harmoth, Tax Director. A Person has “constructive knowledge” of those matters which the individual involved could reasonably be expected to have as a result of undertaking an investigation of such a scope and extent as a reasonably prudent man would undertake concerning the particular subject matter.      “Lien” means any claim, lien, mortgage, security interest, pledge, charge, option, right-of-way, easement, encroachment, or encumbrance of any kind.      “Material Adverse Effect” means a material adverse effect on the value of the Assets (taken as a whole and after taking into account any insurance, indemnity and other recoveries payable in respect thereof), excluding any effect resulting from or arising in connection with (a) this Agreement or the transactions contemplated hereby or the public announcement thereof; (b) the effect of any change in the United States or foreign economies or securities or financial markets in general; (c) the effect of any change that affect generally the oil and gas industry, such as fluctuations in the price of oil and gas; (d) the effect of any change arising in connection with any natural disasters, hostilities, acts of war, sabotage or terrorism or military actions or any escalation or material worsening of any such hostilities, acts of war, sabotage or terrorism or military actions existing or underway as of the date hereof; (e) the effect of any action taken by Purchaser or its Affiliates (other than providing consent or approval pursuant to Section 6.1) with respect to the transactions contemplated hereby or with respect to the Assets, (f) any matter expressly set forth in an exhibit or schedule hereto; or (g) any change in Applicable Law or accounting rules.      “Net Revenue Interest” or “NRI” means an interest (expressed as a percentage or decimal fraction) in and to the Hydrocarbons produced and saved from or attributable to an Asset.      “Person” shall mean any individual, firm, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, Governmental Entity or any other entity.      “Working Interest” or “WI” means the percentage of costs and expenses attributable to the maintenance, development and operation of an Asset.      18.2 Certain Additional Defined Terms. In addition to such terms as are defined in the preamble of and the recitals to this Agreement and in Section 18.1, the following terms are used in this Agreement as defined in the Articles or Sections set forth opposite such terms: 52 --------------------------------------------------------------------------------         Term   Defined Adjusted Purchase Price   Section 2.2 Adjustment Amount   Section 3.5 AFE   Section 4.13 Agreement   Preamble Allocated Value   Section 3.1(c)(i) Assets   Section 1.1 Assumed Obligations   Section 11.4(a) Business Days   Section 2.3(a) Business Employees   Section 11.12(a) Claim Notice   Section 11.4(e)(i) Closing   Section 10.1 Closing Date   Section 10.1 Code   Section 4.5 Continuing Employee   Section 11.12(c) Cure Period   Section 3.6(b) Deductible Amount   Section 3.4 Defects Escrow   Section 3.6(a) Defects Escrow Agent   Section 3.6(a) Defects Escrow Agreement   Section 3.6(a) Defects Escrow Amount   Section 3.6(a) Defensible Title   Section 3.1(d)(i) Deferred Adjustment Claim   Section 3.5 Deferred Matters Date   Section 3.5 Deposit   Section 2.1(c) Deposit Escrow Agreement   Section 2.1(e) Disputes   Section 17.1(a) Documents   Section 14.1 Effective Time   Section 1.1 Entech   Section 1.2 Environmental Claims   Section 16.2 Environmental Defect   Section 3.2(e)(i) Environmental Defect Notice   Section 3.2(c) Environmental Defect Value   Section 3.2(e)(ii) Environmental Information   Section 3.2(b) Escrow Agent   Section 2.1(c) Examination Period   Section 3.1(a) Estimated Adjusted Purchase Price   Section 2.3(a) Excluded Assets   Section 1.1 Filings   Section 17.24 Indemnified Party   Section 11.4(e)(i) Indemnifying Party   Section 11.4(e)(i) Independent Expert   Section 17.1(a) Interim Period   Section 6.1 53 --------------------------------------------------------------------------------         Term   Defined Leasehold Interests   Section 1.1(a) Leases   Section 4.17 Losses   Section 7.4 Material Contracts   Section 4.7 MMS   Section 5.7 Noble   Heading Noble Indemnified Parties   Section 7.4 Noble Internal ORRIs   Section 11.4(f) Orders and Contracts   Section 1.1(b)(iii) Overheld Amount   Section 3.5 Party and Parties   Preamble Permitted Encumbrances   Section 3.1(d)(ii) Platforms   Section 1.1(b)(i) Post-Closing Defect   Section 3.6(a) Pref Right Notice   Section 3.9(a) Property Taxes   Section 13.1 Purchase Price   Section 2.1(a) Purchaser   Heading Purchaser Indemnified Parties   Section 11.4(c) Purchaser Party   Section 17.24 Purchaser’s Environmental Consultant   Section 3.2(a) Purchaser’s Environmental Review   Section 3.2(a) Purchaser’s Estimate   Section 3.5 Purchaser’s Title Review   Section 3.1(a) Records   Section 1.1(c) Resolved Amount   Section 3.5 Rules   Section 17.1(b)(i) Title Defect   Section 3.1(d)(iii) Title Defect Amount   Section 3.1(c) Title Defect Asset   Section 3.1(b) Title Defect Notice   Section 3.1(b) Third Party   Section 11.4(a)(i) Third Party Claim   Section 11.4(e)(i) Wells   Section 1.1(b)(i) [signature page to follow] 54 --------------------------------------------------------------------------------        EXECUTED on May 15, 2006, to be effective for all purposes, however, as of the Effective Date.                   NOBLE ENERGY, INC.                       By:    /s/ David L. Stover                     Name: David L. Stover         Title: Senior Vice President                           COLDREN RESOURCES LP                           By   Coldren Resources GP LLC,             Its General Partner                               By:   /s/ Clinton W. Coldren                             Name:   Clinton W. Coldren                             Title:   Authorized Person                     Schedules and Exhibits have been intentionally omitted, and will be made available to the Securities and Exchange Commission upon request. 55

Exhibit 10.1 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made, entered into and effective as of October 9, 2006 (the “Effective Date”), between Ethanex Energy, Inc. (the “Company”), and David J. McKittrick, an individual (the “Executive”). WHEREAS, the Company and the Executive wish to memorialize the terms and conditions of the Executive’s employment by the Company in the positions of Executive Vice President and Chief Financial Officer; NOW, THEREFORE, in consideration of the covenants and promises contained herein, the Company and the Executive agree as follows: 1. Employment Period. The Company offers to employ the Executive, and the Executive agrees to be employed by Company, in accordance with the terms and subject to the conditions of this Agreement. The Company and Executive agree that Executive is employed “at will” which means that the employment relationship may be terminated by either party at any time, for any reason or no reason, subject to the provisions of Section 11 below. The Executive affirms that no obligation exists between the Executive and any other entity which would prevent or impede the Executive’s immediate and full performance of every obligation of this Agreement. 2. Position and Duties. During the term of the Executive’s employment hereunder, the Executive shall continue to serve in, and assume duties and responsibilities consistent with, the positions of Executive Vice President and Chief Financial Officer of a public company, which may include, but are not limited to, management of the Company’s financial affairs, information technology functions and legal functions, unless and until otherwise instructed by the Company. The Executive agrees to devote to the Company substantially all of his working time, skill, energy and best business efforts during the term of his employment with the Company, and the Executive shall not engage in business activities outside the scope of his employment with the Company if such activities would detract from or interfere with his ability to fulfill his responsibilities and duties under this Agreement or require substantial amounts of his time or of his services. The Company consents to Executive’s continued membership on the Boards of Directors of Wellman, Inc. and Hamilton Beach/Proctor Silex and the Board of Trustees of Hampden-Sydney College. While you will not be a formal member of the Board of Directors it is the Company’s expectation that you will be an active participant in all Board meetings and other Board affairs. 3. No Conflicts. The Executive covenants and agrees that for so long as he is employed by the Company, he shall inform the Company of each and every future business opportunity presented to the Executive that arises within the scope of the Business of the Company (as defined below) and would be feasible for the Company, and that he will not, directly or indirectly, exploit any such opportunity for his own account. 4. Hours of Work. The Executive’s normal days and hours of work shall coincide with the Company’s regular business hours. The nature of the Executive’s employment with the Company requires flexibility in the days and hours that the Executive must work, and may necessitate that the Executive work on other or additional days and hours.     --------------------------------------------------------------------------------     5. Location. The locus of the Executive’s employment with the Company shall be Richmond, Virginia and any other locus where the Company now or hereafter has a business facility. The Executive will travel to the Company’s office in Basehor, Kansas and elsewhere from time to time as necessary to fulfill his duties. 6. Compensation. (a) Base Salary. During the term of this Agreement, the Company shall pay, and the Executive agrees to accept, in consideration for the Executive’s services hereunder, pro rata bi-weekly payments of the annual salary of $190,000, less all applicable taxes and other appropriate deductions. (i) Upon successful completion of financing in such amount as is sufficient, in the opinion of the Company’s Board of Directors (the “Board”), to enable the Company to finance the acquisition or construction of the Company’s initial operating ethanol producing facility (the “Initial Ethanol Facility”), the Executive’s annual base salary shall be increased to $210,000. (ii) The Executive’s base salary shall be increased to $250,000 at such time as the Initial Ethanol Facility becomes operational, either through the start of revenue producing activities of a newly constructed plant or through the acquisition of an existing operational plant. The Compensation Committee (the “Compensation Committee”) of the Board shall also review the Executive’s base salary annually and shall make a recommendation to the Board as to whether such base salary should be increased but not decreased, which decision shall be within the Board’s sole discretion. (b) Annual Bonus. During the term of this Agreement, the Executive shall be entitled to an annual bonus of up to 50% of his base salary (considered at the end of the period for which the bonus is being calculated) the actual amount of which bonus shall be determined according to achievement of performance-related financial and operating targets established annually for the Company and the Executive by the Compensation Committee (or by the independent members of the Board if there exists no Compensation Committee). Such performance targets for each fiscal year shall be adopted by the Compensation Committee promptly after the end of the prior fiscal year, but in no event later than March 31st of the current fiscal year (except for fiscal year 2006, the performance targets for which shall be adopted within 45 days after the Effective Date). Each annual bonus shall be paid by the Company to the Executive promptly after the first meeting of the Board following the completion of the annual audit, which meeting shall occur on or about April 15th of each year. (c) The Executive’s salary and bonus for 2006 shall be paid pro rata for the portion of the year he is an employee. 7. Expenses. During the term of this Agreement, the Executive shall be entitled to payment or reimbursement of any reasonable expenses paid or incurred by him in connection with and related to the performance of his duties and responsibilities hereunder for the Company. All requests by the Executive for payment of reimbursement of such expenses shall be supported by appropriate invoices, vouchers, receipts or such other supporting documentation in such form and containing such information as the Company may from time to time require, evidencing that the Executive, in fact, incurred or paid said expenses. Without limiting the foregoing, the Company shall, upon the Executive’s written request, provide the Executive with reasonable temporary office facilities in Richmond, Virginia, which may include, but is not limited to, computers, telephones, and administrative assistance as may be necessary for the effective performance of the Executive’s duties and responsibilities.     --------------------------------------------------------------------------------     8. Vacation. During the term of this Agreement, the Executive shall be entitled to accrue, on a pro rata basis, 20 vacation days, per year. The Executive shall be entitled to carry over any accrued, unused vacation days from year to year without limitation. 9. Stock Options and Restricted Shares. The Company hereby agrees that the Executive shall be granted a non-qualified stock option and restricted shares on the terms and conditions hereinafter stated: (a) Grant of Options. On the Effective Date, the Company will grant the Executive an option to purchase an aggregate of 1,500,000 shares of the Company’s common voting stock (the “Option”) under the Company’s 2006 Stock Option Plan (the “Stock Option Plan”). Such grant shall be evidenced by an Option Agreement as contemplated by the Stock Option Plan. In subsequent years the Executive shall be eligible for such grants of Options and other permissible awards (collectively with Options and Restricted Shares, “Awards”) under the Stock Option Plan as the Compensation Committee or the Board shall determine. (b) Option Price; Term. The per share exercise price of the Option shall be the fair market value per share of Company common voting stock on the Effective Date as determined by the closing sale price of Company common stock on the OTC Bulletin Board on the date immediately preceding the Effective Date. The term of the Option shall be ten years from the date of grant. (c) Option Vesting and Exercise. Twenty-five percent (25%) of the Option shall be vested and exercisable on the first anniversary of the grant of the Option. Thereafter, the balance of the Options shall be vested and become exercisable in monthly installments over the next 24 months that the Executive is employed with the Company. (d) Grant of Restricted Shares. On the Effective Date, the Company will grant the Executive a restricted stock award of 1,000,000 shares of the Company’s common voting stock (the “Restricted Shares”) under the Stock Option Plan. Such grant shall be evidenced by a Restricted Stock Agreement as contemplated by the Stock Option Plan. (e) Restricted Share Vesting and Disposition. Twenty-five percent (25%) of the Restricted Shares shall be vested six months after the Effective Date. Thereafter, the balance shall be vested in monthly installments over the next 30 months that the Executive is employed with the Company. During the Executive’s employment with the Company, all Restricted Shares, whether vested or not, shall only be sold or otherwise disposed of with the consent of the Company’s Board of Directors or if the dollar value of the shares of common stock beneficially owned by the Executive following such sale or disposition is equal to or exceeds four times the Executive’s base salary. (f) Termination of Service; Accelerated Vesting.    (i) If the Executive’s employment is terminated for Cause, as such term is defined below, all Awards, whether or not vested, shall immediately expire effective the date of termination of employment.     --------------------------------------------------------------------------------     (ii) If the Executive’s employment is terminated voluntarily by the Executive without Good Reason, as such term is defined below, all unvested Awards shall immediately expire effective the date of termination of employment. Vested Awards, to the extent unexercised, shall expire one month after the termination of employment. (iii) If the Executive’s employment is terminated (A) in connection with a Change of Control, as defined below, (B) by the Company without Cause or (C) upon death or Disability, as defined below, all unvested Awards shall immediately vest and become exercisable effective the date of termination of employment, and, to the extent unexercised, shall expire one year after any such event. (g) Payment. The full consideration for any shares purchased by the Executive upon exercise of the Option shall be paid in cash.    10. Other Benefits. (a) During the term of this Agreement, the Executive shall be eligible to participate in incentive, savings, retirement (401(k)), and welfare benefit plans, including, without limitation, health, medical, dental, vision, life (including accidental death and dismemberment) and disability insurance plans (collectively, “Benefit Plans”), in substantially the same manner, including but not limited to responsibility for the cost thereof, and at substantially the same levels, as the Company makes such opportunities available to all of the Company’s managerial or salaried executive employees. (b) The Executive’s spouse and dependent minor children will be covered under the Benefit Plans providing health, medical, dental, and vision benefits, in substantially the same manner, including but not limited to responsibility for the cost thereof, and at substantially the same levels, as the Company makes such opportunities available to the spouses and dependent minor children to all of the Company’s managerial or salaried executive employees. (c) The Company shall purchase and maintain traditional directors and officers liability insurance coverage in the amount of at least $5,000,000 covering the Company’s officers and directors, including the Executive no later than 30 days following the Effective Date, provided such coverage is available on commercially reasonable terms. (d)  Until such time as Executive becomes covered by Company medical coverage, the Company shall reimburse Executive for Executive’s medical coverage currently in place. 11. Termination of Employment. (a) Death. In the event that during the term of this Agreement the Executive dies, this Agreement and the Executive’s employment with the Company shall automatically terminate and the Company shall have no further obligations or liability to the Executive or his heirs, administrators or executors with respect to compensation and benefits accruing thereafter, except for the obligation to pay the Executor’s heirs, administrators or executors any earned but unpaid base salary, unpaid pro rata annual bonus and unused vacation days accrued through the date of death; provided, that nothing contained in this paragraph shall be deemed to excuse any breach by the Company of any provision of this Agreement. The Company shall deduct, from all payments made hereunder, all applicable taxes, including income tax, FICA and FUTA, and other appropriate deductions.     --------------------------------------------------------------------------------     (b) “Disability.” In the event that, during the term of this Agreement the Executive shall be prevented from performing his duties and responsibilities hereunder to the full extent required by the Company by reason of Disability (as defined below) this Agreement and the Executive’s employment with the Company shall automatically terminate and the Company shall have no further obligations or liability to the Executive or his heirs, administrators or executors with respect to compensation and benefits accruing thereafter, except for the obligation to pay the Executive or his heirs, administrators or executors any earned but unpaid base salary, unpaid pro rata annual bonus and unused vacation days accrued through the Executive’s last date of Employment with the Company; provided, that nothing contained in this paragraph shall be deemed to excuse any breach by the Company of any provision of this Agreement including any failure to maintain the long-term disability insurance coverage required pursuant to Section 10(b)(iv). The Company shall deduct, from all payments made hereunder, all applicable taxes, including income tax, FICA and FUTA, and other appropriate deductions through the last date of the Executive’s employment with the Company. For purposes of this Agreement, “Disability” shall mean a physical or mental disability that prevents the performance by the Executive, with or without reasonable accommodation, of his duties and responsibilities hereunder for a period of not less than an aggregate of three months during any twelve consecutive months. (c) “Cause.” (i) At any time during the term of this Agreement, the Company may terminate this Agreement and the Executive’s employment hereunder for “Cause.” For purposes of this Agreement, “Cause” shall be defined as the occurrence of: (A) gross neglect, malfeasance or gross insubordination in performing the Executive’s duties under this Agreement; (B) the Executive’s conviction for a felony, excluding convictions associated with traffic violations; (C) an egregious act of dishonesty (including without limitation theft or embezzlement) or a malicious action by the Executive toward the Company’s customers or employees; (D) a willful and material violation of any provision of Sections 12 and 13 hereof; (E) intentional reckless conduct that is materially detrimental to the business or reputation of the Company; or (F) material failure, other than by reason of Disability, to carry out reasonably assigned duties or instructions consistent with the titles of Executive Vice President and Chief Financial Officer (provided that material failure to carry out reasonably assigned duties shall be deemed to constitute Cause only after a finding by the Board of Directors, or a duly constituted committee thereof, of material failure on the part of the Executive and the failure to remedy such performance to the Board’s or the committee’s satisfaction within 30 days after delivery of written notice to the Executive of such finding). (ii) Upon termination of this Agreement for Cause, the Company shall have no further obligations or liability to the Executive or his heirs, administrators or executors with respect to compensation and benefits thereafter, except for the obligation to pay the Executive any earned but unpaid base salary, unpaid pro rata annual bonus and unused vacation days accrued through the Executive’s last day of employment with the Company. The Company shall deduct, from all payments made hereunder, all applicable taxes, including income tax, FICA and FUTA, and other appropriate deductions. (d) Change of Control. For purposes of this Agreement, “Change of Control” means the occurrence of, or the Company’s Board votes to approve: (A) any consolidation or merger of the Company pursuant to which the stockholders of the Company immediately before the transaction do not retain immediately after the transaction, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately before the transaction, direct or indirect beneficial ownership of more than 50% of the total combined voting power of the outstanding voting securities of the surviving business entity; (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company other than any sale, lease, exchange or other transfer to any company where the Company owns, directly or indirectly, 100% of the outstanding voting securities of such company after any such transfer; (C) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than 50% of the voting stock of the Company.     --------------------------------------------------------------------------------     (e) “Good Reason.”   (i) At any time during the term of this Agreement, subject to the conditions set forth in Section 11(e)(ii) below, the Executive may terminate this Agreement and the Executive’s employment with the Company for “Good Reason.” For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following events: (A) the assignment, without the Executive’s consent, to the Executive of duties that are significantly different from, and that result in a substantial diminution of, the duties that he assumed on the Effective Date; (B) the assignment, without the Executive’s consent, to the Executive of a title that is different from and subordinate to the title specified in Section 2 above; (C) any termination of the Executive’s employment by the Company, other than a termination for Cause, within 12 months after a Change of Control; (D) the assignment, without the Executive’s consent, to the Executive of duties that are significantly different from, and that result in a substantial diminution of, the duties that he assumed on the Effective Date within 12 months after a Change of Control; (E) the requirement that the Executive relocate beyond 50 miles of Richmond, Virginia within 12 months of a Change of Control; or (F) material breach by the Company of this Agreement. (ii) The Executive shall not be entitled to terminate his employment with the Company and this Agreement for Good Reason unless and until he shall have delivered written notice to the Company of his intention to terminate this Agreement and his employment with the Company for Good Reason, which notice specifies in reasonable detail the circumstances claimed to provide the basis for such termination for Good Reason, and the Company shall not have eliminated the circumstances constituting Good Reason within 30 days of its receipt from the Executive of such written notice. (iii) In the event that the Executive terminates this Agreement and his employment with the Company for Good Reason, the Company shall pay or provide to the Executive (or, following his death, to the Executive’s heirs, administrators or executors): (A) any earned but unpaid base salary, unpaid pro rata annual bonus and unused vacation days accrued through the Executive’s last day of employment with the Company; and (B) severance in an amount equal to six month’s base salary, as in effect immediately prior to the Executive’s termination hereunder. All payments due hereunder shall be made within 45 days after the date of termination of the Executive’s employment. The Company shall deduct, from all payments made hereunder, all applicable taxes, including income tax, FICA and FUTA, and other appropriate deductions.   (iv) The Executive shall have no duty to mitigate his damages.   (f) Without “Cause.”   (i) By The Executive. At any time during the term of this Agreement, the Executive shall be entitled to terminate this Agreement and the Executive’s employment with the Company without Cause by providing prior written notice of at least 30 days to the Company. Upon termination by the Executive of this Agreement and the Executive’s employment with the Company without Cause, the Company shall have no further obligations or liability to the Executive or his heirs, administrators or executors with respect to compensation and benefits thereafter, except for the obligation to pay the Executive any earned but unpaid base salary, and unused vacation days accrued through the Executive’s last day of employment with the Company. The Company shall deduct, from all payments made hereunder, all applicable taxes, including income tax, FICA and FUTA, and other appropriate deductions.     --------------------------------------------------------------------------------     (ii) By The Company. At any time during the term of this Agreement, the Company shall be entitled to terminate this Agreement and the Executive’s employment with the Company without Cause by providing prior written notice of at least 30 days to the Executive. Upon termination by the Company of this Agreement and the Executive’s employment with the Company without Cause, the Company shall pay or provide to the Executive (or, following his death, to the Executive’s heirs, administrators or executors): (A) any earned but unpaid base salary, unpaid pro rata annual bonus and unused vacation days accrued through the Executive’s last day of employment with the Company and (B) severance in an amount equal to six month’s base salary, as in effect immediately prior to the Executive’s termination hereunder. All payments due hereunder shall be made within 45 days after the date of termination of the Executive’s employment. The Company shall deduct, from all payments made hereunder, all applicable taxes, including income tax, FICA and FUTA, and other appropriate deductions.   12. Confidential Information. (a) The Executive expressly acknowledges that, in the performance of his duties and responsibilities with the Company, he has been exposed since prior to the Effective Date, and will be exposed, to the trade secrets, business and/or financial secrets and confidential and proprietary information of the Company, its affiliates and/or its clients, business partners or customers (“Confidential Information”). The term “Confidential Information” includes information or material that has actual or potential commercial value to the Company, its affiliates and/or its clients, business partners or customers and is not generally known to and is not readily ascertainable by proper means to persons outside the Company, its affiliates and/or its clients or customers. (b) Except as authorized in writing by the Board, during the performance of the Executive’s duties and responsibilities for the Company and until such time as any such Confidential Information becomes generally known to and readily ascertainable by proper means to persons outside the Company, its affiliates and/or its clients, business partners or customers, the Executive agrees to keep strictly confidential and not use for his personal benefit or the benefit to any other person or entity (other than the Company) the Confidential Information. “Confidential Information” includes the following, whether or not expressed in a document or medium, regardless of the form in which it is communicated, and whether or not marked “trade secret” or “confidential” or any similar legend: (i) lists of and/or information concerning customers, prospective customers, suppliers, employees, consultants, co-venturers and/or joint venture candidates of the Company, its affiliates or its clients or customers; (ii) information submitted by customers, prospective customers, suppliers, employees, consultants and/or co-venturers of the Company, its affiliates and/or its clients or customers; (iii) non-public information proprietary to the Company, its affiliates and/or its clients or customers, including, without limitation, cost information, profits, sales information, prices, accounting, unpublished financial information, business plans or proposals, expansion plans (for current and proposed facilities), markets and marketing methods, advertising and marketing strategies, administrative procedures and manuals, the terms and conditions of the Company’s contracts and trademarks and patents under consideration, distribution channels, franchises, investors, sponsors and advertisers; (iv) proprietary technical information concerning products and services of the Company, its affiliates and/or its clients, business partners or customers, including, without limitation, product data and specifications, diagrams, flow charts, know how, processes, designs, formulae, inventions and product development; (v) lists of and/or information concerning applicants, candidates or other prospects for employment, independent contractor or consultant positions at or with any actual or prospective customer or client of Company and/or its affiliates, any and all confidential processes, inventions or methods of conducting business of the Company, its affiliates and/or its clients, business partners or customers; (vi) acquisition or merger targets; (vii) business plans or strategies, data, records, financial information or other trade secrets concerning the actual or contemplated business, strategic alliances, policies or operations of the Company or its affiliates; or (viii) any and all versions of proprietary computer software (including source and object code), hardware, firmware, code, discs, tapes, data listings and documentation of the Company; or (ix) any other confidential information disclosed to the Executive by, or which the Executive is otherwise obligated under a duty of confidence to, the Company, its affiliates, clients, business partners, or customers.       --------------------------------------------------------------------------------     (c) The Executive affirms that he does not possess and will not rely upon the protected trade secrets or confidential or proprietary information of his prior employer(s) in providing services to the Company. (d) In the event that the Executive’s employment with the Company terminates for any reason, the Executive shall deliver forthwith to the Company any and all originals and copies of Confidential Information. 13. Non-Competition And Non-Solicitation.   (a) The Executive agrees and acknowledges that the Confidential Information that the Executive has already received and will receive is valuable to the Company and that its protection and maintenance constitutes a legitimate business interest of the Company, to be protected by the non-competition restrictions set forth herein. The Executive agrees and acknowledges that the non-competition restrictions set forth herein are reasonable and necessary and do not impose undue hardship or burdens on the Executive. The Executive also acknowledges that the products and services developed or provided by the Company, its affiliates and/or its clients or customers are or are intended to be sold, provided, licensed and/or distributed to customers and clients in and throughout the Mid-West (the “Geographic Boundary”) (to the extent the Company comes to own or operate any material asset in other areas of the United States during the term of the Executive’s employment, the definition of Geographic Boundary shall be automatically expanded to cover such other areas), and that the Geographic Boundary, scope of prohibited competition, and time duration set forth in the non-competition restrictions set forth below are reasonable and necessary to maintain the value of the Confidential Information of, and to protect the goodwill and other legitimate business interests of, the Company, its affiliates and/or its clients or customers. (b) The Executive hereby agrees and covenants that he shall not, without the prior written consent of the Company, directly or indirectly, in any capacity whatsoever, including, without limitation, as an employee, employer, consultant, principal, partner, shareholder, officer, director or any other individual or representative capacity (other than a holder of less than one percent (5%) of the outstanding voting shares of any publicly held company), or whether on the Executive’s own behalf or on behalf of any other person or entity or otherwise howsoever, during the Executive’s employment with the Company and for a period equal to the greater of (i) one year (two years, if termination of this Agreement or of Executive’s employment is pursuant to Section 11(f)(i) hereof) following the termination of this Agreement or of the Executive’s employment with the Company or (ii) the period during which the Executive continues to receive his base salary pursuant to Sections 11(e) or 11(f)(ii) of this Agreement following the termination of this Agreement and of the Executive’s employment, in the Geographic Boundary:       --------------------------------------------------------------------------------     (i) Engage, own, manage, operate, control, be employed by, consult for, participate in, or be connected in any manner with the ownership, management, operation or control of any business in competition with the Business of the Company. The “Business of the Company” is defined as the development and production of ethanol and other alternatives to petroleum-based fuels within the Geographic Boundary. (ii) Recruit, solicit or hire, or attempt to recruit, solicit or hire, any employee, or independent contractor of the Company to leave the employment (or independent contractor relationship) thereof, whether or not any such employee or independent contractor is party to an employment agreement. (iii) Attempt in any manner to solicit or accept from any customer of the Company, with whom the Executive had significant contact during the term of the Agreement, business of the kind or competitive with the business done by the Company with such customer or to persuade or attempt to persuade any such customer to cease to do business or to reduce the amount of business which such customer has customarily done or is reasonably expected to do with the Company, or if any such customer elects to move its business to a person other than the Company, provide any services (of the kind or competitive with the Business of the Company) for such customer, or have any discussions regarding any such service with such customer, on behalf of such other person. (iv) Interfere with any relationship, contractual or otherwise, between the Company and any other party, including; without limitation, any supplier, co-venturer or joint venturer of the Company to discontinue or reduce its business with the Company or otherwise interfere in any way with the Business of the Company. 14. Dispute Resolution. The Executive and the Company agree that any dispute or claim, whether based on contract, tort, discrimination, retaliation, or otherwise, relating to, arising from, or connected in any manner with this Agreement or with the Executive’s employment with Company shall be resolved exclusively through final and binding arbitration under the auspices of the American Arbitration Association (“AAA”). The arbitration shall be held in Basehor, Kansas. The arbitration shall proceed in accordance with the National Rules for the Resolution of Employment Disputes of the AAA in effect at the time the claim or dispute arose, unless other rules are agreed upon by the parties. The arbitration shall be conducted by one arbitrator who is a member of the AAA, unless the parties mutually agree otherwise. The arbitrators shall have jurisdiction to determine any claim, including the arbitrability of any claim, submitted to them. The arbitrators may grant any relief authorized by law for any properly established claim. The interpretation and enforceability of this paragraph of this Agreement shall be governed and construed in accordance with the United States Federal Arbitration Act, 9. U.S.C. § 1, et seq. More specifically, the parties agree to submit to binding arbitration any claims for unpaid wages or benefits, or for alleged discrimination, harassment, or retaliation, arising under Title VII of the Civil Rights Act of 1964, the Equal Pay Act, the National Labor Relations Act, the Age Discrimination in Employment Act, the Americans With Disabilities Act, the Employee Retirement Income Security Act, the Civil Rights Act of 1991, the Family and Medical Leave Act, the Fair Labor Standards Act, Sections 1981 through 1988 of Title 42 of the United States Code, COBRA, the New York State Human Rights Law, the New York City Human Rights Law, and any other federal, state, or local law, regulation, or ordinance, and any common law claims, claims for breach of contract, or claims for declaratory relief. The Executive acknowledges that the purpose and effect of this paragraph is solely to elect private arbitration in lieu of any judicial proceeding he might otherwise have available to him in the event of an employment-related dispute between him and the Company. Therefore, the Executive hereby waives his right to have any such employment-related dispute heard by a court or jury, as the case may be, and agrees that his exclusive procedure to redress any employment-related claims will be arbitration.     --------------------------------------------------------------------------------     15. Notice. For purposes of this Agreement, notices and all other communications provided for in this Agreement or contemplated hereby shall be in writing and shall be deemed to have been duly given when personally delivered, delivered by a nationally recognized overnight delivery service or when mailed United States Certified or registered mail, return receipt requested, postage prepaid, and addressed as follows: If to the Company: Ethanex Energy, Inc. 14500 Parallel Road Suite A Basehor, Kansas Attn: Albert Knapp, President and Chief Executive Officer Facsimile: (913) 724-4107   If to the Executive: David J. McKittrick 5111 Cary Street Road Richmond, Virginia 23226 [email protected] Facsimile: (804) 288-2513 Any party may change the address to which communications hereunder are to be delivered by giving the other party notice in the manner herein set forth. 16. Miscellaneous. (a) All issues and disputes concerning, relating to or arising out of this Agreement and from the Executive’s employment by the Company, including, without limitation, the construction and interpretation of this Agreement, shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to that State’s principles of conflicts of law. (b) The Executive and the Company agree that any provision of this Agreement deemed unenforceable or invalid may be reformed to permit enforcement of the objectionable provision to the fullest permissible extent. Any provision of this Agreement deemed unenforceable after modification shall be deemed stricken from this Agreement, with the remainder of the Agreement being given its full force and effect. (c) The Company shall be entitled to equitable relief, including injunctive relief and specific performance as against the Executive, for the Executive’s threatened or actual breach of Sections 12 or 13 of this Agreement, as money damages for a breach thereof would be incapable of precise estimation, uncertain, and an insufficient remedy for an actual or threatened breach of Sections 12 or 13 of this Agreement. The Executive and the Company agree that any pursuit of equitable relief in respect of Sections 12 or 13 of this Agreement shall have no effect whatsoever regarding the continued viability and enforceability of Section 14 of this Agreement.     --------------------------------------------------------------------------------     (d) Any waiver or inaction by the Company for any breach of this Agreement shall not be deemed a waiver of any subsequent breach of this Agreement. (e) The Executive and the Company independently have made all inquiries regarding the qualifications and business affairs of the other which either party deems necessary. The Executive affirms that he fully understands this Agreement’s meaning and legally binding effect. Each party has participated fully and equally in the negotiation and drafting of this Agreement. Each party assumes the risk of any misrepresentation or mistaken understanding or belief relied upon by him or it in entering into this Agreement. (f) The Executive’s obligations under this Agreement are personal in nature and may not be assigned by the Executive to any other person or entity. (g) This instrument constitutes the entire Agreement between the parties regarding its subject matter. When signed by all parties, this Agreement supersedes and nullifies all prior or contemporaneous conversations, negotiations, or agreements, oral and written, regarding the subject matter of this Agreement. In any future construction of this Agreement, this Agreement should be given its plain meaning. This Agreement may be amended only by a writing signed by the Company and the Executive. (h) This Agreement may be executed in counterparts, a counterpart transmitted via facsimile, and all executed counterparts, when taken together, shall constitute sufficient proof of the parties’ entry into this Agreement. The parties agree to execute any further or future documents which may be necessary to allow the full performance of this Agreement. This Agreement contains headings for ease of reference. The headings have no independent meaning. (i) THE EXECUTIVE STATES THAT HE HAS FREELY AND VOLUNTARILY ENTERED INTO THIS AGREEMENT AND THAT HE HAS READ AND UNDERSTOOD EACH AND EVERY PROVISION THEREOF. THIS AGREEMENT IS EFFECTIVE UPON THE EXECUTION OF THIS AGREEMENT BY BOTH PARTIES. [Signature Page Follows]     --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the Company and the Executive have executed this Employment Agreement as of the day and year first above written.           David J. McKittrick               By:   /s/ David J. McKittrick   --------------------------------------------------------------------------------             Ethanex Energy, Inc.               By:   /s/ Albert Knapp   -------------------------------------------------------------------------------- Name: Albert Knapp Title: President & CEO    

  Exhibit 10.11 EXECUTION VERSION AMENDED AND RESTATED EMPLOYMENT AGREEMENT      THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”), dated as of this 16th day of May, 2006, is made and entered into by and between Hargopal (Paul) Singh (“Executive”) and Suntron Corporation, a Delaware corporation (the “Company”). WITNESSETH:      WHEREAS, Executive and the Company are parties to that certain Employment Agreement, effective as of May 6, 2005 (the “Superseded Agreement”).      WHEREAS, Executive and the Company deem it to be in their respective best interests to amend and restate the Superseded Agreement as hereinafter set forth.      NOW, THEREFORE, in consideration of the premises and the mutual promises and agreements contained herein, it is hereby agreed as follows:      1. Effective Date. This Agreement shall be effective as of the date hereof, which date shall be referred to herein as the “Effective Date.”      2. Position and Duties.           (a) The Company hereby agrees to continue to employ Executive, and Executive hereby agrees to continue his employment, as President and Chief Executive Officer of the Company for the “Term of Employment” (as defined in Section 5). In this capacity, Executive shall devote his reasonable best efforts to the performance of the services customarily incident to such office and position and to such other services of an executive nature as may be reasonably requested by the Board of Directors (the “Board”) of the Company which may include services for one or more subsidiaries or affiliates of the Company. Executive, in his capacity as an employee and officer of the Company, shall be directly responsible to and obey the reasonable and lawful directives of the Board.           (b) Executive shall use his reasonable best efforts during the Term of Employment to protect, encourage, and promote the interests of the Company.      3. Compensation.           (a) Base Salary. The Company shall pay to Executive during the Term of Employment a salary at the rate of four hundred thousand dollars ($400,000) per calendar year. Such salary shall be payable in accordance with the Company’s normal payroll procedures. Executive’s annual salary, as set forth above or as it may be increased from time to time by the Board in its sole discretion, shall be referred to hereinafter as “Base Salary.”           (b) Bonus Compensation. In addition to the Base Salary, for each fiscal year of the Company, or any portion thereof, during the Term of Employment, Executive shall be eligible to participate in an incentive-based bonus compensation program (the “Bonus Compensation”) in an amount determined by the Compensation Committee of the Board (the “Compensation Committee”), and consistent with other comparable executives of the Company and its affiliated companies. The amount, if any, of such Bonus Compensation for each such fiscal year shall be determined based upon the Company’s attainment of performance goals approved by the Compensation Committee and/or the Board of Directors. Performance goals may include, among other things, the Company’s earnings before interest expenses, taxes, and amortization costs (adjusted to reflect working capital carrying costs and capital spending) (“EBITDA”) as well as other goals and targets to be determined solely by the Compensation Committee and/or the Board of Directors. Without limiting the foregoing, the amount of Bonus Compensation, if any, to be paid in respect of any such fiscal year shall be up to $480,000 for meeting or exceeding the agreed upon performance goals. The performance goals and associated   --------------------------------------------------------------------------------   potential bonus payments for fiscal year 2006 are set forth in Exhibit A hereto. For any subsequent years after 2006, the performance or other goals, EBITDA targets, EBITDA target payout levels, and bonus payouts will be determined by the Board of Directors or its designee, in its sole discretion.      4. Benefits. During the Term of Employment:           (a) Executive shall be eligible to participate in any life, health and long-term disability insurance programs, pension and retirement programs, leave of absence and other fringe benefit programs made available to senior executive employees of the Company from time to time, and Executive shall be entitled to receive such other fringe benefits as may be granted to him from time to time by the Compensation Committee.           (b) Executive shall be entitled to four weeks paid vacation per each full year during the Term of Employment; provided that Executive may be provided with additional paid vacation as provided by the Board (or its designee) in its sole discretion.           (c) Executive shall be eligible to participate in the Company’s 2002 Stock Option Plan, as amended, and such other equity based or incentive compensation plans or programs as may be adopted by the Company from time to time (collectively, the “Equity Plan”) for its senior executives, at such level and in such amounts as may be determined by the Board in its sole discretion, subject to the terms and conditions of the Equity Plan and any applicable award agreements.           (d) The Company shall reimburse Executive for reasonable business expenses incurred in performing Executive’s duties and promoting the business of the Company, including, but not limited to, reasonable entertainment expenses, travel and lodging expenses, following presentation of documentation in accordance with the Company’s business expense reimbursement policies.           (e) The Company shall reimburse Executive for reasonable moving expenses incurred by Executive if he is asked to move to the Phoenix, Arizona area in connection with his employment by the Company following presentation of documentation thereof; provided, that such expenses shall not exceed $75,000 (grossed up for tax purposes) in the aggregate and shall include any previously unused portion of the $50,000 in moving expenses offered to Executive to facilitate his move from Minnesota to Texas, as set forth in the offer letter from Suntron Corporation to Hargopal (Paul) Singh dated June 30, 2004 for the position of Vice President of Customer Business Management at its Gulf Coast Operations (hereinafter “GCO 2004 Offer Letter”), but that was not used by Executive).           (f) If Executive is not able to sell his home in Minnesota for a period of six (6) months from the date of its placement on the market, which shall require an active listing in the multiple listing service for a period of six (6) months, the Company will offer additional assistance to Executive to offset the financial burden, if any, at that time.      5. Term; Termination of Employment. As used herein, the phrase “Term of Employment” shall mean the period commencing on the Effective Date and, except as otherwise specifically provided below, ending on December 31, 2006, which shall automatically renew for periods of one year unless one party gives written notice to the other at least 60 days prior to the end of the then current term that the Agreement shall not be further extended. Notwithstanding the foregoing, the Term of Employment shall expire on the first to occur of the following:           (a) Termination by the Company without Cause or Resignation for Good Reason. Notwithstanding anything to the contrary in this Agreement, whether express or implied, (i) the Company may, at any time, terminate Executive’s employment without Cause (as defined below) by giving Executive at least 15 days’ prior written notice of the effective date of termination and (ii) the Executive may resign for Good Reason (as defined below) by giving the Company at least 15 days’ prior written notice of the effective date of termination. In the event Executive’s employment hereunder is 2 --------------------------------------------------------------------------------   terminated by the Company without Cause (defined below), or Executive resigns for Good Reason (defined below), the Company shall continue to pay to Executive Base Salary for a period of twelve (12) months following the date of such termination, in accordance with the Company’s customary payroll practices, subject to and consistent with Section 409A of the Internal Revenue Code, and shall pay Executive a pro-rated Bonus Compensation for the year in which such termination occurs, based on performance to the date of termination. Further, notwithstanding the foregoing, as a condition precedent to Executive’s receipt of said continued Base Salary and any pro-rated Bonus Compensation under this Section 5(a), Executive shall execute and shall not revoke a Severance Agreement and Release of All Claims, consistent with and not in excess of the consideration set forth this Section, and in a form mutually acceptable to the Company and Executive. The Parties agree to amend this Agreement to the extent necessary to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Internal Revenue Code 409A and any temporary or final Treasury Regulations and IRS guidance thereunder.           (b) Termination for Cause. The Company shall have the right to terminate Executive’s employment at any time for Cause by giving Executive written notice of the effective date of termination (which effective date may, except as otherwise provided below, be the date of such notice). If the Company terminates Executive’s employment for Cause, Executive shall be paid his unpaid Base Salary through the date of termination and the Company shall have no further obligation hereunder from and after the effective date of such termination and the Company shall have all other rights and remedies available under this or any other agreement and at law or in equity.           (c) Certain Definitions. For purposes of this Agreement:                (i) “Cause” shall mean:                     (A) Fraud, misappropriation, embezzlement, dereliction of duty, or other act of material misconduct by Executive against the Company or any of its affiliates;                     (B) Executive’s indictment for, charging with, or conviction of a felony;                     (C) Executive’s breach of any material term of this Agreement, including without limitation Section 6; or                     (D) Executive’s willful refusal or failure to act on any reasonable and lawful directive or order from the Board which is material to the business of the Company and which remains uncured for a period of thirty days following written notice by the Company to Executive describing such refusal or failure to act.                (ii) “Change of Control” shall mean the occurrence of any of the following events:                     (A) a reorganization, merger or consolidation with respect to which persons who were the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company’s (or entity’s) then outstanding voting securities in substantially the same proportions as their ownership immediately prior to such reorganization, merger, or consolidation,                     (B) a liquidation or dissolution of the Company, or                     (C) the sale of all or substantially all of the assets of the Company, unless the approved reorganization, merger, consolidation, liquidation, dissolution or sale is subsequently abandoned. 3 --------------------------------------------------------------------------------                  (iii) “Good Reason” shall mean: (A) the assignment to the Executive of any duties that are materially inconsistent with the Executive’s duties at the Company, or any other action by the Company which results in a diminution in the Executive’s responsibilities at the Company, excluding for this purpose (i) any transfer or promotion to a position of equal or enhanced responsibility following a Change of Control and (ii) any isolated, insubstantial or inadvertent action that is remedied by the Company within thirty (30) days after receipt of notice thereof given by the Executive; (B) any material breach by the Company of the provisions of Sections 3 or 4 of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (C) the Company’s requiring the Executive to be based at any office or location other than that described in Section 4(a)(i)(2) hereof, except for travel reasonably required in the performance of the Executive’s responsibilities consistent with practices in effect prior to the Effective Date; or (D) any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by this Agreement; provided, however, that none of the events described in this Section 5(c)(iii) shall constitute Good Reason unless Executive shall have notified the Company in writing describing the events which constitute Good Reason and the Company shall have failed to cure such event within thirty days after the Company’s receipt of such written notice.           (d) Termination on Account of Death. In the event of Executive’s death while in the employ of the Company, his employment hereunder shall terminate on the date of his death and Executive shall be paid his unpaid Base Salary through the date of termination of employment, any pro-rated Bonus Compensation, if any, for the then current fiscal year when it is paid to other active employees, and any unpaid Bonus Compensation for the prior year, if any, when it is paid to other active employees. No additional payments under Section 5(a) shall be paid by the Company. In addition, any other benefits payable on behalf of Executive shall be determined under the Company’s insurance and other compensation and benefit plans and programs then in effect in accordance with the terms of such programs.           (e) Resignation by Executive without Good Reason. In the event that Executive’s employment with the Company is voluntarily terminated by Executive for any reason other than for Good Reason, Executive shall be paid his unpaid Base Salary through the date of termination of employment and any unpaid Bonus Compensation for the prior year, if any, when it is paid to other active employees, and the Company shall have no further obligation hereunder from and after the effective date of termination and the Company shall have all other rights and remedies available under this Agreement or any other agreement and at law or in equity. Executive shall give the Company at least 30 days’ advance written notice of his intention to terminate his employment hereunder.           (f) Termination on Account of Disability. To the extent not prohibited by The Americans With Disabilities Act of 1990 or other applicable law, if, as a result of Executive’s incapacity due to physical or mental illness (as determined in good faith by a physician acceptable to the Company and Executive), Executive shall have been absent from the full-time performance of his duties with the Company for 120 consecutive days during any twelve (12) month period or if a physician acceptable to the Company advises the Company that it is likely that Executive will be unable to return to the full-time performance of his duties for 120 consecutive days during the succeeding twelve (12) month period, his employment may be terminated for “Disability.” During any period that Executive fails to perform his full-time duties with the Company as a result of incapacity due to physical or mental illness, he shall continue to receive his Base Salary, Bonus Compensation and other benefits provided hereunder, together with all 4 --------------------------------------------------------------------------------   compensation payable to him under the Company’s disability plan or program or other similar plan during such period, until Executive’s employment hereunder is terminated pursuant to this Section 5(f). Upon termination of employment under this Section 5(f), Executive shall not be entitled to additional payments under Section 5(a), provided, however, Executive shall be paid any pro-rated Bonus Compensation, if any, for the then current fiscal year when it is paid to other active employees, and any unpaid Bonus Compensation for the prior year, if any, when it is paid to other active employees. In the event of a Disability, Executive’s benefits shall be determined under the Company’s retirement, insurance, and other compensation and benefit plans and programs then in effect, in accordance with the terms of such programs and to the extent permitted by applicable law.           (g) Termination of Employment Due to Change of Control. If Company terminates Executive’s employment without Cause (as defined herein) six (6) months prior to a Change of Control and in anticipation thereof, or, if within the first year after a Change of Control, Executive’s employment is either terminated without Cause (as defined herein) or Executive resigns for Good Reason (as defined herein), then the Company shall pay the Executive, subject to Section 409A of the Internal Revenue Code, in a lump sum in cash within 30 days after the Executive’s termination under this Section 5(g) an amount equal to the product of three (3) times the sum of (i) the Base Salary and (ii) the maximum Bonus Compensation payable to the Executive from the Company with respect to the fiscal year in which such Change of Control occurs. Notwithstanding anything to the contrary in this Agreement, termination after a Change of Control, under this Section 5(g), will not trigger the additional payment of one year’s salary and any pro-rated Bonus Compensation under the provisions of Section 5(a).      6. Confidential Information, Non-Solicitation and Non-Competition.           (a) During the Term of Employment and for a period of one year following the date Executive ceases to be employed by the Company (the “Non-Compete Period”) for any reason, including, but not limited to, termination with or without Cause or Resignation for Good Reason, with the exception of a termination of employment after a Change of Control (as defined above in Section 5(c)(ii)) in the event a successor to the Company and Executive have not reached a mutually acceptable employment agreement prior to termination, Executive shall not, directly or indirectly, engage in, work for, consult or provide advice or assistance to any Named Competitor (as defined below) within the United States and its territories and protectorates. “Named Competitor” shall mean any company that derives more than 50% of its annual revenues from the provision of high mix electronic manufacturing services to original equipment manufacturers in the semiconductor capital equipment, aerospace and defense electronics, computer peripherals, medical equipment, industrial controls, telecommunications equipment and/or electronic instrumentation industries. Executive further agrees that during the Non-Compete Period he will not assist or encourage any other person in carrying out any activity that would be prohibited by the provisions of this Section 6 if such activity were carried out by Executive and, in particular, Executive agrees that he will not induce any employee of the Company to carry out any such activity; provided, however, that the “beneficial ownership” by Executive, either individually or as a member of a “group,” as such terms are used in Rule 13d of the General Rules and Regulations under the Exchange Act, of not more than five percent (5%) of the voting stock of any publicly held corporation shall not be a violation of this Agreement.           (b) Executive agrees that, during the Term of Employment, and for a period of one year thereafter, he will not, directly or indirectly, solicit or contact any customer or supplier of the Company on behalf of any Named Competitor or in any way interfere with the Company’s relationship with any customer or supplier of the Company.           (c) Executive agrees that, during the Term of Employment, and for a period of one year thereafter, he will not, directly or indirectly, solicit or recruit any employee of the Company for the purpose of being employed by him or by any Named Competitor.           (d) Executive and the Company expressly agree that the Company will or would suffer irreparable injury if Executive were to violate any provision of this Section 6 and that the 5 --------------------------------------------------------------------------------   Company would by reason of such violation be entitled to injunctive relief in a court of appropriate jurisdiction.           (e) If it is determined by a court of competent jurisdiction in any state that any restriction in this Section 6 is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that state.      7. Taxes. All payments to be made to Executive under this Agreement will be subject to any applicable withholding of federal, state and local income and employment taxes.      8. Miscellaneous. This Agreement shall also be subject to the following miscellaneous considerations:           (a) Executive and the Company each represent and warrant to the other that he or it has the authorization, power and right to deliver, execute, and fully perform his or its obligations under this Agreement in accordance with its terms.           (b) This Agreement contains a complete statement of all the arrangements between the parties with respect to Executive’s employment by the Company, this Agreement supersedes all prior and existing negotiations and agreements between the parties concerning Executive’s employment, including, but not limited to, the Superseded Agreement and the GCO 2004 Offer Letter (as defined in the Superseded Agreement), and this Agreement can only be changed or modified pursuant to a written instrument duly executed by each of the parties hereto.           (c) If any provision of this Agreement or any portion thereof is declared invalid, illegal, or incapable of being enforced by any court of competent jurisdiction, the remainder of such provisions and all of the remaining provisions of this Agreement shall continue in full force and effect.           (d) This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, except to the extent governed by federal law.           (e) The Company may assign this Agreement to any direct or indirect subsidiary or parent of the Company or joint venture in which the Company has an interest, or any successor (whether by merger, consolidation, spin-off, purchase or otherwise) to all or substantially all of the stock, assets or business of the Company or any subsidiary or parent of the Company, and this Agreement shall be binding upon and inure to the benefit of such successors and assigns. Except as expressly provided herein, Executive may not sell, transfer, assign, or pledge any of his rights or interests pursuant to this Agreement.           (f) Any rights of Executive hereunder shall be in addition to any rights Executive may otherwise have under benefit plans, agreements, or arrangements of the Company to which he is a party or in which he is a participant, including, but not limited to, any Company-sponsored employee benefit plans.           (g) For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the named Executive at the address contained in the Company’s records concerning the Executive. All notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company.           (h) Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. 6 --------------------------------------------------------------------------------             (i) Failure to insist upon strict compliance with any of the terms, covenants, or conditions hereof shall not be deemed a waiver of such term, covenant, or condition, nor shall any waiver or relinquishment of, or failure to insist upon strict compliance with, any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times.           (j) This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.           (k) The Company shall indemnify Executive to the fullest extent permitted by the laws of the State of Delaware, as in effect at the time of the subject act or omission, and he will be entitled to the protection of any insurance policies that the Company may elect to maintain generally for the benefit of its directors and officers against all costs, charges and expenses incurred or sustained by him in connection with any action, suit or proceeding to which he may be made a party by reason of his being or having been a director, officer or employee of the Company or any of its affiliates or his having served any other enterprise, plan or trust as director, officer, employee or fiduciary at the request of the Company. The provisions of this Section 8(k) shall survive any termination of Executive’s employment or any termination of this Agreement.      9. Resolution of Disputes. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted in Phoenix, Arizona in accordance with the rules of the American Arbitration Association governing employment disputes as then in effect. The Company and Executive hereby agree that the arbitrator will not have the authority to award punitive damages, damages for emotional distress or any other damages that are not contractual in nature. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of Section 6, and Executive consents that such restraining order or injunction may be granted without the necessity of the Company’s posting any bond except to the extent otherwise required by applicable law. The fees and expenses of the American Arbitration Association and the arbitrator shall be borne by the Company.      10. Attorneys’ Fees.           (a) Upon invoice in conformity with the Company’s customary practices, the Company shall reimburse Executive the amount of all reasonable legal fees incurred by Executive in connection with the negotiation of this Agreement; provided, that such expenses shall not exceed $5,000 in the aggregate.           (b) If any suit or action is filed by any party to enforce this Agreement or otherwise with respect to the subject matter of this Agreement, each party shall be responsible to pay the attorneys fees and costs incurred by such party in preparation or in prosecution or defense of such suit or action; provided, however, that the court or adjudicator may in its sole discretion allocate attorneys fees and costs to Executive. * * * * * * * *      IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the dates set forth below, to be effective as of approval of the Board of Directors of Suntron Corporation. 7 --------------------------------------------------------------------------------                     EXECUTIVE:           SUNTRON CORPORATION                   /s/ Hargopal Singh       By:    /s/ Oscar A. Hager               Hargopal (Paul) Singh                         Title:    VP - IT and Admin.                   Address:    2401 W. Grandview Rd.                                    Phoenix, AZ 85023                                                                   8

Exhibit 10.1   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   CCH II, LLC CCH II CAPITAL CORP.   10.25% Senior Notes due 2010   SECOND SUPPLEMENTAL INDENTURE   Dated as of September 14, 2006   WELLS FARGO BANK, NATIONAL ASSOCIATION,   Trustee     -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   --------------------------------------------------------------------------------       SECOND SUPPLEMENTAL INDENTURE dated as of September 14, 2006 (this "Supplemental Indenture"), among CCH II, LLC, a Delaware limited liability company, CCH II  CAPITAL CORP., a Delaware corporation (collectively, the "Issuers"), and WELLS FARGO BANK, NATIONAL ASSOCIATION (the "Trustee").       WHEREAS, the Issuers and the Trustee have entered into an Indenture dated as of September 23, 2003 and a First Supplemental Indenture dated as of January 30, 2006, each by and among the Issuers and the Trustee (as supplemented, the "Indenture"), relating to the Issuers' 10.25% Senior Notes due 2010 (the "Outstanding 10.25% Notes");       WHEREAS, the Issuers desire and have requested that the Trustee join them in the execution and delivery of this Supplemental Indenture in order to establish and provide for the issuance by the Issuers of an additional $146,204,000 aggregate principal amount of 10.25% Notes due 2010 (the "Additional 10.25% Notes");       WHEREAS, Section 2.02 of the Indenture provides for the issuance of Additional Notes and Section 9.01(3) of the Indenture permits supplementing the Indenture to establish a series of Additional Notes without the consent of any Holders;       WHEREAS, the Additional 10.25% Notes shall constitute Additional Notes pursuant to the Indenture;       WHEREAS, the Issuers desire to correct a defect in the definition of “Charter Holdings Indentures”;       WHEREAS, Section 9.01(1) of the Indenture permits the Issuers and the Trustee to amend the Indenture to cure any ambiguity, defect or inconsistency without the consent of any Holders;       WHEREAS, the conditions set forth in the Indenture for the execution and delivery of this Supplemental Indenture have been complied with; and       WHEREAS, all things necessary to make this Supplemental Indenture a valid supplement to the Indenture pursuant to its terms and the terms of the Indenture have been done.       NOW, THEREFORE, the parties hereto agree as follows:     ARTICLE I GENERAL TERMS AND CONDITIONS OF THE ADDITIONAL 10.25% NOTES.     SECTION 1.01. DESIGNATION OF THE NOTES.   The changes, modifications and supplements to the Indenture effected by this Supplemental Indenture (other than those effected by Article III) shall be applicable only with respect to, and govern the terms of, the Additional 10.25% Notes and shall not apply to any other Notes that have been or may be issued under the Indenture unless a supplemental indenture with respect to such other Notes specifically incorporates such changes, modifications and supplements. The changes, modifications and supplements to the Indenture effected by this Supplemental Indenture pursuant to Article III shall be applicable with respect to, and govern the terms of, the Outstanding 10.25% Notes and the Additional 10.25% Notes and any other Notes that may be issued under the Indenture. Pursuant to this Supplemental Indenture, there is hereby designated an additional $146,204,000 aggregate principal amount of the series of Notes under the Indenture entitled "10.25% Senior Notes due 2010."   SECTION 1.02. OTHER TERMS OF THE NOTES.   (a) General. Without limiting the foregoing provisions of this Article I, the terms of the Additional 10.25% Notes shall be as set forth in the form of Note set forth in Exhibit A and Exhibit B hereto and as provided in the Indenture, as supplemented by this Supplemental Indenture. The Additional 10.25% Notes shall initially be evidenced by a temporary Global Note (the “Temporary Global Note”) in the form of Exhibit A hereto. The Additional 10.25% Notes shall have the same terms, including without limitation, the same maturity date,     1 --------------------------------------------------------------------------------     interest rate, redemption and other provisions and interest payment dates as the Outstanding 10.25% Notes, and will be part of the same series as the Outstanding 10.25% Notes, except that interest will accrue from the date of issuance thereof and the Temporary Global Note will not be fungible with the Outstanding 10.25% Notes until the Temporary Global Note is replaced with a permanent Global Note in accordance with clause (c) below. For all purposes under the Indenture, the term "Notes" shall include the Outstanding 10.25% Notes and the Additional 10.25% Notes.   (b) Issue Date. The Additional 10.25% Notes shall be issued on September 14, 2006.   (c) CUSIP. The CUSIP number for the Additional 10.25% Notes shall initially be 12502CAP6. On the first interest payment date, the Trustee shall cancel the Temporary Global Note, the Issuers shall issue a replacement Global Note in the form of Exhibit B hereto (the “Permanent Global Note”) and the Trustee shall authenticate the Permanent Global Note. The CUSIP number for the Permanent Global Note shall be 12502CAD3.   SECTION 1.03 DEFINITIONS.  Capitalized terms used herein but not otherwise defined shall have the respective meanings assigned thereto in the Indenture.     ARTICLE II ADDITIONAL ISSUANCE OF ADDITIONAL 10.25% NOTES.    Additional 10.25% Notes in the aggregate principal amount equal to $146,204,000 may, upon execution of this Supplemental Indenture, be executed by the Issuers and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and make available for delivery such Additional 10.25% Notes pursuant to Section 2.02 of the Indenture and Section 1.02 of this Supplemental Indenture.     ARTICLE III AMENDMENT TO DEFINITION OF “CHARTER HOLDINGS INDENTURES”.    This Supplemental Indenture hereby amends Section 1.01 of the Indenture by deleting the reference to “11.750% Senior Discount Notes Due 2011 dated January 2002” at the end of clause (a) of the definition of “Charter Holdings Indentures” and substituting “12.125% Senior Discount Notes Due 2012 dated January 2002” in place thereof.     ARTICLE IV MISCELLANEOUS.   SECTION 4.01.  AMENDMENT AND SUPPLEMENT.    This Supplemental Indenture or the Additional 10.25% Notes may be amended or supplemented as provided for in the Indenture.   SECTION 4.02.  CONFLICTS.    In the event of any conflict between this Supplemental Indenture and the Indenture, the provisions of this Supplemental Indenture shall prevail.   SECTION 4.03.  GOVERNING LAW.       THIS SUPPLEMENTAL INDENTURE AND THE ADDITIONAL 10.25% NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE OR THE ADDITIONAL 10.25% NOTES.     2 --------------------------------------------------------------------------------   SECTION 4.04.  COUNTERPARTS.   The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Supplemental Indenture.   SECTION 4.05.  RATIFICATION.   The Indenture, as supplemented by this Supplemental Indenture, shall remain in full force and effect and is in all respects ratified and confirmed.   SECTION 4.06.  SEVERABILITY.   In case any one or more of the provisions contained in this Supplemental Indenture or in the Additional 10.25% Notes, as the case may be, shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect or impair any other provisions of this Supplemental Indenture or of such Notes.   SECTION 4.07.  TRUSTEE DISCLAIMER.   The recitals contained herein shall be taken as the statements of the Issuers, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Supplemental Indenture.     [Signature pages follow.]       3 --------------------------------------------------------------------------------   SIGNATURES   IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to be duly executed, all as of the date first above written. CCH II, LLC   By: /s/ Eloise Schmitz               Name: Eloise E. Schmitz Title: Senior Vice President, Strategic Planning CCH II CAPITAL CORP.   By:/s/ Eloise Schmitz               Name: Eloise E. Schmitz Title: Senior Vice President, Strategic Planning WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee   By: /s/ Timothy P. Mowdy            Name: Timothy P. Mowdy       Title: Vice President             SIGNATURE PAGE TO CCH II SECOND SUPPLEMENTAL INDENTURE SEPTEMBER 2006   4 -------------------------------------------------------------------------------- EXHIBIT A   FORM OF TEMPORARY GLOBAL NOTE   [SEE ATTACHED] A-1 --------------------------------------------------------------------------------   EXHIBIT B   FORM OF PERMANENT GLOBAL NOTE   [SEE ATTACHED] B-1 --------------------------------------------------------------------------------

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10(j)(j) Res_unit.doc LOGO [g295111.jpg] HEWLETT-PACKARD COMPANY <PLAN> RESTRICTED STOCK UNIT AGREEMENT         THIS AGREEMENT, dated <GRANT DATE> between Hewlett-Packard Company, a Delaware Corporation ("Company"), and <EMPNO> <NAME> (the "Employee"), is entered into as follows:         WHEREAS, the continued participation of the Employee is considered by the Company to be important for the Company's continued growth; and         WHEREAS, in order to give the Employee an incentive to continue in the employ of the Company and to participate in the affairs of the Company, the HR and Compensation Committee of the Board of Directors of the Company or its delegates ("Committee") has determined that the Employee shall be granted stock units representing hypothetical shares of the Company's common stock ("Stock Units"), with each Stock Unit equal in value to one share of the Company's $0.01 par value common stock ("Stock"), subject to the restrictions stated below and in accordance with the terms and conditions of the <PLAN> ("Plan"), a copy of which can be found on the Stock Incentive Program Web Site at: http://hrcms01.atl.hp.com:6047/public/pages/home/en_US/index.htm or by written or telephonic request to the Company Secretary.         THEREFORE, the parties agree as follows: 1.Grant of Stock Units. Subject to the terms and conditions of this Agreement and of the Plan, the Company hereby grants to the Employee <SHARES> Stock Units. 2.Vesting Schedule. The interest of the Employee in the Stock Units shall vest as follows: <INSERT VESTING PROVISION HERE>. Provided the Employee remains in the employ of the Company on a continuous, full-time basis through the close of business on the <INSERT FULL VESTING DATE HERE>, the interest of the Employee in the Stock Units shall become fully vested on that date. 3.Benefit Upon Vesting. Upon the vesting of the Stock Units, the Employee shall be entitled to receive, as soon as administratively practicable, Stock or a combination of cash and Stock, as the Company determines in its sole discretion, equal to: (a)the number of Stock Units that have vested multiplied by the fair market value (as defined in the Plan) of a share of Stock on the date on which such Stock Units vest, and (b)a dividend equivalent payment determined by (1)multiplying the number of vested Stock Units by the dividend per share of Stock on each dividend payment date between the date here of and the vesting date to determine the dividend equivalent amount for each dividend payment date; (2)dividing the amount determined in (1) above by the fair market value of a share of Stock on the date of such dividend payment to determine the number of additional Stock Units to be credited to the Employee; and (3)multiplying the number of additional Stock Units determined in (2) above by the fair market value of a share of Stock on the vesting date to determine the aggregate amount of dividend equivalent payments for such vested Stock Units; -------------------------------------------------------------------------------- provided, however, that if any aggregated dividend equivalent payments in paragraph (b)(3) above results in a payment of a fractional share, such fractional share shall be rounded up to the nearest whole share. 4.Restrictions. (a)Except as otherwise provided for in this Agreement, the Stock Units or rights granted hereunder may not be sold, pledged or otherwise transferred until the Stock Units become vested in accordance with Section 2. The period of time between the date hereof and the date the Stock Units become fully vested is referred to herein as the "Restriction Period." (b)Except as otherwise provided for in this Agreement, if the Employee's employment with the Company is terminated at any time for any reason prior to the lapse of the Restriction Period, all Stock Units granted hereunder shall be forfeited by the Employee. 5.Custody of Stock Units. The Stock Units subject hereto shall be held in escrow in a restricted book entry account with the Company's transfer agent in the name of the Employee. Upon termination of the Restriction Period, if the Company determines, in its sole discretion, to issue Stock pursuant to Section 3 above, such Stock shall be released into an unrestricted book entry account with the Company's transfer agent; provided, however, that a portion of such Stock shall be surrendered in payment of required withholding taxes in accordance with Section 9 below, unless the Company, in its sole discretion, establishes alternative procedures for the payment of required withholding taxes. 6.No Stockholder Rights. Stock Units represent hypothetical shares of Stock. During the Restriction Period, the Employee shall not be entitled to any of the rights or benefits generally accorded to stockholders. 7.Disability or Retirement of the Employee. If the Employee's termination of employment is due to the Employee's total and permanent disability or retirement after attaining 55 years of age with 15 years of service to the Company or 65 years of age or age under local law without regard to service, in accordance with the Company's retirement policy, all outstanding and unvested Stock Units shall continue to vest in accordance with Section 2, provided that the following conditions are met for the entire Restriction Period: (a)The Employee shall render, as an independent contractor and not as an employee, such advisory or consultative services to the Company as shall reasonably be requested by the Company, consistent with the Employee's health and any other employment or other activities in which such Employee may be engaged; (b)The Employee shall not render services for any organization or engage directly or indirectly in any business which, in the opinion of the Company, competes with or is in conflict with the interests of the Company; (c)The Employee shall not, without prior written authorization from the Company, disclose to anyone outside the Company, or use in other than the Company's business, any confidential information or material relating to the business of the Company, either during or after employment with the Company; and (d)The Employee shall disclose promptly and assign to the Company all right, title and interest in any invention or idea, patentable or not, made or conceived by the Employee during employment by the Company, relating in any manner to the actual or anticipated business, anything reasonably necessary to enable the Company to secure a patent where appropriate in the United States and in foreign countries. 8.Death of the Employee. In the event of the Employee's death prior to the end of the Restriction Period, the Employee's estate or designated beneficiary shall have the right to receive a pro rata payment of cash, Stock or combination of cash and Stock, as the Company determines in its sole discretion. In the event of the Employee's death after the vesting date but prior to the payment associated with such the -------------------------------------------------------------------------------- Stock Units, payment for such Stock Units shall be made to the Employee's estate or designated beneficiary. 9.Taxes. (a)The Employee shall be liable for any and all taxes, including withholding taxes, arising out of this grant or the vesting of Stock Units hereunder. In the event that the Company or the Employer is required to withhold taxes as a result of the grant or vesting of Stock Units, or subsequent sale of Stock acquired pursuant to such Stock Units, or due upon receipt of dividend equivalent payments, the Employee shall surrender a sufficient number of whole shares of such Stock or make a cash payment at the election of the Company, in its sole discretion, as necessary to cover all applicable required withholding taxes and required social security contributions at the time the restrictions on the Stock Units lapse, unless the Company, in its sole discretion, has established alternative procedures for such payment. The Employee will receive a cash refund for any fraction of a surrendered share or shares of Stock not necessary for required withholding taxes and required social insurance contributions. To the extent that any surrender of Stock or payment of cash or alternative procedure for such payment is insufficient, the Employee authorizes the Company, its Affiliates and Subsidiaries, which are qualified to deduct tax at source, to deduct all applicable required withholding taxes and social security contributions from the Employee's compensation. The Employee agrees to pay any amounts that cannot be satisfied from wages or other cash compensation, to the extent permitted by law. (b)Regardless of any action the Company or the Employee's employer (the "Employer") takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related withholding ("Tax-Related Items"), the Employee acknowledges and agrees that the ultimate liability for all Tax-Related Items legally due by him is and remains the Employee's responsibility and that the Company and or the Employer (i) make no representations nor undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this grant of Stock Units, including the grant and vesting of Stock Units, subsequent payment of Stock and or cash related to such Stock Units or the subsequent sale of any Stock acquired pursuant to such Stock Units and receipt of any dividend equivalent payments; and (ii) do not commit to structure the terms or any aspect of this grant of Stock Units to reduce or eliminate the Employee's liability for Tax-Related Items. The Employee shall pay the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of the Employee's participation in the Plan or the Employee's receipt of Stock Units that cannot be satisfied by the means previously described. The Company may refuse to deliver the benefit described in Section 3 if the Employee fails to comply with the Employee's obligations in connection with the Tax-Related Items. 10.Data Privacy Consent. The Employee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Employee's personal data as described in this document by and among, as applicable, the Employer, and the Company and its Subsidiaries and Affiliates for the exclusive purpose of implementing, administering and managing the Employee's participation in the Plan. The Employee understands that the Company, its Affiliates, its Subsidiaries and the Employer hold certain personal information about the Employee, including, but not limited to, name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all options or any other entitlement to shares of stock awarded, canceled, purchased, exercised, vested, unvested or outstanding in the Employee's favor for the purpose of implementing, managing and administering the Plan ("Data"). The Employee understands that the Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the Employee's country or elsewhere and that the recipient country may have different data privacy laws and protections than -------------------------------------------------------------------------------- the Employee's country. The Employee understands that he may request a list with the names and addresses of any potential recipients of the Data by contacting the local human resources representative. The Employee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Employee's participation in the Plan, including any requisite transfer of such Data, as may be required to a broker or other third party with whom the Employee may elect to deposit any Stock acquired under the Plan. The Employee understands that Data will be held only as long as is necessary to implement, administer and manage participation in the Plan. The Employee understands that he may, at any time, view Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data or refuse or withdraw the consents herein, in any case without cost, by contacting the local human resources representative in writing. The Employee understands that refusing or withdrawing consent may affect the Employee's ability to participate in the Plan. For more information on the consequences of refusing to consent or withdrawing consent, the Employee understands that he may contact an HP local human resources representative. 11.Plan Information. The Employee agrees to receive copies of the Plan, the Plan prospectus and other Plan information, including information prepared to comply with laws outside the United States, from the Stock Incentive Program Web Site referenced above and stockholder information, including copies of any annual report, proxy and Form 10-K, from the investor relations section of the HP web site at www.hp.com. The Employee acknowledges that copies of the Plan, Plan prospectus, Plan information and stockholder information are available upon written or telephonic request to the Company Secretary. 12.Acknowledgment and Waiver. By accepting this grant of Stock Units, the Employee acknowledges and agrees that: (i) the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time unless otherwise provided in the Plan or this Agreement; (ii) the grant of Stock Units is voluntary and occasional and does not create any contractual or other right to receive future grants of Stock or Stock Units, or benefits in lieu of Stock or Stock Units, even if Stock or Stock Units have been granted repeatedly in the past; (iii) all decisions with respect to future grants, if any, will be at the sole discretion of the Company; (iv) the Employee's participation in the Plan shall not create a right to further employment with Employer and shall not interfere with the ability of Employer to terminate the Employee's employment relationship at any time with or without cause and it is expressly agreed and understood that employment is terminable at the will of either party, insofar as permitted by law; (v) the Employee is participating voluntarily in the Plan; (vi) stock unit, stock unit grants and resulting benefits are an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or the Employer, and is outside the scope of the Employee's employment contract, if any; (vii) stock units, stock unit grants and resulting benefits are not part of normal or expected compensation or salary for any purposes, including, but not limited to calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments insofar as permitted by law; (viii) in the event that the Employee is not an employee of the Company, this grant of Stock Units will not be interpreted to form an employment contract or relationship with the Company, and furthermore, this grant of Stock Units will not be interpreted to form an employment contract with the Employer or any Subsidiary or Affiliate of the Company; (ix) the future value of the underlying Stock is unknown and cannot be predicted with certainty; (x) in consideration of this grant of Stock Units, no claim or entitlement to compensation or damages shall arise from termination of this grant of Stock Units or diminution in value of this grant of Stock Units resulting from termination of the Employee's employment by the Company or the Employer (for any reason whatsoever and whether or not in breach of local labor laws) and the Employee irrevocably releases the Company and the Employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to -------------------------------------------------------------------------------- have arisen, then, by accepting the terms of this Agreement, the Employee shall be deemed irrevocably to have waived any entitlement to pursue such claim; and (xi) notwithstanding any terms or conditions of the Plan to the contrary, in the event of involuntary termination of the Employee's employment (whether or not in breach of local labor laws), the Employee's right to receive benefits under this Agreement, if any, will terminate effective as of the date that the Employee is no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of "garden leave" or similar period pursuant to local law); furthermore, in the event of involuntary termination of employment (whether or not in breach of local labor laws), the Employee's right to receive benefits under this Agreement after termination of employment, if any, will be measured by the date of termination of the Employee's active employment and will not be extended by any notice period mandated under local law; the Committee shall have the exclusive discretion to determine when the Employee is no longer actively employed for purposes of this grant of Stock Units. 13.Miscellaneous. (a)The Company shall not be required to treat as owner of Stock Units, and associated benefits hereunder, to any transferee to whom such Stock Units or benefits shall have been so transferred. (b)The parties agree to execute such further instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement. (c)Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon delivery to the Employee at his address then on file with the Company. (d)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 the Employee with respect to the subject matter hereof, and may not be modified adversely to the Employee's interest except by means of a writing signed by the Company and the Employee. This Agreement is governed by the laws of the state of Delaware. (e)If the Employee has received this or any other document related to the Plan translated into a language other than English and if the translated version is different than the English version, the English version will control. (f)The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.     HEWLETT-PACKARD COMPANY     By         -------------------------------------------------------------------------------- Mark V. Hurd CEO and President     By         -------------------------------------------------------------------------------- Charles N. Charnas Vice President, Acting General Counsel and Assistant Secretary RETAIN THIS AGREEMENT FOR YOUR RECORDS -------------------------------------------------------------------------------- QuickLinks Exhibit 10(j)(j) Res_unit.doc HEWLETT-PACKARD COMPANY <PLAN> RESTRICTED STOCK UNIT AGREEMENT

  EXHIBIT 10.2 EMPLOYMENT AGREEMENT      This EMPLOYMENT AGREEMENT (this “Agreement”) is made effective as of the 8th day of November, 2006 by and between Jack Weinstein (the “Employee”), and Catalyst Pharmaceutical Partners, Inc., a Delaware corporation (the “Company”).      WHEREAS, the Company desires to continue to employ the Employee and the Employee wishes to perform services for the Company pursuant to the terms of this Agreement.      NOW, THEREFORE, in consideration of the mutual covenants and obligations contained, herein, and intending to be legally bound, the parties, subject to the terms and conditions set forth herein, agree as follows: 1.   Employment and Term. The Company hereby employs the Employee, and the Employee hereby accepts employment with the Company, as the Vice President, Treasurer and Chief Financial Officer (such position, referred to herein as the Employee’s “Position”) for a period commencing on the closing date of the Company’s initial public offering, as contemplated by the Company’s Registration Statement on Form S-1 (File No. 333-136039) (the “Effective Date”) and continuing until the earlier of: (a) the second anniversary of the Effective Date, or (b) termination of the Employee in accordance with Section 7 of this Agreement (the “Term”). On the second Anniversary of the Effective Date, unless this Agreement is renewed by written agreement between the Company and the Employee, the Employee will become an “at will” employee and his employment may be terminated at any time, for any reason or no reason, with or without Cause, by him or by the Company; provided, however, that if the Employee’s employment is terminated without Cause or for Good Reason following such non-renewal, then, subject to the provisions of Section 7.5 or Section 7.6 of this Agreement (as applicable), the Company will continue to pay to the Employee his then current Base Salary for the twelve (12) month period following such date of termination. This Agreement supercedes the Consulting Agreement between the parties hereto dated effective October 1, 2004, as amended. Such agreement shall be of no further force or effect as of the Effective Date.   2.   Duties and Responsibilities.   2.1.   Generally. During the Term, Employee hereby agrees to serve the Company faithfully and to the best of his ability and shall devote his full time, attention, skill and efforts to the performance of the duties: (i) as shall be specified and designated from time-to-time by the Board; and (ii) customarily performed by the Chief Financial Officer of a business of the size and nature similar to that of the Company. During the Term, Employee shall report directly to the Chief Executive Officer of the Company.     2.2.   Travel Obligations. Employee acknowledges that his Position will require travel from time-to-time for Company business, including travel on a regular basis to the Company’s headquarters in Coral Gables, Florida. 1 --------------------------------------------------------------------------------     2.3.   Primary Location. Employee’s business location of record shall be at a Company office to be established following the Effective Date in Bergen County, New Jersey. 3.   Other Business Activities. During the Term, the Employee will not, without the prior written consent of the Company, which consent shall not be unreasonably withheld, directly or indirectly engage in any other business activity or pursuit whatsoever, except such activities in connection with any charitable or civic activities or serving as an executor, trustee or in other similar fiduciary capacity as do not interfere with his performance of his responsibilities and obligations pursuant to this Agreement.   4.   Compensation   4.1.   Base Salary. The Company shall pay the Employee, and the Employee hereby agrees to accept, as compensation for all services rendered by Employee in any capacity under this Agreement or otherwise in consideration for the covenants referenced in Section 5 of this Agreement, base salary at the annual rate of Two Hundred Thousand Dollars ($200,000) less applicable withholding (as the same may hereafter be adjusted, the “Base Salary”). Base Salary shall be paid in accordance with the Company’s payroll practices in effect from time-to-time. The Board (or any committee of the Board charged with that responsibility) shall review the performance of Employee annually, on or about the anniversary of the Effective Date and make such appropriate adjustments to the Employee’s Base Salary in their discretion, as they may determine.     4.2.   Annual Bonus Program. For each calendar year of the Agreement, Employee will be eligible to participate in any annual bonus programs (the “Annual Bonus”) established by the Board from time-to-time for the benefit of Company management, in each case to the extent Employee is eligible under the terms of such annual bonus program.     4.3.   Benefits and Expenses. The Employee shall be eligible to participate in the benefit plans and programs (including without limitation, the sick leave, holidays and retirement plans or programs) that are available to other employees of the Company generally on the same terms as such other employees (excluding any equity-based compensation plan, program or policy), in each case to the extent that the Employee is eligible under the terms of such plans or programs. Employee shall be eligible for expense allowances and/or reimbursements for reasonable expenses incurred in connection with the performance of his duties hereunder as are consistent with the Company’s usual practice and policies with respect to such allowances and reimbursements.     4.4.   Vacation. In addition to paid holidays recognized by the Company from time-to-time, Employee shall be entitled to three calendar weeks of paid vacation during any calendar year of the Term of this Agreement. Vacation accrued with respect to any calendar year will be forfeited if Employee does not take such vacation prior to the last day of such calendar year unless Employee receives, prior to such last day, written confirmation from the Board that such vacation will not be forfeited.     4.5.   Withholding. The Base Salary and all other payments made under this Agreement are inclusive of all applicable income, social security and other taxes and charges which are 2 --------------------------------------------------------------------------------   required by law to be withheld from Employee’s wages by the Company, and which will be withheld and paid in accordance with applicable law and the Company’s normal payroll practices. 5.   Confidentiality. Employee agrees that at all times during the term of this Agreement and after the termination of employment for as long as such information remains non-public information, Employee shall (i) hold in confidence and refrain from disclosing to any other party all information, whether written or oral, tangible or intangible, of a private, secret, proprietary or confidential nature, of or concerning the Company or any of its affiliates and their business and operations, and all files, letters, memoranda, reports, records, computer disks or other computer storage medium, data, models or any photographic or other tangible materials containing such information (“Confidential Information”), including without limitation, any sales, promotional or marketing plans, clinical data or information about the Company’s product development efforts, programs, techniques, practices or strategies, or future development plans (including existing and entry into new geographic and/or product markets), and any customer lists, (ii) use the Confidential Information solely in connection with his employment with the Company or any of its affiliates and for no other purpose, (iii) take all precautions necessary to ensure that the Confidential Information shall not be, or be permitted to be, shown, copied or disclosed to third parties, without the prior written consent of the Company or any of its affiliates, and (iv) observe all security policies implemented by the Company or any of its subsidiaries or affiliates from time to time with respect to the Confidential Information. In the event that Employee is ordered to disclose any Confidential Information, whether in a legal or regulatory proceeding or otherwise, Employee shall provide the Company or any of its affiliates with prompt notice of such request or order so that the Company or any of its subsidiaries or affiliates may seek to prevent disclosure. In addition to the foregoing Employee shall not at any time libel, defame, ridicule or otherwise disparage the Company. Employee agrees that all work done in the name of or on behalf of the Company is deemed the property of the Company pursuant to this Agreement. 6.   Restrictive Covenants. In consideration of his employment and the other benefits arising under this Agreement, the Employee agrees that during the Term and for a period of one (1) year following the termination of this Agreement in accordance with Section 7 hereof, Employee shall not, directly or indirectly,   6.1.   alone or as a partner, joint venturer, officer, director, member, employee, consultant, agent, independent contractor or stockholder of, or lender to, any company or business, engage in any business which competes, directly or indirectly, with any business of the Company; provided, however, that the beneficial ownership of less than one percent (1%) of the shares of stock of any corporation having a class of equity securities actively traded on a national securities exchange or over-the-counter market shall not be deemed, in and of itself, to violate the prohibitions of this section;     6.2.   for any reason, (i) induce any customer of the Company or any of its affiliates to patronize any business directly or indirectly in competition with the businesses conducted by the Company or any of its subsidiaries or affiliates in any market in which 3 --------------------------------------------------------------------------------   the Company or any of its affiliates does business; (ii) canvass, solicit or accept from any customer of the Company or any of its affiliates any such competitive business; or (iii) request or advise any customer or vendor of the Company or any of its affiliates to withdraw, curtail or cancel any such customer’s or vendor’s business with the Company or any of its affiliates; or   6.3.   for any reason, employ, or knowingly permit any company or business entity directly or indirectly controlled by him to employ, any person who was employed by the Company or its affiliates at or within the prior six months, or in any manner seek to induce any such person to leave his or her employment. The provisions of this Section shall apply to Employee whether or not Employee’s employment with the Company has been terminated for Cause or without Cause and whether or not the Company is required to pay Employee severance benefits. Notwithstanding the foregoing, if this Agreement expires by its terms at the end of the Term or if Employee is terminated without Cause, the provisions of this Section 6 shall apply to Employee only if the Company provides Employee with all of the severance benefits which it would be obligated to provide him as if the Employee had been terminated from his employment with the Company without Cause. 7.   Termination. The Employee’s employment hereunder may be terminated during the Term upon the occurrence of any one of the events described in this Section 7. Upon termination, the Employee shall be entitled only to such compensation and benefits as described in this Section 7.   7.1.   Termination for Disability.   7.1.1.   In the event of the Disability (as hereinafter defined) of the Employee, the Employee’s employment may be terminated by the Company by notice to the Employee.   7.1.2.   In the event of a termination of the Employee’s employment pursuant to Section 7.1.1: (i) the Employee will be entitled to receive any accrued and unpaid Base Salary and Annual Bonus through the date of such termination (and reimbursement for expenses, in accordance with Section 4.3, incurred prior to the termination of employment), including without limitation, payment prescribed under any disability plan or arrangement in which he is a participant or to which he is a party in his capacity as an employee of the Company; (ii) the Company shall continue to pay Employee his Base Salary at the time of the Disability for a period of one (1) year following such Disability, such payments to be made in accordance with normal payroll practices, except that such payments may be reduced or eliminated by the amount paid with respect to such Disability by any disability insurance policy that the Company may purchase for the benefit of the Employee; and (iii) if the Employee and/or his spouse or eligible dependents elect continuation of medical and/or dental benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company will pay the full premium cost of such participation for a period of twenty-nine (29) months following the date of 4 --------------------------------------------------------------------------------   such termination or until the Employee or his spouse or dependents cease to be eligible for participation under COBRA, whichever is shorter. Except as specifically set forth in this Section 7.1, or to the extent provided under any Company-provided disability benefits policy, the Company shall have no other liability or obligation to the Employee for compensation or benefits by reason of such termination.   7.1.3.   For purposes of this Section 7.1, “Disability” shall mean a physical or mental condition that entitles the Employee to benefits under the Company’s long-term disability policy which covers the Employee, if any, or, in the absence of coverage under any such policy, a disability which prevents the Employee from performing his duties, with or without a reasonable accommodation, under this Agreement for forty-five (45) calendar days during any period of 180 calendar days. The Company will notify the Employee of commencement of the disability period, which period cannot commence more than fourteen (14) calendar days prior to the date of the notice. The determination of whether the Employee has a Disability will be made by the Board. Any dispute as to whether the Employee is or was prevented from performing his duties under this Agreement because of a physical or mental disability or incapacitation, whether his disability or incapacity has ceased or whether he is able to resume his duties under this Agreement shall be finally and conclusively decided by a licensed physician chosen by the Company, and any such determination by the physician shall be conclusive and binding on the parties hereto. The Employee must submit to all tests and examinations and provide all information as requested by the physician.   7.2.   Termination by Death. Employee’s employment shall automatically be terminated on his death. Employee’s executors, legal representatives or administrators shall receive any accrued and unpaid Base Salary and Annual Bonus through the date of the Employee’s death (and reimbursement for expenses, in accordance with Section 4.3, incurred prior to the Employee’s death). Employee’s estate shall also be paid, for a period of one (1) year following the date of the Employee’s death, Employee’s Base Salary at of his death, in accordance with normal payroll practices. The Company may reduce or eliminate such payments to the extent that the Employee’s estate (or a beneficiary designated by the Employee) is paid such amounts due from a life insurance policy purchased for the benefit of the Employee by the Company. In addition, if the Employee’s spouse and/or eligible dependents elect continuation of medical and/or dental benefits under COBRA, the Company will pay the full premium cost of such participation for a period of twenty-four (24) months following the date of the Employee’s death or until the Employee’s spouse or dependents cease to be eligible for participation under COBRA, whichever is shorter. Except as specifically set forth in this Section 7.2, or to the extent provided under any Company-provided life insurance policy, the Company shall have no other liability or obligation hereunder to the Employee’s executors, legal representatives, administrators, heirs or assigns or any other person claiming under or through him by reason of the Employee’s death.     7.3.   Termination by the Employee Without Good Reason. Upon thirty (30) days’ prior written notice to the Board, the Employee may terminate his employment with the Company without Good Reason (as defined below) and for a reason other than those 5 --------------------------------------------------------------------------------   identified in Section 7.1 or Section 7.2 of this Agreement. In the event of a termination of the Employee’s employment pursuant to this Section 7.3, the Employee shall be entitled to receive any accrued and unpaid Base Salary and Annual Bonus through the date of such termination (and reimbursement for expenses, in accordance with Section 4.3, incurred prior to such date). All other Base Salary and Annual Bonus shall cease at the effective date of such termination. Except as specifically set forth in this Section 7.3, the Company shall have no other liability or obligation hereunder by reason of such termination.   7.4.   Termination By the Company for Cause.   7.4.1.   Upon written notice to the Employee from the Board or an appropriate officer of the Company designated by the Board, the Company may terminate the Employee’s employment at any time for Cause as defined in Section 7.4.3 of this Agreement.     7.4.2.   In the event of a termination of the Employee’s employment pursuant to Section 7.4.1, the Employee shall be entitled to receive accrued and unpaid Base Salary and Annual Bonus through the date of such termination (and reimbursement for expenses, in accordance with Section 4.3, incurred prior to the termination of employment). All other Base Salary and Annual Bonus shall cease at the effective date of such termination. Except as specifically set forth in this Section 7.4, the Company shall have no other liability or obligation hereunder by reason of such termination.     7.4.3.   For purposes of this Agreement, “Cause” shall mean as determined by the Board in good faith: (i) commission by Employee of any act of fraud or any act of misappropriation or personal dishonesty relating to or involving the Company in any way; (ii) the Employee’s willful failure, neglect or refusal to perform, or gross negligence in the performance of, his material duties and responsibilities or any express direction of the Company (other than the failure, neglect or refusal to perform an unlawful act), or any violation of any rule, regulation, policy or plan established by the Company from time-to-time regarding the conduct of its employees and/or its business, if such violation is not remedied by the Employee within ten (10) days of receiving notice of such violation from the Company; (iii) Employee’s violation of any obligation of this Agreement that is not remedied by the Employee within ten (10) days after receiving notice of such violation from the Company; or (iv) Employee’s arrest for, conviction of or plea of nolo contendere to a crime constituting a felony.     7.4.4.   The Employee shall not, under any circumstances, be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a Board resolution (the “Board Resolution”) duly adopted by the affirmative vote of not less than fifty one percent (51%) of the Board at a meeting of the Board held for that purpose. Any such Board Resolution, which in the event of an alleged termination for Cause under Sections 7.4.3 (ii) and (iii) hereof shall be dated no sooner than ten (10) days after such notice has been deemed to have been given to the Employee and the Employee shall have had an opportunity, together with 6 --------------------------------------------------------------------------------   counsel, to be heard before the Board, shall find that in the good faith opinion of the Board, the Employee was guilty of conduct constituting Cause and specifying the particulars thereof in detail.   7.5.   Termination by the Company Without Cause.   7.5.1.   Upon written notice to the Employee from the Board or an appropriate officer of the Company designated by the Board, the Company may terminate the Employee’s employment at any time without Cause.     7.5.2.   In the event of a termination of the Employee’s employment pursuant to Section 7.5.1: (i) the Company will pay to Employee any earned but unpaid Base Salary through the date of such termination; (ii) the Company will reimburse the Employee’s unreimbursed business expenses pursuant to Section 4.3 for all expenses incurred in the performance of his duties prior to the date of such termination; (iii) the Company will pay to Employee any earned and accrued but unpaid Annual Bonus as of the date of such termination; (iv) commencing on the day immediately following “the date of such termination, the Company will continue to pay to the Employee his then current Base Salary until the expiration of the later of: (a) the second anniversary of the Effective Date, or (b) the twelve (12) month period following such date of termination without Cause; provided, however, that if Employee is terminated without Cause following a Change in Control (as defined below), the Company will continue to pay to Employee his then current Base Salary until the expiration of the later of: (a) the second anniversary of the Effective Date, or (b) the twenty-four (24) month period following such date of termination, which amount shall be paid as a lump sum within thirty (30) days after the date of termination, or, at the Company’s election, in accordance with the Company’s payroll practices in effect from time-to-time. Except as specifically set forth in this Section 7.5, the Company shall have no other liability or obligation hereunder by reason of such termination.     7.5.3.   Notwithstanding any other provision in this Agreement to the contrary, Employee hereby agrees and acknowledges that he will not be entitled to and the Company shall have no obligation to pay or provide any amount or benefit provided under Section 7.5 of this Agreement unless Employee executes and delivers to the Company and does not revoke a release satisfactory to the Company in a manner consistent with the requirements of the Age Discrimination in Employment Act.   7.6.   Termination by the Employee for Good Reason.   7.6.1.   The Employee may terminate the Employee’s employment at any time for Good Reason (as hereinafter defined), upon written notice from the Employee to the Company in connection with his resignation for Good Reason setting forth the effective date of termination (which shall not be less than thirty (30) business days from the date such notice is given). 7 --------------------------------------------------------------------------------     7.6.2.   In the event of a termination of the Employee’s employment for Good Reason pursuant to Section 7.6.1: (i) the Company will pay to Employee any earned but unpaid Base Salary through the date of such termination; (ii) the Company will reimburse the Employee’s unreimbursed business expenses pursuant to Section 4.3 for all expenses incurred in the performance of his duties prior to the date of such termination; (iii) the Company will pay to Employee any earned and accrued but unpaid Annual Bonus as of the date of such termination; (iv) commencing on the day immediately following the date of such termination, the Company will continue to pay to the Employee his then current Base Salary until the expiration of the later of: (a) the second anniversary of the Effective Date, or (b) the twelve (12) month period following such date of termination for Good Reason; provided, however, that if Employee terminates his employment for Good Reason following a Change in Control, the Company will pay to Employee his then current Base Salary until the expiration of the later of: (a) the second anniversary of the Effective Date, or (b) the eighteen (18) month period following such date of termination, which amount shall be paid as a lump sum within thirty (30) days after the date of termination, or, at the Company’s election, in accordance with the Company’s payroll practices in effect from time-to-time. Except as specifically set forth in this Section 7.6, the Company shall have no other liability or obligation hereunder by reason of such termination.   7.6.3.   Notwithstanding any other provision in this Agreement to the contrary, Employee hereby agrees and acknowledges that he will not be entitled to and the Company shall have no obligation to pay or provide any amount or benefit provided under Section 7.6 of this Agreement unless Employee executes and delivers to the Company and does not revoke a release satisfactory to the Company in a manner consistent with the requirements of the Age Discrimination in Employment Act.     7.6.4.   For purposes of this Agreement, “Good Reason” shall mean, as determined by the Company, the first occurrence of either: (i) any material alteration by the Company of Employee’s positions, functions, duties or responsibilities that is not remedied by the Company within ten (10) days after receiving notice of such material alteration from Employee, including any change that (a) alters Employee’s reporting responsibility or (b) causes Employee’s Position with the Company to become of materially less importance than the applicable positions; (ii) a material decrease in Employee’s Base Salary that has not been agreed to by the Employee; or (iii) failure of the Company to perform any of its material obligations under this Agreement that are not remedied by the Company within ten (10) days after receiving notice of such failure to perform from Employee; provided, however, that Employee’s consent to any event which would otherwise constitute “Good Reason” shall be conclusively presumed if Employee does not exercise his rights hereunder within ninety (90) days of the event.     7.6.5.   For purposes of this Agreement, “Change in Control” means: (i) the sale, transfer, assignment or other disposition (including by merger or consolidation, but excluding any sales by stockholders made as part of an underwritten public offering of the common stock of the Company) by stockholders of the Company, in one transaction or a series of related transactions, of more than fifty percent (50%) of the 8 --------------------------------------------------------------------------------   voting power represented by the then outstanding capital stock of the Company to one or more Persons (other than to Employee or a “group” (as that term is defined under the Securities Exchange Act of 1934) in which Employee is a member); (ii) the sale of substantially all the assets of the Company (other than a transfer of financial assets made in the ordinary course of business for the purpose of securitization); or (iii) the liquidation or dissolution of the Company. 8.   Parachute Payments. Payments under this Agreement shall be made without regard to whether the deductibility of such payments (or any other payments) would be limited or precluded by Section 280G of the Internal Revenue Code of 1986 (the “Code”) and without regard to whether such payments would subject the Employee to the federal excise tax levied on certain “excess parachute payments” under Section 4999 of the Code; provided, however, that if the Total After-Tax Payments (as defined below) would be increased by the limitation or elimination of any amount payable under this Agreement, then the amount payable under this Agreement will be reduced to the extent necessary to maximize the Total After-Tax Payments. The determination of whether and to what extent payments under this Agreement are required to be reduced in accordance with the preceding sentence will be made at the Company’s expense by an independent, certified public accountant selected by the Employee and reasonably acceptable to the Company. In the event of any underpayment or overpayment under this Agreement (as determined after the application of this Section 8), the amount of such underpayment or overpayment will be immediately paid by the Company to the Employee or refunded by the Employee to the Company, as the case may be, with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. For purposes of this Agreement, “Total After-Tax Payments” means the total of all “parachute payments” (as that term is defined in Section 280G(b)(2) of the Code) made to or for the benefit of Employee (whether made hereunder or otherwise), after reduction for all applicable federal taxes (including, without limitation, the tax described in Section 4999 of the Code).   9.   Representations. The Employee represents and warrants to the Company that:   9.1.   there are no restrictions, agreements or understandings whatsoever to which the Employee is a party which would prevent or make unlawful the Employee’s execution of this Agreement or the Employee’s employment hereunder, or which is or would be inconsistent or in conflict with this Agreement or the Employee’s employment hereunder, or would prevent, limit or impair in any way the performance by the Employee of his obligations hereunder; and     9.2.   the Employee’s execution of this Agreement and the Employee’s employment hereunder shall not constitute a breach of any contract, agreement or understanding, oral or written, to which the Employee is a party or by which the Employee is bound. 10.   Survival of Provisions. The provisions of this Agreement set forth in Sections 5 through 8 and 10 through 18 hereof shall survive the termination of the Employee’s employment hereunder.   11.   Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Company and the Employee and their respective successors, executors, administrators, 9 --------------------------------------------------------------------------------   heirs and/or permitted assigns; provided, however, that neither the Employee nor the Company may make any assignments of this Agreement or any interest herein, by operation of law or otherwise, without the prior written consent of the other party hereto, except that, without such consent, the Company may assign this Agreement to an Affiliate or any successor to all or substantially all of its assets and business by means of liquidation, dissolution, merger, consolidation, transfer of assets, or otherwise, provided that such successor assumes in writing all of the obligations of the Company under this Agreement, subject, however, to the Employee’s rights as to termination as provided in Section 7 hereof. 12.   Notice. Any notice or communication required or permitted under this Agreement shall be made in writing and sent by certified or registered mail, return receipt requested, addressed as follows: If to Employee: Jack Weinstein                                                                                                                           If to the Company: Catalyst Pharmaceutical Partners, Inc. 220 Miracle Mile, Suite 234 Coral Gables, Florida 33134 Attn: Chief Executive Officer With a copy to: Philip B. Schwartz, Esq. Akerman Senterfitt One Southeast Third Avenue Miami, Florida 33131 or to such other address as either party may from time-to-time duly specify by notice given to the other party in the manner specified above. 13.   Waiver of Personal Liability. To the extent permitted by applicable law. Employee hereby acknowledges and agrees that he shall have recourse only to the Company (and its successors-in-interest) with respect to any claims he may have for compensation or benefits arising in connection with his employment, whether or not under this Agreement or under any other plan, program, or arrangement, including, but not limited to, any agreements related to the grant or exercise of equity options or other equity rights in the Company. To the extent permitted by applicable law, the Employee hereby waives any such claims for compensation, benefits and equity rights against officers, directors, managers, members, stockholders, or other representatives in their personal or separate capacities. 10 --------------------------------------------------------------------------------   14.   Entire Agreement; Amendments. This Agreement contains the entire agreement and understanding of the parties hereto relating to the subject matter hereof, and merges and supersedes all prior and contemporaneous discussions, agreements and understandings of every nature between the parties hereto relating to the employment of the Employee with the Company. This Agreement may not be changed or modified, except by an agreement in writing signed by each of the parties hereto. 15.   Waiver. The waiver of the breach of any term or provision of this Agreement shall not operate as or be construed to be a waiver of any other or subsequent breach of this Agreement. 16.   Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Florida, without regard to its rules on conflict of laws. 17.   Invalidity. In case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the validity of any other provision of this Agreement, and such provision(s) shall be deemed modified to the extent necessary to make it enforceable. 18.   Section Headings. The section headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation. 19.   Legal Fees; Limitations. If an action at law or in equity is necessary to enforce or interpret the terms of this Agreement and the Employee is the prevailing party, he shall be entitled to recover, in addition to any other relief, all reasonable attorney’s fees, costs and disbursements. In the event that the provisions of Sections 5 or 6 hereof should ever be adjudicated to exceed the time, geographic, or other limitations permitted by applicable law in any applicable jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic, or other limitations permitted by applicable law. 20.   Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together shall be deemed to be one and the same instrument. [Signatures on Following Page] 11 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have caused this agreement to be made this 13th day of November, 2006.             EMPLOYEE       /s/ Jack Weinstein      Jack Weinstein                CATALYST PHARMACEUTICAL PARTNERS, INC.       By:   /s/ Patrick J. McEnany        Patrick J. McEnany        President and Chief Executive Officer      12

  Exhibit 10.17 EXECUTIVE EMPLOYMENT AGREEMENT      This Employment Agreement (this “Agreement”) is made as of January 9, 2006 (the “Effective Date”), by and between BMC Software, Inc., a Delaware corporation (the “Employer”), and Michael A. Vescuso (the “Executive”). The Employer and the Executive are each a “party” and are together “parties” to this Agreement. RECITALS      WHEREAS, the Employer desires to employ the Executive, and the Executive wishes to accept such employment, upon the terms and conditions set forth in this Agreement.      WHEREAS, the Executive acknowledges that his employment duties will be undertaken in the state of Texas at the corporate headquarters of Employer. In addition, Executive shall be principally physically located and maintain residence in Texas and shall be deemed a Texas employee. AGREEMENT      NOW THEREFORE, in consideration of the employment compensation to be paid to the Executive and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, agree as follows: 1.   DEFINITIONS      For the purposes of this Agreement, the following terms have the meanings specified or referred to in this Section 1.      “Agreement” refers to this Employment Agreement, including all Exhibits attached hereto, as amended from time to time.      “Benefits” as defined in Section 3.1(b).      “Board of Directors” refers to the board of directors of the Employer.      “Change of Control” refers to (i) the acquisition of at least 50% of Employer’s outstanding voting stock; (ii) an unapproved change in the majority of the Employer’s board of directors; (iii) a merger, consolidation, or similar corporate transaction in which the Company’s shareholders immediately prior to the transaction do not own more than 60% of the voting stock of the surviving corporation in the transaction; and (iv) shareholder approval of the company’s liquidation, dissolution, or sale or substantially all of its assets.      “Confidential Information” means any and all:   a.   trade secrets (as defined herein) concerning the business and affairs of the Employer, product specifications, data, know-how, formulae, compositions, processes, designs, sketches, photographs, graphs, drawings, samples, inventions and ideas, past, current, and planned 1 --------------------------------------------------------------------------------         research and 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;     b.   information concerning the business and affairs of the Employer (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     c.   notes, analysis, compilations, studies, summaries, and other material prepared by or for the Employer containing or based, in whole or in part, on any information included in the foregoing.      “Disability” as defined in Section 6.2.      “Effective Date” is the date stated in the first paragraph of the Agreement.      “Employee Invention” shall mean any idea, invention, technique, modification, process, or improvement (whether patentable or not), any industrial design (whether registerable or not), any mask work, however fixed or encoded, that is suitable to be fixed, embedded or programmed in a semiconductor product (whether recordable or not), and any work of authorship (whether or not copyright protection may be obtained for it) created, conceived, or developed by the Executive, either solely or in conjunction with others, during the Employment Period, or a period that includes a portion of the Employment Period, that relates in any way to, or is useful in any manner in, the business then being conducted or proposed to be conducted by the Employer, and any such item created by the Executive, either solely or in conjunction with others, following termination of the Executive’s employment with the Employer, that is based upon or uses Confidential Information.      “Employment Period” is the term of the Executive’s employment under this Agreement.      “Fiscal Year” shall mean the Employer’s fiscal year, which shall end on March 31 of each year, or as changed from time to time.      “for cause” as defined in Section 6.3.      “Good Reason” as defined in Section 6.3. 2 --------------------------------------------------------------------------------        “person” is any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, or governmental body.      “Proprietary Items” as defined in Section 7.2(a)(iv).      “Salary” as defined in Section 3.1(a).      “trade secrets” shall mean the whole or any part of any scientific or technical information, design, process, procedure, formula, or improvement that has value and that the owner has taken measures to prevent from becoming available to persons other than those selected by the owner to have access for limited purposes. 2.   EMPLOYMENT TERMS AND DUTIES   2.1   EMPLOYMENT      The Employer hereby employs the Executive, and the Executive hereby accepts employment by the Employer, upon the terms and conditions set forth in this Agreement.   2.2   EMPLOYMENT PERIOD      Subject to the provisions of Section 6, the term of the Executive’s employment under this Agreement will commence upon the Effective Date and shall continue in effect through the third anniversary of the Effective Date (the “Employment Period”); provided, however, that, subject to the provisions of Section 6, commencing on the day after the Effective Date and on each day thereafter, the Employment Period shall be automatically extended for one additional day unless the Employer shall give written notice to Executive that the Employment Period shall cease to be so extended, in which event the Employment Period shall terminate on the third anniversary of the date such notice is given. The Employment Period may be further extended by mutual agreement of the parties.   2.3   DUTIES      The Executive will have such duties as are assigned or delegated to the Executive by the Board of Directors, and will initially serve as the Employer’s Senior Vice President of Administration. The Executive will use good faith and reasonable efforts to devote his entire business time, attention, skill, and energy exclusively to the business of the Employer, will use his best efforts to promote the success of the Employer’s business, and will cooperate fully with the Board of Directors in the advancement of the best interests of the Employer. The Executive’s employment will be subject to the policies maintained and established by the Employer, from time to time. Nothing in this Section 2.3, however, will prevent the Executive from engaging in additional activities in connection with passive personal investments and community affairs that are not inconsistent with the Executive’s duties under this Agreement. Additionally, nothing in this Section 2.3 will prevent the Executive from serving on the Board of Directors and/or advisory boards of other companies or organizations, or engaging in other 3 --------------------------------------------------------------------------------   activities, so long as such participation does not conflict with the interests or business of Employer or require such involvement as to interfere with the performance of the Executive’s duties hereunder and has been expressly approved by the Chief Executive Officer of Employer. If the Executive is elected as a director of the Employer or as a director or officer of any of its affiliates, the Executive will fulfill his duties as such director or officer without additional compensation. The Executive acknowledges and agrees that he owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of the Employer. 3.   COMPENSATION   3.1   COMPENSATION   a.   Salary. During the Employment Period, the Executive will be paid an annual base salary of $375,000 (the “Salary”), which will be payable in twenty-four (24) equal installments according to the Employer’s customary payroll practices. Executive may be subject to such increases in Salary as deemed appropriate in the sole discretion of the Compensation Committee of the Board of Directors of Employer.     b.   Benefits. The Executive will, during the Employment Period, be permitted to participate in such pension, profit sharing, life insurance, hospitalization, major medical, and other employee benefit plans of the Employer that may be in effect from time to time, to the extent the Executive is eligible under the terms of those plans (collectively, the “Benefits”).     c.   Cash Bonus. Executive will be eligible for a cash bonus as described in Attachment A incorporated herein by reference. 4 --------------------------------------------------------------------------------     d.   Stock Options. Executive will receive the right and option to purchase 75,000 shares of stock of the Employer. Such options will be subject to the terms and conditions of the BMC Software, Inc. 1994 Employee Incentive Plan and an Executive Stock Option Agreement.     e.   Long-Term Incentive Plan. Executive will be eligible (beginning April 1, 2006) to participate in the BMC Long-Term Incentive Plan providing a 3-year cash plan based on Employer’s total shareholder return against a peer group of companies with the first plan for new members divided into two payments: 18-month payment (target is at $100,000 payment) and 36-month payment (target is at $100,000 payment). 4.   FACILITIES AND EXPENSES   4.1   FACILITIES.      The Employer will furnish the Executive office space, equipment, supplies, and such other facilities and personnel as the Employer deems necessary or appropriate for the performance of the Executive’s duties under this Agreement.   4.2   EXPENSES.      The Employer will pay on behalf of the Executive (or reimburse the Executive for) reasonable expenses incurred by the Executive at the request of, or on behalf of, the Employer in the performance of the Executive’s duties pursuant to this Agreement, and in accordance with the Employer’s employment policies, including reasonable expenses incurred by the Executive in attending business meetings, in appropriate business entertainment activities, and for promotional expenses. The Executive must file expense reports with respect to such expenses in accordance with the Employer’s policies then in effect. 5.   VACATIONS AND HOLIDAYS      The Executive will be entitled to paid vacation during the term of the Agreement in accordance with the vacation policies of the Employer in effect for its employees from time to time. The Executive will also be entitled to the paid holidays and other paid leave set forth in the Employer’s policies. 5 --------------------------------------------------------------------------------   6.   TERMINATION   6.1   EVENTS OF TERMINATION      The Employment Period, the Executive’s Salary and any and all other rights of the Executive under this Agreement or otherwise as an employee of the Employer will terminate (except as otherwise provided in this Section 6):   a.   upon the death of the Executive;     b.   upon the Disability (as defined in Section 6.2) of the Executive immediately upon notice from either party to the other;     c.   upon termination by the Employer for cause (as defined in Section 6.3);     d.   upon the voluntary retirement from or voluntary resignation of employment by the Executive for any reason other than those set forth in Section 6.1(f) below;     e.   upon termination by the Employer for any reason other than those set forth in Section 6.1(a) through 6.1(d) above; or     f.   upon voluntary resignation of employment by the Executive within 60 days of the occurrence of an event that constitutes Good Reason, as defined in Section 6.3 below.      Upon termination of the Employment Period, as provided above or otherwise, Executive’s rights respecting Benefits, Stock Options, and Cash Bonus will be determined under the applicable plan or program providing the same.   6.2   DEFINITION OF DISABILITY      For purposes hereof, the term “Disability” shall mean an incapacity by accident, illness or other circumstance which renders the Executive mentally or physically incapable of performing the duties and services required of the Executive hereunder on a full-time basis for a period of at least 180 consecutive days.   6.3   DEFINITION OF “FOR CAUSE” AND “GOOD REASON”   a.   For purposes of Section 6.1, the phrase “for cause” means: (i) the Executive’s continued and material failure to perform his obligations under this Agreement; (ii) the Executive’s material failure to adhere to any Employer policy or code of conduct; (iii) the appropriation (or attempted appropriation) of a material business opportunity of the Employer, including attempting to secure or securing any personal profit in 6 --------------------------------------------------------------------------------         connection with any transaction entered into on behalf of the Employer; (iv) the Executive’s engaging in conduct that is materially injurious to the Employer, (v) the misappropriation (or attempted misappropriation) of any of the Employer’s funds or property; (vi) the conviction of or the entering of a guilty plea or plea of no contest with respect to, a felony, the equivalent thereof, or any other crime with respect to which imprisonment is a punishment; or (vii) the conviction of the Executive by a court of competent jurisdiction of a crime involving moral turpitude. The determination of whether the Executive’s employment is terminated for cause shall be made solely by the Employer, which shall act in good faith in making such determination.     b.   “Good Reason” means:   i.   The occurrence, prior to a Change of Control or after the date which is 12 months after a Change of Control occurs, of any one or more of the following events without the Executive’s express written consent: (i) a significant change in the Executive’s titles or offices from those previously applicable to the Executive (but not an alteration in Executive’s reporting responsibilities); (ii) a reduction in the Executive’s Salary or target bonus amount from that provided to him immediately on the Effective Date of this Agreement (or the effective date of any extension of this Agreement pursuant to Paragraph 7(a)) or as the same may be increased from time to time; or (iii) a diminution in employee benefits (including but not limited to medical, dental, life insurance and long-term disability plans) and perquisites applicable to the Executive from those substantially similar to the employee benefits and perquisites provided by the Employer (including subsidiaries) to executives with comparable duties; or     ii.   The occurrence, within 12 months after the date upon which a Change of Control occurs, of any one or more of the following events without Executive’s express written consent: (i) a change in Executive’s reporting responsibilities, titles or offices as in effect immediately prior to the Change of Control or any removal of Executive from, or any failure to re-elect Executive to, any of such positions which has the effect of diminishing Executive’s responsibility or authority; (ii) a reduction by the Employer or a subsidiary thereof in Executive’s Salary or target bonus amount as in effect immediately prior to the Change of Control or as the same may be increased from time to time or a change in the eligibility requirements or performance criteria under any bonus, incentive or compensation plan, program or arrangement under which Executive is covered immediately prior to the Change of Control which adversely affects Executive; (iii) 7 --------------------------------------------------------------------------------         the Employer or a subsidiary thereof requiring Executive to be permanently based anywhere other than within 50 miles of Executive’s job location at the time of the Change of Control; (iv) without replacement by a plan providing benefits to Executive equal to or greater than those discontinued, the failure by the Employer or a subsidiary thereof to continue in effect, within its maximum stated term, any pension, bonus, incentive, stock ownership, purchase, option, life insurance, health, accident, disability, or any other employee benefit plan, program or arrangement in which Executive is participating at the time of the Change of Control, or the taking of any action by the Employer or a subsidiary thereof that would adversely affect Executive’s participation or materially reduce Executive’s benefits under any of such plans; (v) the taking of any action by the Employer or a subsidiary thereof that would materially adversely affect the physical conditions existing at the time of the Change of Control in or under which Executive performs his employment duties; (vi) if Executive’s primary employment duties are with a subsidiary of the Employer, the sale, merger, contribution, transfer or any other transaction in conjunction with which the Employer’s ownership interest in the subsidiary decreases below a majority interest; or (vii) any material variance from the terms of this Agreement by the Employer or a subsidiary thereof.   6.4   SEVERANCE      Should the Executive’s employment with the Employer be terminated during the Employment Period pursuant to Section 6.1(e) or Section 6.1(f) above, the Executive shall be entitled to:   a.   a payment equal to two years of his then current Salary; and     b.   a payment equal to two times his then current cash bonus target amount.      Such payments under this section will be made no later than 30 days following the termination from employment. Severance payments do not constitute continued employment beyond the termination date.   6.5   CHANGE OF CONTROL      If, within 12 months of a Change of Control, the Executive’s position is eliminated or the Executive is terminated pursuant to Section 6.1(e) or 6.1(f) above, regardless of whether such termination event occurs during or after the Employment Period, the Executive shall be entitled to the following in lieu of the amounts set forth in Section 6.4:   a.   a payment equal to two years of his then current Salary; 8 --------------------------------------------------------------------------------     b.   a payment equal to two times his then current cash bonus target amount;     c.   vesting of Executive’s stock option awards, subject to the terms and conditions of the respective stock option agreements; and     d.   continued medical and life insurance benefits at no cost to the Executive, for the Executive and his dependents (including his spouse) who were covered as of such termination event under the medical and life insurance benefit plan as in effect for employees of the Employer during the coverage period, or the substantial equivalence, for 18 months or until such time that he is re-employed and is provided medical and life insurance benefits (which coverage shall be promptly reported to the Employer by the Executive) whichever is sooner.      Severance payments do not constitute continued employment beyond the termination date.      Notwithstanding anything to the contrary in this Agreement, if the Executive is a “disqualified individual” (as defined in Section 280G(c) of the Internal Revenue Code of 1986, as amended (the “Code”)), and the severance benefits provided for in this Section 6.5, together with any other payments and benefits which the Executive has the right to receive from the Employer and its affiliates, would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), then the severance benefits provided hereunder (beginning with any benefit to be paid in cash hereunder) shall be either (1) reduced (but not below zero) so that the present value of such total amounts and benefits received by the Executive will be one dollar ($1.00) less than three times the Executive’s “base amount” (as defined in Section 280G of the Code) and so that no portion of such amounts and benefits received by the Executive shall be subject to the excise tax imposed by Section 4999 of the Code or (2) paid in full, whichever produces the better net after-tax position to the Executive (taking into account any applicable excise tax under Section 4999 of the Code and any other applicable taxes). The determination as to whether any such reduction in the amount of the severance benefit is necessary shall be made initially by the Employer in good faith. If a reduced severance benefit is paid hereunder in accordance with clause (1) of the first sentence of this paragraph and through error or otherwise that payment, when aggregated with other payments and benefits from the Employer (or its affiliates) used in determining if a “parachute payment” exists, exceeds one dollar ($1.00) less than three times the Executive’s base amount, then the Executive shall immediately repay such excess to the Employer upon notification that an overpayment has been made.   6.6   NO MITIGATION Any remuneration received by the Executive from a third party following the Employment Period shall not apply to reduce the Employer’s obligations to make payments hereunder. 9 --------------------------------------------------------------------------------     6.7   LIQUIDATED DAMAGES Due to the difficulties in estimating damages for an early termination of the Employment Period, the Employer and the Executive agree that the payments, if any, to be received by the Executive hereunder shall be received as liquidated damages. 7.   NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS   7.1   ACKNOWLEDGMENTS BY THE EXECUTIVE      The Executive acknowledges that (a) prior to and during the Employment Period and as a part of his employment, the Executive has been and will be afforded access to Confidential Information; (b) public disclosure of such Confidential Information could have an adverse effect on the Employer and its business; (c) because the Executive possesses substantial technical expertise and skill with respect to the Employer’s business, the Employer desires to obtain exclusive ownership of each Employee Invention, and the Employer will be at a substantial competitive disadvantage if it fails to acquire exclusive ownership of each Employee Invention; and (d) the provisions of this Section 7 are reasonable and necessary to prevent the improper use or disclosure of Confidential Information and to provide the Employer with exclusive ownership of all Employee Inventions.   7.2   AGREEMENTS OF THE EXECUTIVE      In consideration of the compensation and benefits to be paid or provided to the Executive by the Employer under this Agreement, the Executive covenants the following:   a.   Confidentiality.   i.   The Executive will hold in confidence the Confidential Information and will not disclose it to any person except with the specific prior written consent of the Employer or except as otherwise expressly permitted by the terms of this Agreement.     ii.   Any trade secrets of the Employer will be entitled to all of the protections and benefits under any applicable law. If any information that the Employer 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 purposes of this Agreement. The Executive hereby waives any requirement that the Employer submit proof of the economic value of any trade secret or post a bond or other security.     iii.   None of the foregoing obligations and restrictions applies to any part of the Confidential Information that the Executive 10 --------------------------------------------------------------------------------         demonstrates was or became generally available to the public other than as a result of a disclosure by the Executive.     iv.   The Executive will not remove from the Employer’s premises (except to the extent such removal is for purposes of the performance of the Executive’s duties at home or while traveling, or except as otherwise specifically authorized by the Employer) any document, record, notebook, plan, model, component, device, or computer software or code, whether embodied in a disk or in any other form (collectively, the “Proprietary Items”). The Executive recognizes that, as between the Employer and the Executive, all of the Proprietary Items, whether or not developed by the Executive, are the exclusive property of the Employer. Upon termination of this Agreement by either party, or upon the request of the Employer during the Employment Period, the Executive will return to the Employer all of the Proprietary Items in the Executive’s possession or subject to the Executive’s control, and the Executive shall not retain any copies, abstracts, sketches, or other physical embodiment of any of the Proprietary Items.   b.   Employee Inventions. Each Employee Invention will belong exclusively to the Employer. The Executive acknowledges that all of the Executive’s writing, works of authorship, and other Employee Inventions are works made for hire and the property of the Employer, including any copyrights, patents, or other intellectual property rights pertaining thereto. If it is determined that any such works are not works made for hire, the Executive hereby assigns to the Employer all of the Executive’s right, title, and interest, including all rights of copyright, patent, and other intellectual property rights, to or in such Employee Inventions. The Executive covenants that he will promptly:   i.   disclose to the Employer in writing any Employee Invention;     ii.   assign to the Employer or to a party designated by the Employer, at the Employer’s request and without additional compensation, all of the Executive’s right to the Employee Invention for the United States and all foreign jurisdictions;     iii.   execute and deliver to the Employer such applications, assignments, and other documents as the Employer may request in order to apply for and obtain patents or other registrations with respect to any Employee Invention in the United States and any foreign jurisdictions;     iv.   sign all other papers necessary to carry out the above obligations; and 11 --------------------------------------------------------------------------------     v.   give testimony and render any other assistance in support of the Employer’s rights to any Employee Invention.   c.   Notice of Intent to Resign. Except in the event of a resignation for Good Reason, Executive agrees to provide Employer with 90 days advance notice of his intention to resign (“Notice Period”). During the Notice Period, Executive shall continue in the diligent fulfillment of all duties of his position and this Agreement. Should Executive fail to provide Employer with the full Notice Period, Executive shall forfeit that portion of his earned pro-rata yearly cash bonus as follows:         (90 – (number of full days of advance notice) / 90) X(times) pro-rata earned yearly cash bonus = amount forfeited by Executive.         Pro-rata earned yearly cash bonus is: (unconditional portion of yearly cash bonus, if any, targeted for Executive in the current Fiscal Year) / (number of full months worked in the current Fiscal Year / 12).     d.   NonDisparagement. Executive shall not disparage the Employer or any of its shareholders, directors, officers, employees, or agents.     e.   Creative Works. Executive shall not create, assist with or consult on any creative works which discuss, describe or reference Employer or any executive of Employer. Creative works includes but is not limited to novels, nonfiction writings, any authored work, plays, screenplays, musicals or the like.   7.3   DISPUTES OR CONTROVERSIES      The Executive recognizes that should a dispute or controversy arising from or relating to this Agreement be submitted for adjudication to any court, arbitration panel, or other third party, the preservation of the secrecy of Confidential Information may be jeopardized. All pleadings, documents, testimony, and records relating to any such adjudication will be maintained in secrecy and will be available for inspection by the Employer, the Executive, and their respective attorneys and experts, who will agree, in advance and in writing, to receive and maintain all such information in secrecy, except as may be limited by them in writing. 12 --------------------------------------------------------------------------------   8.   NON-COMPETITION AND NON-INTERFERENCE   8.1   ACKNOWLEDGMENTS BY THE EXECUTIVE      The Executive acknowledges that: (a) the services to be performed by him under this Agreement are of a special, unique, unusual, extraordinary, and intellectual character; (b) the Employer’s business is international in scope and its products are marketed throughout the United States and the world; (c) the Employer competes with other businesses that are or could be located in any part of the United States or the world; (d) the provisions of this Section 8 are reasonable and necessary to protect the Employer’s business; and (e) in connection with the fulfillment of his duties hereunder and as an employee of the Employer, the Employer will provide Executive with Confidential Information necessitating the execution of the covenants contained in this Section 8.   8.2   COVENANTS OF THE EXECUTIVE      In consideration of the acknowledgments by the Executive, and in consideration of the compensation and benefits to be paid or provided to the Executive by the Employer, the Executive covenants that during and for two (2) years following the Employment Period he will not, directly or indirectly:   a.   except in the course of his employment hereunder, engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend the Executive’s name or any similar name to, lend Executive’s credit to or render services or advice to, any business whose products or activities compete in whole or in part with the products or activities of the Employer anywhere in the world, provided, however, that the Executive may purchase or otherwise acquire up to (but not more than) five percent (5%) of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934, as amended;     b.   whether for the Executive’s own account or for the account of any other person, solicit business of the same or similar type being carried on by the Employer, from any person known by the Executive to be a customer or a potential customer of the Employer, whether or not the Executive had personal contact with such person during and by reason of the Executive’s employment with the Employer;     c.   whether for the Executive’s own account or the account of any other person, (i) solicit, employ, or otherwise engage as an employee, independent contractor, or otherwise, any person who is an employee (or 13 --------------------------------------------------------------------------------         was an employee within two (2) years of the date in question) of the Employer at any time during the Employment Period or in any manner induce or attempt to induce any employee of the Employer to terminate his employment with the Employer; or (ii) interfere with the Employer’s relationship with any person, including any person who at any time during the Employment Period was an employee, contractor, supplier, or customer of the Employer; or      If any covenant in this Section 8.2 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 Executive.      The period of time applicable to any covenant in this Section 8.2 will be extended by the duration of any violation by the Executive of such covenant. 9.   GENERAL PROVISIONS   9.1   INJUNCTIVE RELIEF AND ADDITIONAL REMEDY      The Executive acknowledges that the injury that would be suffered by the Employer as a result of a breach of the provisions of this Agreement (including any provision of Sections 7 and 8) would be irreparable and that an award of monetary damages to the Employer for such a breach would be an inadequate remedy. Consequently, the Employer will have the right, in addition to any other rights it may have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce any provision of this Agreement, and the Employer will not be obligated to post bond or other security in seeking such relief.   9.2   COVENANTS OF SECTIONS 7 AND 8 ARE ESSENTIAL AND INDEPENDENT COVENANTS      The covenants by the Executive in Sections 7 and 8 are essential elements of this Agreement, and without the Executive’s agreement to comply with such covenants, the Employer would not have entered into this Agreement or employed the Executive. The Employer and the Executive have independently consulted with 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.      If the Executive’s employment hereunder expires or is terminated, this Agreement will continue in full force and effect as is necessary or appropriate to enforce the covenants and agreements of the Executive in Sections 7 and 8. 14 --------------------------------------------------------------------------------     9.3   REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE      The Executive represents and warrants to the Employer that the execution and delivery by the Executive of this Agreement do not, and the performance by the Executive of the Executive’s obligations hereunder will not, with or without the giving of notice or the passage of time, or both: (a) violate any judgment, writ, injunction, or order of any court, arbitrator, or governmental agency applicable to the Executive; or (b) conflict with, result in the breach of any provisions of or the termination of, or constitute a default under, any agreement to which the Executive is a party or by which the Executive is or may be bound. The Executive further specifically represents and warrants that he is not subject to, nor will he violate, any agreement not to compete upon the execution and delivery by him of this Agreement.      The Executive represents and warrants that he will not utilize or divulge any proprietary materials or information from his previous employers and acknowledges that Employer has prohibited Executive from bringing any such materials on to Employer’s premises and has advised Executive that Executive’s failure to adhere to these prohibitions will subject Executive to immediate termination.   9.4   OBLIGATIONS CONTINGENT ON PERFORMANCE      The obligations of the Employer hereunder, including its obligation to pay the compensation provided for herein, are contingent upon the Executive’s performance of the Executive’s obligations hereunder.   9.5   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, power, or privilege under this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement. 15 --------------------------------------------------------------------------------     9.6   BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED      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 Employer may merge or consolidate or to which all or substantially all of its assets may be transferred. The duties and covenants of the Executive under this Agreement, being personal, may not be delegated or assigned.   9.7   NOTICES      All notices, consents, waivers, and other communications 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 receipt), provided that a copy is mailed by registered mail, return receipt requested and signed for by the party required to receive notice, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), 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 Employer: BMC Software, Inc. 2101 CityWest Blvd Houston, Texas 77042 Telephone No.: (713) 918-8800 Facsimile No.:713-918-1110 Attn: General Counsel If to the Executive: Michael A. Vescuso                                                                                                                           Telephone No:                                          E-mail Address:                                            9.8   ENTIRE AGREEMENT; AMENDMENTS      Except as provided in (a) plans and programs of the Employer referred to in Sections 3.1(b) through (d), and (b) any signed written agreement contemporaneously or hereafter executed by the Employer and the Executive, this Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, between the parties hereto with respect to the subject matter hereof. Notwithstanding the foregoing, this Agreement shall not be construed to supersede any stock option agreements or restricted stock agreements entered into between Executive and Employer at any time prior to the execution of this Agreement. This Agreement may not be amended orally, but only by an agreement in writing signed by the parties hereto. 16 --------------------------------------------------------------------------------     9.9   GOVERNING LAW      This Agreement will be governed by the laws of the State of Texas without regard to conflicts of laws principles.   9.10   ARBITRATION      In the event that there shall be any dispute arising out of or in any way relating to this Agreement, the contemplated transactions, any document referred to or incorporated herein by reference or centrally related to the subject matter hereof, or the subject matter of any of the same, the parties covenant and agree as follows:   a.   The parties shall first use their reasonable best efforts to resolve such dispute among themselves, with or without mediation.     b.   If the parties are unable to resolve such dispute among themselves, such dispute shall be submitted to binding arbitration in Houston, Texas, under the auspices of, and pursuant to the rules of, the American Arbitration Association’s Commercial Arbitration Rules as then in effect, or such other procedures as the parties may agree to at the time, before a tribunal of three (3) arbitrators, one of which shall be selected by the Executive, one of which shall be selected by the Employer, and the third of which shall be selected by the two (2) arbitrators so selected. Any award issued as a result of such arbitration shall be final and binding between the parties, and shall be enforceable by any court having jurisdiction over the party against whom enforcement is sought. A ruling by the arbitrators shall be non-appealable. The parties agree to abide by and perform any award rendered by the arbitrators. If either the Executive or Employer seeks enforcement of the terms of this Agreement or seeks enforcement of any award rendered by the arbitrators, then the prevailing party (designated by the arbitrators) to such proceeding(s) shall be entitled to recover its costs and expenses (including applicable travel expenses) from the non-prevailing party, in addition to any other relief to which it may be entitled. If a dispute arises and one party fails or refuses to designate an arbitrator within thirty (30) days after receipt of a written notice that an arbitration proceeding is to be held, then the dispute shall be resolved solely by the arbitrator designated by the other party and such arbitration award shall be as binding as if three (3) arbitrators had participated in the arbitration proceeding. Either the Executive or the Employer may cause an arbitration proceeding to commence by giving the other party notice in writing of such arbitration. Executive and the Employer covenant and agree to act as expeditiously as practicable in order to resolve all disputes by arbitration. Notwithstanding anything in this section to the contrary, neither Executive nor the Employer shall be precluded from seeking court action in the event the action sought is either injunctive action, a 17 --------------------------------------------------------------------------------         restraining order or other equitable relief. The arbitration proceeding shall be held in English.     c.   Legal process in any action or proceeding referred to in the preceding section may be served on any party anywhere in the world.     d.   Except as expressly provided herein and except for injunctions and other equitable remedies that are required in order to enforce this Agreement, no action may be brought in any court of law and EACH OF THE PARTIES WAIVES ANY RIGHTS THAT IT MAY HAVE TO BRING A CAUSE OF ACTION IN ANY COURT OR IN ANY PROCEEDING INVOLVING A JURY TO THE MAXIMUM EXTENT PERMITTED BY LAW. Each party acknowledges that it has been represented by legal counsel of its own choosing and has been advised of the intent, scope and effect of this Section 9.10 and has voluntarily entered into this Agreement and this Section 9.10.     e.   Excluded from this Section 9.10 are any claims for temporary injunctive relief to enforce Sections 7 and 8 of this Agreement.   9.11   SECTION HEADINGS, CONSTRUCTION      The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to “Section” or “Sections” refer to the corresponding Section or Sections of this Agreement unless otherwise specified. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word “including” does not limit the preceding words or terms.   9.12   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. 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.   9.13   COUNTERPARTS      This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.   9.14   WAIVER OF JURY TRIAL      THE PARTIES HERETO HEREBY WAIVE A JURY TRIAL IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT. 18 --------------------------------------------------------------------------------     9.15   WITHHOLDING OF TAXES AND OTHER EMPLOYEE DEDUCTIONS The Employer may withhold from any payments and benefits made pursuant to this Agreement all federal, state, city, and other taxes as may be required pursuant to any law or governmental regulation or ruling and all other normal deductions made with respect to the Employer’s employees generally.      IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date above first written above.                   EMPLOYER:                       BMC Software, Inc.                       By:      /s/ ROBERT E. BEAUCHAMP         Name:     Robert E. Beauchamp         Title:   President and CEO                       EXECUTIVE:                           /s/ MICHAEL A. VESCUSO                   Michael A. Vescuso     19 --------------------------------------------------------------------------------   Michael A. Vescuso   Attachment A BMC SOFTWARE, INC. Executive Employment Agreement Cash Bonus Description      The Executive will, during the Employment Period, be permitted to participate in the BMC Annual Executive Incentive Plan that may be in effect from time to time. During the employment period, the Executive will be eligible to receive a target incentive, which is 100% of base salary. The actual amount received is not guaranteed and is dependent on the performance of the Company and the Executive in accordance with the Annual Incentive Plan established for each fiscal year during the employment period.      Each fiscal year, the Executive will receive a detailed description of the Annual Incentive Plan and the targeted measures and objectives for that year. 20

EXHIBIT 10.3 December 14, 2006 Mr. W. Brian Olson Mr. Joseph E. Katona III Tecstar Automotive Group, Inc. Tecstar Manufacturing Canada, Ltd. Wheel to Wheel, LLC 1123 South Indiana Avenue Goshen, Indiana 46528   RE: FINANCING ARRANGEMENTS AMONG COMERICA BANK (“BANK”), TECSTAR AUTOMOTIVE GROUP, INC. (“AUTOMOTIVE”), TECSTAR MANUFACTURING CANADA, LTD. (“MANUFACTURING”) AND WHEEL TO WHEEL, LLC, AS SUCCESSOR BY REASON OF MERGER TO WHEEL TO WHEEL, INC. (“WHEEL TO WHEEL”, AND IDENTIFIED TOGETHER WITH AUTOMOTIVE AND MANUFACTURING AS “BORROWERS”) AND THE FOLLOWING PARTIES WHICH ARE IDENTIFIED COLLECTIVELY (TOGETHER WITH AUTOMOTIVE, MANUFACTURING AND WHEEL TO WHEEL) AS “GUARANTORS”: (1) TECSTAR, L.P., (2) STARCRAFT AUTOMOTIVE GROUP, INC., (3) POWERTRAIN INTEGRATION, LLC, (4) CLASSIC DESIGN CONCEPTS, LLC, (5) TECSTAR PARTNERS, LLC, (6) WHEEL TO WHEEL POWERTRAIN, LLC, (7) QUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC., (8) REGENCY CONVERSIONS, LLC, (9) QUANTUM PERFORMANCE, LLC, (10) UNIQUE PERFORMANCE CONCEPTS, LLC, (11) PERFORMANCE CONCEPTS, LLC, (12) TROY TOOLING, LLC, (13) EMPIRE COACH ENTERPRISES, LLC, (14) DOUGLASS C. GOAD, (15) JEFFREY BEITZEL, (16) DANIEL VANAUKEN AND (17) RICHARD ANDERSON Gentlemen: Please refer to any and all documents, instruments and agreements executed in connection with the financing arrangements from Bank to Borrowers and Guarantors (collectively, the “Loan Documents”). All amounts due from Borrowers to Bank, whether now or in the future, contingent, fixed, primary and/or secondary, including, but not limited to, principal, interest, inside and outside counsel fees, audit fees, costs, expenses and any and all other charges provided for in the Loan Documents shall be known, in the aggregate, as the “Liabilities.” All capitalized terms not defined in this letter agreement (“Agreement”) shall have the meanings described in the Loan Documents. The obligations of Automotive to Bank are guarantied by Manufacturing, Wheel to Wheel and the Guarantors identified in numbers 1 through 13 above. The obligations of Manufacturing to Bank are guarantied by Automotive, Wheel to Wheel and the Guarantors identified in numbers 1 -------------------------------------------------------------------------------- Mr. W. Brian Olson Mr. Joseph E. Katona III December 14, 2006 Page 2   through 13 above. The obligations of Wheel to Wheel to Bank are guarantied by Douglass C. Goad, Jeffrey Beitzel, Daniel VanAuken and Richard Anderson. As of December 6, 2006 the Liabilities include, but are not limited to, the following:   Loans (obligor, note amount and date)    Principal    Interest Automotive Revolving Credit Loan (Automotive; $25,000,000; 5/19/06)    $ 21,404,957.14    $ 24,608.83 Manufacturing Revolving Credit Loan (Manufacturing; $5,000,000; 5/19/06)    US$ 2,275,000.00    US$ 2,873.96    Cdn$ 1,363,728.63    Cdn$ 1,513.18 Mortgage Loan (Wheel to Wheel; $1,635,000; 9/7/01)    $ 1,114,224.81    $ 1,532.06 The amounts referenced above are exclusive of interest accruing after December 6, 2006 and costs and expenses (including, but not limited to, inside and outside counsel fees). Automotive has violated (a) the Tangible Effective Net Worth covenant set forth in section 7.10 of the May 19, 2006 Second Amended and Restated Credit Agreement between Automotive and Bank (as amended, the “Automotive Credit Agreement”) for the quarters ending July 31, 2006 and October 31, 2006, (b) the limitation on capital expenditures covenant set forth in section 8.7 of the Automotive Credit Agreement, (c) the obligation set forth in section 7.13 of the Automotive Credit Agreement to cause the aggregate amount of the Advances under the Automotive Credit Agreement and the credit extensions under the Manufacturing Loan Agreement (as defined below) to be less than $15,000,000 for at least 5 consecutive Business Days during each month; and (d) section 8.8 of the Automotive Credit Agreement by lending $95,000 to Spectorworks (collectively, the “Covenant Violations”). The Covenant Violations constitute Events of Default under the Automotive Credit Agreement and are also Events of Default under the May 19, 2006 Amended and Restated Loan Agreement between Manufacturing and Bank (the “Manufacturing Loan Agreement”). The Wheel to Wheel Mortgage Loan matured on December 1, 2006 and remains unpaid. -------------------------------------------------------------------------------- Mr. W. Brian Olson Mr. Joseph E. Katona III December 14, 2006 Page 3   Subject to timely, written acceptance by Borrowers and Guarantors of the following conditions, Bank is willing to forbear until March 15, 2007, subject to earlier termination as provided below, from making demand and from further action to collect the Liabilities:   1. Borrowers and Guarantors acknowledge the Liabilities as set out in the Loan Documents, the amount of the Liabilities as stated above and the existence of the default. Borrowers and Guarantors acknowledge and agree that as a result of the default, Bank has the right to demand repayment of the Liabilities. Wheel to Wheel, LLC acknowledges that it is the successor by merger to Wheel to Wheel, Inc. and is obligated on the Wheel to Wheel Mortgage Loan as set forth above. Guarantors reaffirm their respective guaranties.   2. Future administration of the Liabilities and the financing arrangements among Bank, Borrowers and Guarantors shall continue to be governed by the covenants, terms and conditions of the Loan Documents, which are ratified and confirmed and incorporated by this reference, except to the extent that the Loan Documents have been superseded, amended, modified or supplemented by this Agreement or are inconsistent with this Agreement, then this Agreement shall govern.   3. Except as otherwise provided in this Agreement, Borrowers and Guarantors acknowledge Bank is under no obligation to advance funds or extend credit to Borrowers under the Loan Documents, or otherwise.   4. 100% of Automotive’s cash inflows will be applied to the Automotive Revolving Credit Loan. Subject to maintaining an advisory “Borrowing Base” (defined below) equal to or greater than the balance owing on the Automotive Revolving Credit Loan (including Letter of Credit Obligations), and provided there are no defaults under the terms of this Agreement, and no further defaults under the Loan Documents, Bank agrees that it will continue to advance to Automotive under the Automotive Revolving Credit Loan, in accordance with the Loan Documents, through March 15, 2007. Effective immediately, the maximum amount available under the Automotive Revolving Credit Loan plus the Letter of Credit Obligations (collectively, the “Credit Extensions”) is $25,000,000 (the “Revolving Credit Aggregate Commitment”). The sum of the Credit Extensions plus the amount outstanding under the Manufacturing Revolving Credit Loan (including L/C Obligations) shall not exceed the Revolving Credit Aggregate Commitment. The Borrowing Base is set forth in the Automotive Credit Agreement, except that, effective immediately, Accounts owing to Empire Coach Enterprises, LLC shall no longer be included as Eligible Accounts in the Borrowing Base. In the event the sum of the balance on the Automotive Revolving Credit Loan (including Letter of Credit Obligations) plus the amount outstanding on the Manufacturing Revolving Credit Loan (including L/C Obligations) exceeds the Borrowing Base or the Revolving Credit Aggregate Commitment at any time, no advances will be allowed and Automotive and/or Manufacturing shall immediately pay to Bank the amount of such overage. Each borrowing request or Accounts Receivable collection must be accompanied by an accounts receivable report and any other supporting documentation as may be requested by Bank, all in form satisfactory to Bank, with a minimum of one report per week. -------------------------------------------------------------------------------- Mr. W. Brian Olson Mr. Joseph E. Katona III December 14, 2006 Page 4   5. Automotive acknowledges and agrees it shall hold in express trust for Bank and immediately surrender in the form received all of its cash inflows to Bank by depositing such inflows into account #1851381887 maintained at Bank, which funds will then be transferred to a cash collateral account to be established by Bank and then applied to the Automotive Revolving Credit Loan. Effective immediately, Automotive’s account #1851522340 shall be closed and Automotive shall establish a new dda/checking account with Bank (the “New Operating Account”). All advances under the Automotive Revolving Credit Loan shall be made into the New Operating Account.   6. Wheel to Wheel acknowledges and agrees it shall hold in express trust for Bank and immediately surrender in the form received all of its cash inflows to Bank by depositing such inflows into account #1850719111 maintained at Bank, which funds will then be transferred to a cash collateral account to be established by Bank and then applied to the Automotive Revolving Credit Loan.   7. Manufacturing and the Guarantors (other than the individual Guarantors) agree that at any time in Bank’s sole discretion, they may be placed on a Remittance Basis by Bank, and if Bank does so elect, then they shall cooperate with Bank in such regard.   8. 100% of Manufacturing’s cash inflows will be applied to the Manufacturing Revolving Credit Loan. Provided there are no defaults under the terms of this Agreement, and no further defaults under the Loan Documents, Bank agrees that it will continue to advance to Manufacturing under the Manufacturing Revolving Credit Loan, in accordance with the Loan Documents, through March 15, 2007. The maximum amount available under the Manufacturing Revolving Credit Loan (including L/C Obligations) is $5,000,000. In the event the sum of the balance on the Automotive Revolving Credit Loan (including Letter of Credit Obligations) plus the amount outstanding on the Manufacturing Revolving Credit Loan (including L/C Obligations) exceeds the Borrowing Base or the Revolving Credit Aggregate Commitment at any time, no advances will be allowed and Automotive and/or Manufacturing shall immediately pay to Bank the amount of such overage. Each borrowing request or Accounts Receivable collection must be accompanied by an accounts receivable report and any other supporting documentation as may be requested by Bank, all in form satisfactory to Bank, with a minimum of one report per week.   9. By December 31, 2006, Manufacturing shall establish a cash collateral account with Bank and thereafter it shall hold in express trust for Bank and immediately surrender in the form received all of its cash inflows to Bank by depositing such inflows into the cash collateral account. -------------------------------------------------------------------------------- Mr. W. Brian Olson Mr. Joseph E. Katona III December 14, 2006 Page 5   10. Borrowers shall continue to make the regularly scheduled monthly principal and interest payments on each of the loans. In addition, by no later than December 15, 2006, Quantum Fuel Systems Technologies Worldwide, Inc. shall liquidate the securities in the securities accounts at Munder and at Smith Barney and shall pay to Bank by wire transfer $15,000,000 from the liquidation proceeds to be applied to the Automotive Revolving Credit Loan. Simultaneously with the payment of the $15,000,000, the Revolving Credit Aggregate Commitment shall be reduced to $10,000,000. Upon receipt by Bank of the $15,000,000 and an updated Borrowing Base Certificate showing that Borrowers are within formula based upon Eligible Accounts, (a) Bank will release its security interest in the Munder and Smith Barney securities accounts and (b) the portion of the Borrowing Base that is comprised of “the lesser of (A) one hundred percent (100%) of the Loan Value of Eligible Securities Collateral and (B) Fifteen Million Dollars ($15,000,000)” shall be eliminated from the Borrowing Base.   11. Concurrently with execution of this Agreement, Automotive shall execute a guaranty in favor of Bank of the obligations owed by Wheel to Wheel in the form attached.   12. Interest on the Automotive Revolving Credit Loan shall accrue at Bank’s “Prime Rate” (as defined in the Loan Documents) plus one-half of one percent (0.5%). No further advances on the Automotive Revolving Credit Loan at the Eurocurrency-based Rate shall be permitted. Interest on the Manufacturing Revolving Credit Loan shall accrue at (a) Bank’s “Prime Rate” (as defined in the Loan Documents) plus one percent (1%) with respect to advances in U.S. Dollars, and (b) Bank’s “Canadian Prime Rate” (as defined in the Loan Documents) plus two and one-quarter percent (2.25%) with respect to advances in Canadian Dollars. No further advances in Canadian Dollars shall be permitted on the Manufacturing Revolving Credit Loan. Interest on the Wheel to Wheel Mortgage Loan shall accrue at Bank’s “Prime Rate” (as defined in the Loan Documents) plus two and one-quarter percent (2.25%). Upon the occurrence of a default under the terms of this Agreement or any further defaults under the Loan Documents, then the Liabilities shall accrue interest at the rate otherwise provided in this paragraph plus three percent (3%).   13. Until March 15, 2007 only, Bank waives any Event of Default under the Automotive Credit Agreement or the Manufacturing Loan Agreement that result from (a) the Covenant Violations, or (b) a violation of the Tangible Effective Net Worth Covenant set forth in section 7.10 of the Automotive Credit Agreement for the quarter ending January 31, 2007.   14. By no later than January 10, 2007, Borrowers shall engage a consultant acceptable to Bank to assist them in seeking an alternative source of financing. Bank agrees that Imperial Capital is acceptable to serve as such consultant. -------------------------------------------------------------------------------- Mr. W. Brian Olson Mr. Joseph E. Katona III December 14, 2006 Page 6   15. Concurrently with execution of this Agreement, Automotive shall pay to Bank a fee of $37,500. The fee is fully earned upon receipt. The fee is in consideration of Bank’s costs in negotiating and structuring this Agreement (and not as consideration for any specific period of forbearance). Bank may charge Automotive’s operating account for such fee.   16. By no later than December 21, 2006, Automotive and Manufacturing shall provide to Bank updated projections through April 30, 2007 in form satisfactory to Bank.   17. Borrowers and Guarantors acknowledge and agree the Loan Documents presently provide for and they shall reimburse Bank for any and all costs and expenses of Bank, including, but not limited to, all inside and outside counsel fees of Bank whether in relation to drafting, negotiating or enforcement or defense of the Loan Documents or this Agreement, including any preference or disgorgement actions as defined in this Agreement and all of Bank’s audit fees, incurred by Bank in connection with the Liabilities, Bank’s administration of the Liabilities and/or any efforts of Bank to collect or satisfy all or any part of the Liabilities. Borrowers and Guarantors shall immediately reimburse Bank for all of Bank’s costs and expenses upon demand. Concurrently with execution of this Agreement, Borrowers shall reimburse Bank for its currently outstanding attorneys’ fees in the amount of $8,500. Bank may charge Automotive’s account for such fees.   18. Loan payments, interest on the Liabilities, loan administration expenses, including, but not limited to, all inside and outside counsel fees of Bank and Bank’s audit fees, may be charged directly to any of Borrowers’ accounts maintained with Bank.   19. Borrowers will maintain all commercial accounts with Bank.   20. In addition to all reporting currently required by the Loan Documents, Borrowers shall provide Bank any other reporting reasonably requested by Bank.   21. Borrowers and Guarantors acknowledge and agree the Loan Documents presently provide and they shall permit Bank to conduct such fair market value appraisals, inspections, surveys and/or testing, whether for environmental contamination or otherwise, that Bank deems necessary, on any and all real and personal property upon which Bank may possess a mortgage or security interest securing the Liabilities, and the cost of such appraisals, inspections, surveys and testing are part of the costs and expenses for which the Borrowers and Guarantors must reimburse Bank.   22. Notwithstanding anything to the contrary herein, Bank reserves the right, in its sole discretion, to determine the application of the proceeds of all unusual or extraordinary items (including, by way of example, tax refunds, insurance proceeds, or sale proceeds, -------------------------------------------------------------------------------- Mr. W. Brian Olson Mr. Joseph E. Katona III December 14, 2006 Page 7     other than collection of accounts for inventory or services sold in the ordinary course of business) to the various obligations of Borrowers to Bank.   23. To the extent any payment received by Bank is deemed a preference, fraudulent transfer or otherwise by a court of competent jurisdiction which requires the Bank to disgorge such payment then, such payment will be deemed to have never occurred and the Liabilities will be adjusted accordingly.   24. Borrowers and Guarantors agree to execute any and all additional or supplemental documentation, and provide such further assistance and assurances as Bank may reasonably require, in Bank’s sole and absolute discretion, to give full effect of the terms, conditions and intentions of this Agreement.   25. This Agreement shall be governed and controlled in all respects by the laws of the State of Michigan, without reference to its conflict of law provisions, including interpretation, enforceability, validity and construction.   26. Bank expressly reserves the right to exercise any or all rights and remedies provided under the Loan Documents and applicable law except as modified herein. Bank’s failure to exercise immediately such rights and remedies shall not be construed as a waiver or modification of those rights or an offer of forbearance.   27. This Agreement will inure to the benefit of Bank and all its past, present and future parents, subsidiaries, affiliates, predecessors and successor corporations and all of their subsidiaries and affiliates.   28. Bank anticipates that discussions addressing the Liabilities may take place in the future. During the course of such discussions, Bank, Borrowers and Guarantors may touch upon and possibly reach a preliminary understanding on one or more issues prior to concluding negotiations. Notwithstanding this fact and absent an express written waiver by Bank, Bank will not be bound by an agreement on any individual issues unless and until an agreement is reached on all issues and such agreement is reduced to writing and signed by Borrowers and Guarantors and Bank.   29. As of the date of this Agreement, there are no other offers outstanding from Bank to Borrowers and Guarantors. Any prior offer by Bank, whether oral or written is hereby rescinded in full. There are no oral agreements between Bank and Borrowers and Guarantors; any agreements concerning the Liabilities are expressed only in the existing Loan Documents. The duties and obligations of Borrowers and Guarantors and Bank shall be only as set forth in the Loan Documents and this Agreement, when executed by all parties. -------------------------------------------------------------------------------- Mr. W. Brian Olson Mr. Joseph E. Katona III December 14, 2006 Page 8   30. Borrowers and Guarantors acknowledge that they have reviewed (or have had the opportunity to review) this Agreement with counsel of their choice and have executed this Agreement of their own free will and accord and without duress or coercion of any kind by Bank or any other person or entity.   31. BORROWERS, GUARANTORS AND BANK ACKNOWLEDGE AND AGREE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT, THE LOAN DOCUMENTS OR THE LIABILITIES.   32. DEFAULTS HAVE OCCURRED UNDER THE LOAN DOCUMENTS. BORROWERS AND GUARANTORS, TO THE FULLEST EXTENT ALLOWED UNDER APPLICABLE LAW, WAIVE ALL NOTICES THAT BANK MIGHT BE REQUIRED TO GIVE BUT FOR THIS WAIVER, INCLUDING ANY NOTICES OTHERWISE REQUIRED UNDER SECTION 6 OF ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE AS ENACTED IN THE STATE OF MICHIGAN OR THE RELEVANT STATE CONCERNING THE APPLICABLE COLLATERAL (AND UNDER ANY SIMILAR RIGHTS TO NOTICE GRANTED IN ANY ENACTMENT OF REVISED ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE). FURTHERMORE, BORROWERS AND GUARANTORS WAIVE (A) THE RIGHT TO NOTIFICATION OF DISPOSITION OF THE COLLATERAL UNDER § 9-611 OF THE UNIFORM COMMERCIAL CODE, (B) THE RIGHT TO REQUIRE DISPOSITION OF THE COLLATERAL UNDER § 9-620(E) OF THE UNIFORM COMMERCIAL CODE, AND (C) ALL RIGHTS TO REDEEM ANY OF THE COLLATERAL UNDER § 9-623 OF THE UNIFORM COMMERCIAL CODE.   33. BORROWERS AND GUARANTORS, IN EVERY CAPACITY, INCLUDING, BUT NOT LIMITED TO, AS SHAREHOLDERS, PARTNERS, OFFICERS, DIRECTORS, INVESTORS AND/OR CREDITORS OF BORROWER AND/OR GUARANTOR, OR ANY ONE OR MORE OF THEM, HEREBY WAIVE, DISCHARGE AND FOREVER RELEASE BANK, BANK’S EMPLOYEES, OFFICERS, DIRECTORS, ATTORNEYS, STOCKHOLDERS, AFFILIATES AND SUCCESSORS AND ASSIGNS, FROM AND OF ANY AND ALL CLAIMS, CAUSES OF ACTION, DEFENSES, COUNTERCLAIMS OR OFFSETS AND/OR ALLEGATIONS BORROWERS AND/OR GUARANTORS MAY HAVE OR MAY -------------------------------------------------------------------------------- Mr. W. Brian Olson Mr. Joseph E. Katona III December 14, 2006 Page 9     HAVE MADE OR WHICH ARE BASED ON FACTS OR CIRCUMSTANCES ARISING AT ANY TIME UP THROUGH AND INCLUDING THE DATE OF THIS AGREEMENT, WHETHER KNOWN OR UNKNOWN, AGAINST ANY OR ALL OF BANK, BANK’S EMPLOYEES, OFFICERS, DIRECTORS, ATTORNEYS, STOCKHOLDERS, AFFILIATES AND SUCCESSORS AND ASSIGNS.   34. This Agreement may be executed in counterparts and delivered by facsimile and the counterparts and/or facsimiles, when properly executed and delivered by the signing deadline, will constitute a fully executed complete agreement.   35. The parties acknowledge that Empire Coach Enterprises, LLC (“Empire”) is currently the subject of an involuntary bankruptcy petition and is therefore not a signatory to this Agreement. In addition, Borrowers have advised Bank that Daniel VanAuken is no longer employed by Borrowers and accordingly that Borrowers will not obtain Mr. VanAuken’s signature on this Agreement. Bank does not agree to forbear with respect to Empire. Borrowers and the other Guarantors who are signatories to this Agreement agree that they remain bound by the terms of the Loan Documents and this Agreement regardless of whether Mr. VanAuken or Empire execute this Agreement. Notwithstanding the foregoing, Bank agrees that in the event that Bank makes demand on Empire for payment of the Liabilities and Empire is unable to pay, it shall not constitute cause to terminate early Bank’s forbearance against the other Borrowers and Guarantors.   36. Borrowers and Guarantors (other than Empire and Daniel VanAuken) shall properly execute this Agreement and hand deliver same to the undersigned by no later than 12:00 p.m. Eastern time on December 15, 2006. Bank reserves the right to terminate its forbearance prior to March 15, 2007, in the event of any new defaults under the Loan Documents or defaults under this Agreement.   Very truly yours, /s/ Kevin B. Costello Kevin B. Costello Vice President Special Assets Group P.O. Box 75000 Detroit, Michigan 48275-3205 (313) 222-4408 fax: (313) 222-1244 -------------------------------------------------------------------------------- Mr. W. Brian Olson Mr. Joseph E. Katona III December 14, 2006 Page 10   ACKNOWLEDGED AND AGREED:   Tecstar Automotive Group, Inc.     By:   /s/ Joseph E. Katona III     Date:   December 15, 2006   Joseph E. Katona III       Its:   CFO/Treasurer       Tecstar Manufacturing Canada, Ltd.     By:   /s/ Jeffrey P. Beitzel     Date:   December 15, 2006   Jeffrey P. Beitzel       Its:   President       Wheel to Wheel, LLC, as successor by reason of merger to Wheel to Wheel, Inc.     By:   /s/ Richard C. Anderson     Date:   December 15, 2006   Richard C. Anderson       Its:   President       Tecstar, L.P.     By:   /s/ Joseph E. Katona III     Date:   December 15, 2006   Joseph E. Katona III       Its:   CFO/Treasurer       Starcraft Automotive Group, Inc.     By:   /s/ Joseph E. Katona III     Date:   December 15, 2006   Joseph E. Katona III       Its:   CFO/Secretary       -------------------------------------------------------------------------------- Mr. W. Brian Olson Mr. Joseph E. Katona III December 14, 2006 Page 11   Powertrain Integration, LLC     By:   /s/ Joseph E. Katona III     Date:   December 15, 2006   Joseph E. Katona III       Its:   CFO/Treasurer       Classic Design Concepts, LLC     By:   /s/ Joseph E. Katona III     Date:   December 15, 2006 Its:   CFO/Treasurer       Tecstar Partners, LLC     By:   /s/ Joseph E. Katona III     Date:   December 15, 2006   Joseph E. Katona III       Its:   CFO/Treasurer       Wheel to Wheel Powertrain, LLC     By:   /s/ Richard C. Anderson     Date:   December 15, 2006   Richard C. Anderson       Its:   President       -------------------------------------------------------------------------------- Mr. W. Brian Olson Mr. Joseph E. Katona III December 14, 2006 Page 12   Quantum Fuel Systems Technologies Worldwide, Inc.     By:   /s/ Kenneth R. Lombardo     Date:   December 15, 2006   Kenneth R. Lombardo       Its:   Vice President and Secretary       Regency Conversions, LLC       By:   /s/ Kenneth R. Lombardo     Date:   December 15, 2006 Its:   Vice President and Secretary       Quantum Performance, LLC       By:   /s/ Kenneth R. Lombardo     Date:   December 15, 2006   Kenneth R. Lombardo       Its:   Secretary       Unique Performance Concepts, LLC       By:   /s/ Joseph E. Katona III     Date:   December 15, 2006   Joseph E. Katona III       Its:   CFO/Treasurer       Performance Concepts, LLC       By:   /s/ Douglass C. Goad     Date:   December 15, 2006   Douglass C. Goad       Its:   President       -------------------------------------------------------------------------------- Mr. W. Brian Olson Mr. Joseph E. Katona III December 14, 2006 Page 13   Troy Tooling, LLC     By:   /s/ Kenneth R. Lombardo     Date:   December 15, 2006   Kenneth R. Lombardo       Its:   Secretary         /s/ Jeffrey P. Beitzel     Date:   December 15, 2006   Jeffrey Beitzel         /s/ Douglass C. Goad     Date:   December 15, 2006   Douglass C. Goad         /s/ Richard Anderson     Date:   December 15, 2006   Richard Anderson      

EXHIBIT 10.7 LEASE AGREEMENT AND OPTION TO PURCHASE STATE OF LOUISIANA PARISH OF VERMILION THIS LEASE, dated as indicated herein below, is by and between IVY RICHARD, married to and living with, DOLA RICHARD (hereinafter “Lessors”) and OMEGA PROTEIN, INC. (hereinafter “Lessee”). WITNESSETH:   1) In consideration of the rental stated herein and their mutual covenants, Lessors lease to Lessee and Lessee leases from Lessors, on the terms and conditions herein, the following described premises: TRACT 2 THAT CERTAIN TRACT OR PARCEL OF LAND CONTAINING 9.279 ACRES, SITUATED IN IRREGULAR SECTION 86, T 14 S - R 3 E, SEVENTH WARD OF VERMILION PARISH, STATE OF LOUISIANA BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT A POINT FORMED BY THE INTERSECTION OF THE CENTERLINE OF LOUISIANA STATE HIGHWAY 333 AND THE NORTHERN RIGHT-OF-WAY LINE OF ANDREW ROAD, THENCE PROCEEDING S 70E 36’ 54” E ALONG THE NORTHERN RIGHT-OF-WAY LINE OF ANDREW ROAD, A DISTANCE OF 2101.10 FEET TO A POINT; THENCE PROCEEDING S 70E 19’ 10” E ALONG THE NORTHERN RIGHT-OF-WAY LINE OF ANDREW ROAD, A DISTANCE OF 1455.79 FEET TO A POINT; THENCE PROCEEDING S 19E 30’ 00” W A DISTANCE OF 62.64 FEET TO A POINT ON THE SOUTHERN RIGHT-OF-WAY LINE OF ANDREW ROAD, BEING THE POINT OF THE BEGINNING; THENCE CONTINUING S 19E 30’ 00” W A DISTANCE OF 759.36 FEET TO A POINT; THENCE PROCEEDING N 54E 49’ 00” W A DISTANCE OF 60.81 FEET TO A POINT; THENCE PROCEEDING N 52E 28’ 45” W A DISTANCE OF 129.00 FEET TO A POINT; THENCE PROCEEDING N 43E 37’ 12” W A DISTANCE OF 540.10 FEET TO A POINT; THENCE PROCEEDING N 23E 59’ 28” E A DISTANCE OF 460.09 FEET TO A POINT ON THE SOUTHERN RIGHT-OF WAY LINE OF ANDREW ROAD; THENCE PROCEEDING N 70E 30’ 46” E ALONG THE SOUTHERN RIGHT-OF-WAY LINE OF ANDREW ROAD, A DISTANCE OF 626.94 FEET TO THE POINT OF BEGINNING; BEING BOUNDED ON THE NORTH BY ANDREW ROAD, AND ON THE SOUTH, EAST AND WEST BY OMEGA PROTEIN CORPORATION, ALL AS PER PLAT BY JOSEPH E. SCHEXNAIDER, REGISTERED PROFESSIONAL LAND SURVEYOR, DATED AUGUST 20, 1996.   2) TERM: The term of this lease is ONE HUNDRED TWENTY (120) MONTHS commencing AUGUST 1, 2006 and expiring AUGUST 31, 2016.   3) RENTAL: Lessee agrees to pay to Lessors, without deduction, set off, prior notice, or demand, rental during said term payable on the first day of each month in advance monthly installments of TWELVE HUNDRED AND NO/100 ($1200.00) DOLLARS per month. Lessors acknowledge receipt from the Lessee of the sum of ELEVEN THOUSAND FIVE HUNDRED AND NO/100 ($11,500.00) as pre-payment of a portion of the first   -1- -------------------------------------------------------------------------------- year’s rental obligation. It is understood and agreed that in light of Lessee’s prepayment, the balance of the rental obligation for the first twelve months will be reduced to $500.00. Lessors and Lessee intend this lease to amend and supersede all prior lease agreements between them. All rentals due under this lease are payable to the order of IVY and DOLA RICHARD, and are to be delivered to Lessors or Lessors’ agent at 10160 Richard Road (Private Road), Abbeville, Louisiana 70510, or as Lessors or Lessors’ successors or assigns may hereafter from time to time designate in writing. The mailing of Lessee’s check or draft to Lessors, at the address stated herein on or before the rental paying date shall constitute timely payment of rentals.   4) LATE PAYMENT: If the Lessee fails to pay the rental provided for herein when due, Lessors shall have the right to give Lessee notice by registered mail to pay said rent within fifteen (15) days and if Lessee should fail to pay said rent within fifteen (15) days after said notice then Lessors may declare this Lease cancelled.   5) RENEWAL OPTION: Provided Lessee is not in default under any of the provisions contained in this lease, Lessee is granted the automatic option to renew this lease for one 10-year option period and followed by one 5-year option period. Should Lessee exercise the option, the parties hereto do mutually agree that the Consumer Price Index as published by the Bureau of Labor Statistics, U. S. Dept. of Labor (as calculated by the “All Items” feature in Table 1 thereof) or its successor publication shall be adopted by Lessors and Lessee as the scale for determining the rentals to be paid during the option period, and the method to be employed in establishing the said rental shall be as follows: a) A reading of the “All Items” table for the month in which the lease begins shall be taken. b) A reading of the “All Items” table for the last available month of the expiring year shall be taken. c) The reading obtained in item (a) above shall be subtracted from the reading in item (b) above, and the difference thus arrived at as a result of said subtraction shall be calculated as to the percentage change over the beginning period. Such percentage increase shall be added to the expiring rent, and said resulting amount shall be paid for the option period. d) In no case will the monthly rent for the renewal periods be at a rate of less than $1,200.00 per month regardless of the calculation reached by use of the aforesaid method for calculating the rent for the option period. This option to renew will occur automatically upon the expiration of the primary term unless Lessee notifies Lessors of Lessee’s intention to cancel or terminate the Lease at least thirty (30) days prior to the expiration of the primary lease term. The Lessee shall confirm the renewal by recording written notice of said option in the Conveyance Records of Vermilion Parish, and deposit a certified copy thereof, addressed to the Lessors. All notices shall be sent by certified mail to Lessors at the address provided for within this lease agreement.   6) OPTION TO PURCHASE AND RIGHT OF FIRST REFUSAL: For and in consideration of the monthly rental, Lessors do hereby grant unto Lessee for a period of beginning June 1, 2006 and ending upon the termination Lease as provided herein the exclusive privilege or option to purchase the premises herein leased for the price and sum of agreed to by the Lessors and Lessee, or a price equal to any bona fide offer to purchase which is accepted by the Lessors during the option period. In the event Lessee desires to exercise the right to purchase, Lessee shall notify Lessors and deposit with Lessors the sum of Five Thousand and no/100 ($5000.00) Dollars. The Act of Sale shall pass before Lessee’s Notary on or before sixty (60) days after receipt of the deposit and notification of Lessee’s right or intent to purchase.   -2- -------------------------------------------------------------------------------- In the event Lessee desires to exercise said option herein granted after being notified of the receipt of a bona fide purchase agreement by Lessors, and of its terms and conditions, Lessee must then within 24 hours inform Lessors of its intent to and must in fact execute an identical purchase agreement to the one submitted. In such an event, Lessee must deposit with the Lessors only so much as Lessors had required in that first purchase agreement and the act of sale shall take place at the time and in accordance with the terms of that first purchase agreement. In the even that bona fide curative work on the title is required, any period of time in which to perform this act of sale shall be extended for a period of sixty (60) days for said curative work to be accomplished. No rent shall be considered as a payment toward the purchase price of the property in the event the Lessee exercises the options set forth in this section.   7) DELIVERY OF PREMISES: Lessee shall then accept the premises in its existing condition and assume responsibility for the condition of the leased premises. Any additional improvements or alterations desired by Lessee shall be at Lessee’s cost.   8) KIND OF BUSINESS: Lessee shall occupy the premises throughout the full term of the lease and shall be permitted to use said premises for any lawful purpose. Lessee agrees to comply with (and to indemnify Lessors from any violations of) all laws or ordinances relative to Lessee’s use of the premises.   9) IMPROVEMENTS AND ALTERATIONS: Lessee shall have the right to build and erect walls, buildings and other structures and improvements on the premises. All improvements and alterations shall remain the property of Lessee upon the expiration of the lease. Upon the termination of this Lease, Lessee obligates itself to return the land herein leased in its present condition, and to remove therefrom all materials or property that Lessee may have placed thereon.   10) PRIVATE ROAD AND DRAINAGE: A portion of the leased premises is in use as a private road and for parking (so long as it does not interfere with Lessors’ use of said road as provided elsewhere herein), by Lessee and Lessee’s employees, agents, invitees and privies in contract (but not for use by the general public). Lessee obligates itself during the term of this lease to maintain the road in good operating condition and at the termination of this lease to deliver said road to Lessors in good operating condition. In addition, Lessee is granted the right to use, jointly with Lessors, a certain drainage ditch presently running along the easterly side of the road. It is understood that the above drain is an artificial drain for private use and is not a natural drain. Lessee obligates itself, at its sole expense, to maintain in good operating condition, an automatic gate presently installed at the point where the above drain enters a canal located along the southerly line of the property which gate will permit drainage of water from the aforesaid drain into the canal, but will prevent water from backing up from the canal into the drain. Upon termination of this lease the above gate will belong to the Lessors free of charge.   11) UTILITIES: All utility charges on the leased premises shall be paid by Lessee, including cost of heat, water, electric current, gas, garbage pickup, sewer and special fees.   12) TAXES: Lessee shall cause the land and all improvements placed by Lessee upon the Leased premises to be assessed to Lessee on all tax rolls, and Lessee shall pay the taxes assessed against such improvements by the Vermilion Parish Tax Assessor. Should taxes on Lessee’s improvements be assessed to Lessors, the Lessee shall reimburse Lessors for any such taxes paid by Lessors, such reimbursements shall be made within ninety (90) days after receipt by Lessee of notice of proof of payment of such taxes by Lessors.   -3- -------------------------------------------------------------------------------- 13) ASSIGNMENT AND SUBLEASE: Lessee has the right to assign or sublease the whole or part of the leased premises with the written consent of the Lessors which approval shall not be unreasonably withheld. In the event of assignment or sublease, Lessee acknowledges that it shall remain fully responsible for compliance with all terms of the lease. Any sublessee, occupying any part of this space, shall by the act of subletting formally or informally, assume all obligations of Lessee.   14) INSURANCE AND INDEMNITY:     A. LIABILITY AND PROPERTY DAMAGE: Lessee shall at all times during the full term of this lease and during any holdovers or other rental agreements, carry and maintain at its own cost and expense, General Public Liability Insurance against claims for personal injury or death and property damage occurring on or about the leased premises, such insurance to afford protection to both Lessors and Lessee, as their interests may appear, and is to be maintained in reasonable amounts, having regard to the circumstances, and the usual practice at the time of prudent owners and lessees of comparable properties. Lessee shall deliver to Lessors evidence of such insurance and all renewals thereof. Lessors are to be named additional insured on all policies. Lessors must be notified by insurance company fifteen (15) days prior to cancellation of any policies. The insurance policy shall be written and maintained in responsible insurance companies duly authorized and licensed to do business in and to issue policies in the State of Louisiana.     B. INDEMNITY:     1) LESSEE - Lessee further agrees that during the term of this Lease any and all property of any kind that may be on the leased premises shall be at the sole risk of the Lessee, and Lessors shall not be liable to Lessee, its invitees or other person for any injury, loss or damage to the property or to any person lawfully on the premises. Except as provided hereinbelow, Lessee agrees and obligates itself to indemnify and save harmless Lessors from and against any and all claims demands, suits and judgments therefor, or on account of damage or injury, including death to persons and damage to property arising out of or connected with the operation and use of the leased premises and any improvements installed or placed thereon by Lessee under this agreement.     2) LESSORS - Lessors agree and obligate themselves to indemnify and hold Lessee harmless from and against any and all damages, suits, causes of action, or other claims whatsoever in connection with any environmental damage, cleanup, cost of cleanup or assessment resulting from any environmental condition which preexisted this Lease Agreement, or which succeeds this Lease Agreement, including, but not limited to, any claims arising out of any condition, defect, non-compliance with any applicable statue or regulation or other imperfection of the property caused by prior or subsequent use, including, but not limited to, any claim provided for or recognized by (i) Articles 667, 668, 2315, 2315.1, 2315.3 (repealed) of the Louisiana Revised Civil Code; (ii) Statewide Order 29-B of the Office of Conservation, Department of Natural Resources, State of Louisiana; (iii) The Louisiana Environmental Quality Act; (iv) the Louisiana Abandoned Oilfield Waste Site Law; (v) the Comprehensive Environmental Response, Compensation and Liability Act (42. U.S.C. §§ 6901 et seq.); (vi) the Resource Conservation and Recovery Act of 1986; (viii) the Toxic Substance Control Act (15 U.S.C. §§ 2601, et seq.) and/or any other federal, state or local law, statute ordinance, rule, regulation, order, decree, penalty or requirement concerning, affecting, regulating or involving the environment. This indemnity shall include, without limitation, costs   -4- -------------------------------------------------------------------------------- (including response and remediation costs), expenses, penalties, punitive damages, consequential damages and attorney’s fees occasioned by said Claims, as well as the full amount of any judgment rendered or compromise settlement made plus court costs and interest.   15) FORCE MAJEURE: If as a result of force majeure, judgment of any court of competent jurisdiction, or order, decree or regulation of any governmental body or official having jurisdiction, Lessee shall be prevented from utilizing the leased premises as intended, then Lessee shall have and is given the right and privilege to terminate this lease without liability to Lessors for the payment of any unpaid rent, any penalty or any other further sum whatsoever. Any such cancellation shall be made by Lessee within a reasonable period of time after the occurrence of such force majeure or rendition of the judgment, or issuance of the order, decree or regulation which shall prevent Lessee from utilizing the leased premises; and within such period, Lessee shall so advise Lessors in writing of the cancellation of this Lease and the reasons therefor.   16) NOTICE: Any notice provided for herein must be in writing and will be deemed given when deposited by certified mail (regardless of when or if received by the addressee), or when actually delivered in person to the parties or their designated agents at the following addresses or at such other addresses as they may from time to time direct.   Lessors:    Mr. Ivy Richard    10160 Richard Road    Abbeville, LA 70510    (337)         -             Lessee:    Mr. Al Vidrine    Omega Protein, Inc.    P.O. Box 369    Abbeville, LA 70510    (337) 893-2933   17) ATTORNEY’S FEE AND EXPENSES: In the event it becomes necessary for either party to employ an attorney to enforce compliance with any of the covenants and agreements herein contained, unsuccessful litigant shall be liable for reasonable attorney’s fees, costs and expenses incurred by the other party.   18) VENUE: In all actions to enforce this lease or concerning the interpretation and/or enforcement of any provisions of this lease, the parties hereto agree that the proper Venue and Jurisdiction for all actions or suits shall be the 15th Judicial District Court, Parish of Vermilion, State of Louisiana.   19) QUIET POSSESSION: Lessors agree to warrant and defend Lessee in its quiet and peaceful possession.   20) ENTIRETY OF UNDERSTANDING IN WRITTEN LEASE: It is agreed that the entire understanding between the parties is set out in the lease and any riders which are hereto annexed, and that this lease supersedes and voids all prior proposals, letters and agreements, oral or written. The laws of Louisiana where the leased premises are situated shall apply.   21) BINDING ON HEIRS, ETC.: It is further agreed by the parties to this lease that all of the covenants and agreements enumerated herein shall be binding upon and inure to the benefit of both parties hereto and their respective legal representatives, heirs, successors and assigns throughout the life of this lease.   22) BENEFITS OF PARTIES: All of the provisions contained herein shall be bound upon and shall inure to the benefit of Lessors and Lessee, their heirs, executors, administrators, successors and assigns.   -5- -------------------------------------------------------------------------------- 23) LEASE RECORDATION: The lease shall be recorded in the Conveyance Records of Vermilion Parish, State of Louisiana. This lease is made and signed in triplicate, in the Parish of Vermilion, State of Louisiana, this 27th day of July, 2006.   LESSORS:   WITNESSES: /s/ Ivy Richard     IVY RICHARD   /s/ Dola Richard     DOLA RICHARD   SWORN TO AND SUBSCRIBED before me this 31st day of July, 2006.              NOTARY PUBLIC (Notary I.D. No.            )               Printed Name            LESSEE:   WITNESSES: OMEGA PROTEIN, INC.   By:   /s/ Thomas Wittman       THOMAS WITTMAN   Its:   Vice President         SWORN TO AND SUBSCRIBED before me this      day of July, 2006.              NOTARY PUBLIC (Notary I.D. No.            )               Printed Name            -6-

Exhibit 10.13 WARRANT Dated as of April 25, 2006 THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.   W-701   Warrant to Purchase up to 1,200,000   Shares of Common Stock   1,200,000 shares at $1.30 per share BIOVEST INTERNATIONAL, INC. COMMON STOCK PURCHASE WARRANT Void after April 24, 2015 BIOVEST INTERNATIONAL, INC. (the “Company”), a Delaware corporation, hereby certifies that for value received, Telesis CDE Corporation or its successors or assigns (the “Holder”), is entitled, subject to Vesting, to purchase, subject to the terms and conditions hereinafter set forth, at any time or from time to time (the “Exercise Date”) and ending prior to 5:00 P.M., New York City time, on April 24, 2015 (the “Expiration Date”) up to 1,200,000 shares of Common Stock at an exercise price per share of $1.30 per share subject to adjustment as provided herein (the “Purchase Price”). This Warrant is issued in connection with a Loan Agreement dated April 25, 2006 between the Company and, inter alia, Telesis CDE Two, LLC. The Holder agrees to duly execute and deliver the Investment Representation Statement attached hereto as Exhibit A (the “Investment Representation Statement”) to the Company on or before the date hereof and acknowledges that the Company is issuing this Warrant in reliance on the representations set forth in the Investment Representation Statement. -------------------------------------------------------------------------------- 1. Definitions. For the purposes of this Warrant, the following terms shall have the meanings indicated: “Black-out Period” shall mean a six month period commencing on the date that Biovest notifies Holder that it is seeking to raise financing pursuant to a public offering or a private offering requiring registration rights to be granted by Biovest to the purchaser. Holder agrees not to sell a under Rule 144 or otherwise any shares of Biovest stock underlying the Warrant during a Black-Out Period. The Black-out Period shall not apply to Holder during any Black-out Period after the date on which Accentia sells any shares of Biovest common stock held of record by Accentia at the begining of said Black-out Period. “Business Day” shall mean any day other than a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by law or executive order to close. “Closing Price” shall mean, with respect to each share of Common Stock for any day, (a) the last reported sale price regular way or, in case no such sale takes place on such day, the average of the closing bid and asked prices regular way, in either case as reported on the principal national securities exchange on which the Common Stock is listed or admitted for trading or (b) if the Common Stock is not listed or admitted for trading on any national securities exchange, the last reported sale price or, in case no such sale takes place on such day, the average of the highest reported bid and the lowest reported asked quotation for the Common Stock, in either case as reported on the OTCBB or a similar service if OTCBB is no longer reporting such information. “Common Stock” means the common stock, no par value, of the Company, and any class of stock resulting from successive changes or reclassification of such Common Stock. “Company” has the meaning ascribed to such term in the first paragraph of this Warrant. “Current Market Price” shall be determined in accordance with Subsection 3(b). “Exercise Date” has the meaning ascribed to such term in Subsection 2(c). “Expiration Date” has the meaning ascribed to such term in the first paragraph of this Warrant. “Issued Warrant Shares” means any shares of Common Stock issued upon exercise of the Warrant. “NASDAQ” shall mean the Automatic Quotation System of the National Association of Securities Dealers, Inc. OTCBB shall mean the Over the Counter Bulletin Board operated by the National Association of Securities Dealers. -------------------------------------------------------------------------------- “Person” shall mean any individual, firm, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity. “Piggy-Back Registration Right” shall mean the right to require Biovest International, Inc. to include the proportionate number of shares of the common stock underlying the Warrant to be covered by a Registration Statement filed by Biovest International, Inc. with the U.S. Securities and Exchange Commission as part of a registration statement covering shares of Biovest International, Inc owned of record by Accentia Biopharmaceuticals, Inc. The phrase the “proportionate number of the shares of common stock underlying the Warrant” shall mean the greater of: (i) 200,000 shares of Biovest common stock or (ii) the number of shares underlying the Warrant on the calculation date divided by the number of shares of Biovest common stock owned by Accentia. To the extent that Accentia has engaged an underwriter to underwrite or place its shares of Biovest (“Accentia Underwriting”) in connection with the registration of shares held by Accentia, Holder shall be permitted to participate in such Accentia Underwriting to the extent permitted by the underwriter and in such instance Holder shall pay all the proportionate share of all costs and expenses related to the underwriting and registration statement and all commissions, discounts and other underwriting or placement costs or expenses related to Holder’s shares. The Piggy-Back Registration Right shall not give the Holder of the Warrant the right to require the shares underlying the Warrant to be covered by any registration statement filed by Biovest International, Inc. covering any shares other than share of common stock owned by Accentia Biopharmaceuticals, Inc. “Purchase Price” has the meaning ascribed to such term in the first paragraph of this Warrant. “Vesting” or “Vested” shall mean the date on which the Holder can purchase shares pursuant to the Warrant. The Warrant shall be Vested as follows: (i) 300,000 shares shall vest on the first day of the third year following the date hereof and 300,000 shares shall vest on each anniversary thereof until all shares are fully vested; (iii) all shares underlying the Warrant shall vest on the date on which Biovest sells all or substantially all of its assets or (iv) the number of shares which Holder is entitled to include in a Piggy-Back Registration Statement under the Piggy-Back Registration Rights granted hereunder shall vest on the effective date of such Piggy–Back Registration Statement. “Warrant” shall mean this Warrant and any subsequent Warrant issued pursuant to the terms of this Warrant. “Warrant Register” has the meaning ascribed to such term in Subsection 6(c).   3 -------------------------------------------------------------------------------- 2. Exercise of Warrant (a) Exercise. Once Vested, this Warrant may be exercised, in whole or in part, at any time or from time to time and ending on the Expiration Date, by surrendering to the Company at its principal office this Warrant, with the form of Election to Purchase Shares (the “Election to Purchase Shares”) attached hereto as Exhibit B and an updated Investment Representation Statement attached hereto as Exhibit A duly executed by the Holder and accompanied by payment of the Purchase Price for the number of shares of Common Stock specified in such form. or by surrendering this Warrant in exchange for the number of shares of Common Stock equal to the product of (x) the number of shares of Common Stock as to which this Warrant is being exercised, multiplied (y) by the Purchase Price, subject to adjustment as provided herein. (b) Partial Exercise. If this Warrant is exercised for less than all of the shares of Common Stock purchasable under this Warrant, the Company shall cancel this Warrant upon surrender hereof and shall execute and deliver to the Holder a new Warrant of like tenor for the balance of the shares of Common Stock purchasable hereunder. This Warrant may be exercised in partial amounts of no less than 50,000 shares. (c) When Exercise Effective. The exercise of this Warrant shall be deemed to have been effective immediately prior to the close of business on the Business Day on which this Warrant is surrendered to and the Purchase Price is received by the Company as provided in this Section 2 (the “Exercise Date”) and the Person in whose name any certificate for shares of Common Stock shall be issuable upon such exercise, as provided in Subsection 2(b), shall be deemed to be the record holder of such shares of Common Stock for all purposes on the Exercise Date. 3. Adjustment of Purchase Price and Number of Shares. The Purchase Price and the number of shares of Common Stock issuable upon exercise of this Warrant shall be adjusted from time to time upon the occurrence of the following events: (a) Dividend, Subdivision, Combination or Reclassification of Common Stock. If the Company shall, at any time or from time to time, (i) declare a dividend on the Common Stock payable in shares of its capital stock (including Common Stock), (ii) subdivide the outstanding Common Stock into a larger number of shares of Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares of its Common Stock, or (iv) issue any shares of its capital stock in a reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then in each such case, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date shall be proportionately adjusted so that the Holder of any Warrant exercised after such date shall be entitled to receive, upon payment of the same aggregate amount as would have been payable before such date, the aggregate number and kind of shares of capital stock which, if such Warrant had been exercised immediately   4 -------------------------------------------------------------------------------- prior to such date, such Holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. Any such adjustment shall become effective immediately after the record date of such dividend or the effective date of such subdivision, combination or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur. If a dividend is declared and such dividend is not paid, the Purchase Price shall again be adjusted to be the Purchase Price in effect immediately prior to such record date (giving effect to all adjustments that otherwise would be required to be made pursuant to this Section 3 from and after such record date). (b) Determination of Current Market Price. The Current Market Price per share of Common Stock on any date shall be deemed to be the Closing Price per share of Common Stock on the day immediately preceding the date of determination. If on any such date the shares of Common Stock are not listed or admitted for trading on any national securities exchange or quoted by OTCBB or a similar service, then the Current Market Price shall be determined in good faith by the Board of Directors of the Company. (c) De Minimis Adjustments. No adjustment in the Purchase Price shall be made if the amount of such adjustment would result in a change in the Purchase Price per share of less than $0.01, but in such case any adjustment that would otherwise be required to be made shall be carried forward and shall be made at the time of and together with the next subsequent adjustment, which together with any adjustment so carried forward, would result in a change in the Purchase Price of $0.01 per share or more. (d) Adjustment of Number of Shares Issuable Upon Exercise. Upon each adjustment of the Purchase Price as a result of the calculations made in Subsection 3(a) this Warrant shall thereafter evidence the right to receive, at the adjusted Purchase Price, that number of shares of Common Stock (calculated to the nearest one-hundredth) obtained by dividing (x) the product of the aggregate number of shares of Common Stock covered by this Warrant immediately prior to such adjustment and the Purchase Price in effect immediately prior to such adjustment of the Purchase Price by (y) the Purchase Price in effect immediately after such adjustment of the Purchase Price. (e) Reorganization, Reclassification, Merger and Sale of Assets. If there occurs any capital reorganization or any reclassification of the Common Stock of the Company, the consolidation or merger of the Company with or into another Person (other than a merger or consolidation of the Company in which the Company is the continuing corporation and which does not result in any reclassification or change of outstanding shares of its Common Stock) or the sale or conveyance of all or substantially all of the assets of the Company to another Person, then the Holder will thereafter be entitled to receive, upon the exercise of this Warrant in accordance with the terms hereof, the same kind and amounts of securities (including shares of stock) or other assets, or both, which were issuable or distributable to the holders of outstanding Common Stock of the Company upon such reorganization, reclassification, consolidation, merger, sale or conveyance, in respect of that number of shares of Common Stock then deliverable upon the exercise of this Warrant if this Warrant had been exercised immediately prior to such reorganization,   5 -------------------------------------------------------------------------------- reclassification, consolidation, merger, sale or conveyance; and, in any such case, appropriate adjustments (as determined in good faith by the Board of Directors of the Company) shall be made to assure that the provisions hereof (including provisions with respect to changes in, and other adjustments of, the Purchase Price) shall thereafter be applicable, as nearly as reasonably may be practicable, in relation to any securities or other assets thereafter deliverable upon exercise of this Warrant. 4. Fractional Shares. Notwithstanding an adjustment pursuant to Section 3(d) in the number of shares of Common Stock covered by this Warrant or any other provision of this Warrant, the Company shall not be required to issue fractions of shares upon exercise of this Warrant or to distribute certificates which evidence fractional shares. In lieu of fractional shares, the Company may make payment to the Holder, at the time of exercise of this Warrant as herein provided, of an amount in cash equal to such fraction multiplied by the Current Market Price of a share of Common Stock on the Exercise Date. 5. Replacement of Warrants. On receipt by the Company of an affidavit of an authorized representative of the Holder stating the circumstances of the loss, theft, destruction or mutilation of this Warrant (and in the case of any such mutilation, on surrender and cancellation of such Warrant), the Company at its expense will promptly execute and deliver, in lieu thereof, a new Warrant of like tenor which shall be exercisable for a like number of shares of Common Stock. If required by the Company, such Holder must provide an indemnity bond or other indemnity sufficient in the judgment of the Company to protect the Company from any loss which it may suffer if a lost, stolen or destroyed Warrant is replaced. 6. Restrictions on Transfer. (a) The Holder acknowledges that the Warrant and the Common Stock issuable upon the exercise of the Warrant has not been registered under the Securities Act and may be transferred only pursuant to an effective registration under the Securities Act or pursuant to an applicable exemption from the registration requirements of the Securities Act. The Holder further acknowledges that the certificates representing the Issued Warrant Shares shall bear the following legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (II) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT, OR (III) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.   6 -------------------------------------------------------------------------------- (b) With respect to a transfer that should occur prior to the time that the Warrant or the Common Stock issuable upon the exercise thereof is registered under the Securities Act or transferable pursuant to Rule 144 of the Act, such Holder shall request an opinion of counsel (which shall be rendered by counsel reasonably acceptable to the Company) that the proposed transfer may be effected without registration or qualification under any Federal or state securities or blue sky law. (c) The Company shall maintain a register (the “Warrant Register”) in its principal office for the purpose of registering the Warrant and any transfer thereof, which register shall reflect and identify, at all times, the ownership of any interest in the Warrant. Upon the issuance of this Warrant, the Company shall record the name of the initial purchaser of this Warrant in the Warrant Register as the first Holder. Upon surrender for registration of transfer or exchange of this Warrant together with a properly executed Form of Assignment attached hereto as Exhibit C at the principal office of the Company, the Company shall, at its expense, execute and deliver one or more new Warrants of like tenor which shall be exercisable for a like aggregate number of shares of Common Stock, registered in the name of the Holder or a transferee or transferees. 7. Piggy-Back Registration Rights. In the event that Biovest International, Inc. plans to file a registration statement with the U. S. Securities and Exchange Commission covering shares of common stock of Biovest (“Registration Statement”), Biovest shall provide written notice to Holder and Holder shall have 30 days to require in writing that all shares of common stock underlying the Warrant, to the extent vested, be covered in the Registration Statement. 8. No Rights or Liability as a Stockholder. This Warrant does not entitle the Holder hereof to any voting rights or other rights as a stockholder of the Company. No provisions hereof, in the absence of affirmative action by the Holder hereof to purchase Common Stock, and no enumeration herein of the rights or privileges of the Holder shall give rise to any liability of such Holder as a stockholder of the Company. 9. Amendment or Waiver. This Warrant and any term hereof may be amended, waived, discharged or terminated only by and with the written consent of the Company and the Holder. 10. Notices. Any notice or other communication (or delivery) required or permitted hereunder shall be made in writing and shall be by registered mail, return receipt requested, telecopier, courier service or personal delivery to the Company at its principal office and to the Holder at its address as it appears in the Warrant Register. All such notices and communications (and deliveries) shall be deemed to have been duly given: when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial overnight courier service; five Business Days after being deposited in the mail, postage prepaid, if mailed; and when receipt is acknowledged, if telecopied.   7 -------------------------------------------------------------------------------- 11. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of New York, without regard to the principles of conflicts of law of such State.   8 -------------------------------------------------------------------------------- 12. Headings. The headings in this Warrant are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.   BIOVEST INTERNATIONAL, INC. By:   /s/ James McNulty Name:   James McNulty Title:   CFO-Secretary   9 --------------------------------------------------------------------------------     Exhibit A to Common Stock Purchase Warrant INVESTMENT REPRESENTATION STATEMENT Shares of Common Stock of BIOVEST INTERNATIONAL, INC. In connection with the purchase through the exercise of a warrant of the above-listed shares of Common Stock (the “Securities”), the undersigned hereby represents to Biovest International, Inc. (the “Company”) as follows: The Securities will be acquired for investment for its own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and the undersigned has no present intention of selling, granting participation in or otherwise distributing the same in violation of the Securities Act of 1933, as amended (the “Act”), but subject, nevertheless, to any requirement of law that the disposition of its property shall at all times be within its control. By executing this Statement, the undersigned further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer, or grant participations to such person or to any third person in violation of the Act, with respect to any Securities issuable upon exercise of the Warrant. The undersigned understands that the Securities issuable upon exercise of the Warrant at the time of issuance may not be registered under the Act, and applicable state securities laws, on the ground that the issuance of such securities is exempt pursuant to Section 4(2) of the Act and/or Regulation D - Rule 506 thereunder and state law exemptions relating to offers and sales not by means of a public offering, and that the Company’s reliance on such exemptions is predicated on the undersigned’s representations set forth herein. The undersigned recognizes that an investment in the Company involves substantial risks, too numerous and diverse to be adequately described, summarized, or listed herein. It is aware of and understands the nature and potential for such risks in an investment of this kind. It acknowledges receipt of or access to all reports filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof (or such shorter period as the Company was required by law to file such reports) (the foregoing materials, being collectively referred to herein as the “SEC Reports”). The undersigned has determined that the entering into this transaction is consistent with its investment objectives and that it is able to bear the substantial economic risks of losing its investment in the Company. Among other factors and based on present circumstances it has taken into consideration, it can afford to hold the Securities for an indefinite period and can afford a complete loss of its investment It understands that no governmental authority has passed on or made any recommendation or endorsement of the Securities. The undersigned understands that (A) the Securities have not been registered under the Securities Act or applicable state securities laws, and may be offered and sold under an exemption from registration provided by such laws and the rules and regulations thereunder; (B) it must bear the economic risks of the Securities, because the Securities cannot be resold unless subsequently registered under applicable securities laws or unless an exemption from such registration is available; and (C) the exemption provided by Rule 144 under the Securities Act may not be available because of the conditions and limitations of that rule, in the absence of the availability of that rule any disposition by it of any or all of the Securities may require compliance with some other exemption under the   10 -------------------------------------------------------------------------------- Securities Act, and the Company is not under any obligation and does not plan to take any action in furtherance of making that rule or any other exemption so available. It has been informed that legends referring to the restrictions indicated herein will be placed on documents evidencing or representing the Shares. No representations or promises have been made concerning the marketability or value of the Securities. The representations and warranties made by the undersigned herein are made by the undersigned with the intent that they be relied upon by the Company in determining the compliance of issuance of the shares with exemptions from federal or state securities laws. The following information is needed to determine whether issuance of the Securities by the Company is legally permitted. The undersigned understands that this questionnaire is to enable the Company to discharge its responsibilities under federal and state securities laws and that the Company will rely on the information contained herein. Accordingly, the undersigned represents and warrants to the Company that: (a) the information contained herein is complete and accurate and may be relied on by the Company; and The undersigned is an “Accredited Investor” within the meaning of Rule 501 of Regulation D of the Act, as presently in effect, because the undersigned meets one or more of the following criteria (please check where appropriate): ¨ (i) a natural person with individual net worth, or joint net worth with his/her spouse which presently exceeds $1,000,000; ¨ (ii) a natural person with individual income in excess of $200,000 in each of the two most recent years or joint income with his/her spouse in excess of $300,000 in each of those years and who has a reasonable expectation of reaching the same income level in the current year; The undersigned agrees that in no event will it make a disposition of the Securities unless and until the Securities are registered under the Act or sold pursuant to Rule 144, or (i) it shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition, and (ii) it shall have furnished the Company with an opinion of counsel satisfactory to the Company and Company’s counsel to the effect that (A) appropriate action necessary for compliance with the Act and any applicable state securities laws has been taken or an exemption from the registration requirements of the Act and such laws is available, and (B) the proposed transfer will not violate any of said laws. The undersigned acknowledges that the Securities must be held indefinitely unless subsequently registered under the Act or an exemption from such registration is available. The undersigned is aware of the provisions of Rule 144 promulgated under the Act which permit limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale occurring not less than one year after a party has purchased and paid for the security to be sold, the sale being through a “broker’s   11 -------------------------------------------------------------------------------- transaction” or in transactions directly with a “market makers” (as provided by Rule 144(f)) and the number of shares being sold during any three-month period not exceeding specified limitations.   Dated:                              (Typed or Printed Name)   By:         (Signature)         (Title)   12 --------------------------------------------------------------------------------     Exhibit B to Common Stock Purchase Warrant [FORM OF] ELECTION TO PURCHASE SHARES The undersigned hereby irrevocably elects to exercise the Warrant to purchase              shares of Common Stock, no par value (“Common Stock”), of BIOVEST INTERNATIONAL, INC. (the “Company”) and hereby makes payment of $             therefor. The undersigned hereby requests that certificates for such shares be issued and delivered as follows:   ISSUE TO:                                                                                                                                                                                                          (NAME)                                                                                                                                                                                                                               (ADDRESS, INCLUDING ZIP CODE)                                                                                                                                                                                                                               (SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)   DELIVER TO:                                                                                                                                                                                                    (NAME)                                                                                                                                                                                                                               (ADDRESS, INCLUDING ZIP CODE) If the number of shares of Common Stock purchased hereby is less than the number of shares of Common Stock covered by the Warrant, the undersigned requests that a new Warrant representing the number of shares of Common Stock not purchased be issued and delivered as follows:   ISSUE TO:                                                                                                                                                                                                          (NAME OF HOLDER)                                                                                                                                                                                                                               (ADDRESS, INCLUDING ZIP CODE)   DELIVER TO:                                                                                                                                                                                                    (NAME OF HOLDER)                                                                                                                                                                                                                               (ADDRESS, INCLUDING ZIP CODE)   Dated:                        [NAME OF HOLDER1]   By:       Name:     Title:   -------------------------------------------------------------------------------- 1 Name of Holder must conform in all respects to name of Holder as specified on the face of the Warrant.   13 --------------------------------------------------------------------------------       Exhibit C to Common Stock Purchase Warrant [FORM OF] ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the Assignee(s) named below all of the rights of the undersigned to purchase Common Stock, no par value (“Common Stock”), of BIOVEST INTERNATIONAL, INC. represented by the Warrant, with respect to the number of shares of Common Stock set forth below:   Name of Assignee    Address    No. of Shares   and does hereby irrevocably constitute and appoint                              Attorney to make such transfer on the books of BIOVEST INTERNATIONAL, INC. maintained for that purpose, with full power of substitution in the premises.   Dated:                        [NAME OF HOLDER1]   By:       Name:     Title:   -------------------------------------------------------------------------------- 1 Name of Holder must conform in all respects to name of Holder as specified on the face of the Warrant.   14

  AMALGAMATED TECHNOLOGIES, INC. 2005 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK PLAN 1.   DEFINITIONS.       Unless otherwise specified or unless the context otherwise requires, the following terms, as used in this Amalgamated Technologies, Inc., 2005 Employee, Director and Consultant Stock Plan, have the following meanings: Administrator means the Board of Directors, unless it has delegated power to act on its behalf to the Committee, in which case the Administrator means the Committee. Affiliate means a corporation that, for purposes of Section 424 of the Code, is a parent or subsidiary of the Company, direct or indirect. Agreement means an agreement between the Company and a Participant delivered pursuant to the Plan, in such form as the Administrator shall approve. Board of Directors means the Board of Directors of the Company. Code means the United States Internal Revenue Code of 1986, as amended. Committee means the committee of the Board of Directors to which the Board of Directors has delegated power to act under or pursuant to the provisions of the Plan. Common Stock means shares of the Company’s common stock, $0.0001 par value per share. Company means Amalgamated Technologies, Inc., a Delaware corporation. Disability or Disabled means permanent and total disability as defined in Section 22(e)(3) of the Code. Employee means any employee of the Company or of an Affiliate (including, without limitation, an employee who is also serving as an officer or director of the Company or of an Affiliate), designated by the Administrator to be eligible to be granted one or more Stock Rights under the Plan. Fair Market Value of a Share of Common Stock means:   --------------------------------------------------------------------------------   (1) If the Common Stock is listed on a national securities exchange or traded in the over-the-counter market and sales prices are regularly reported for the Common Stock, the closing or last price of the Common Stock on the composite tape or other comparable reporting system for the trading day immediately preceding the applicable date; (2) If the Common Stock is not traded on a national securities exchange but is traded on the over-the-counter market, if sales prices are not regularly reported for the Common Stock for the trading day referred to in clause (1), and if bid and asked prices for the Common Stock are regularly reported, the mean between the bid and the asked price for the Common Stock at the close of trading in the over-the-counter market for the trading day on which Common Stock was traded immediately preceding the applicable date; and (3) If the Common Stock is neither listed on a national securities exchange nor traded in the over-the-counter market, such value as the Administrator, in good faith, shall determine. ISO means an option meant to qualify as an incentive stock option under Section 422 of the Code. Non-Qualified Option means an option that is not intended to qualify as an ISO. Option means an ISO or Non-Qualified Option granted under the Plan. Participant means an Employee, director or consultant of the Company or an Affiliate to whom one or more Stock Rights are granted under the Plan. As used herein, “Participant” shall include “Participant’s Survivors” where the context requires. Plan means this Amalgamated Technologies, Inc. 2005 Employee, Director and Consultant Stock Plan. Shares means shares of the Common Stock as to which Stock Rights have been or may be granted under the Plan or any shares of capital stock into which the Shares are changed or for which they are exchanged within the provisions of Paragraph 3 of the Plan. The Shares issued under the Plan may be authorized and unissued shares or shares held by the Company in its treasury, or both. Stock-Based Award means a grant by the Company under the Plan of an equity award or an equity based award that is not an Option or a Stock Grant. Stock Grant means a grant by the Company of Shares under the Plan. 2 --------------------------------------------------------------------------------   Stock Right means a right to Shares or the value of Shares of the Company granted pursuant to the Plan — an ISO, a Non-Qualified Option, a Stock Grant or a Stock-Based Award. Survivor means a deceased Participant’s legal representatives and/or any person or persons who acquired the Participant’s rights to a Stock Right by will or by the laws of descent and distribution. 2.   PURPOSES OF THE PLAN.      The Plan is intended to encourage ownership of Shares by Employees and directors of and certain consultants to the Company in order to attract and retain such people, to induce them to work for the benefit of the Company or of an Affiliate and to provide additional incentive for them to promote the success of the Company or of an Affiliate. The Plan provides for the granting of ISOs, Non-Qualified Options, Stock Grants and Stock-Based Awards. 3.   SHARES SUBJECT TO THE PLAN.      (a) The number of Shares which may be issued from time to time pursuant to this Plan shall be 10,000,000, or the equivalent of such number of Shares after the Administrator, in its sole discretion, has interpreted the effect of any stock split, stock dividend, combination, recapitalization or similar transaction in accordance with Paragraph 24 of the Plan.      (b) If an Option ceases to be “outstanding”, in whole or in part (other than by exercise), or if the Company shall reacquire (at not more than its original issuance price) any Shares issued pursuant to a Stock Grant or Stock-Based Award, or if any Stock Right expires or is forfeited, cancelled, or otherwise terminated or results in any Shares not being issued, the unissued Shares which were subject to such Stock Right shall again be available for issuance from time to time pursuant to this Plan. 4.   ADMINISTRATION OF THE PLAN.      The Administrator of the Plan will be the Board of Directors, except to the extent the Board of Directors delegates its authority to the Committee, in which case the Committee shall be the Administrator. Subject to the provisions of the Plan, the Administrator is authorized to:   a.   Interpret the provisions of the Plan and all Stock Rights and to make all rules and determinations that it deems necessary or advisable for the administration of the Plan;     b.   Determine which Employees, directors and consultants shall be granted Stock Rights; 3 --------------------------------------------------------------------------------     c.   Determine the number of Shares for which a Stock Right or Stock Rights shall be granted;     d.   Specify the terms and conditions upon which a Stock Right or Stock Rights may be granted;     e.   Make changes to any outstanding Stock Right, including, without limitation, to reduce or increase the exercise price or purchase price, accelerate the vesting schedule or extend the expiration date, provided that no such change shall impair the rights of a Participant under any grant previously made without such Participant’s consent;     f.   Buy out for a payment in cash or Shares, a Stock Right previously granted and/or cancel any such Stock Right and grant in substitution therefor other Stock Rights, covering the same or a different number of Shares and having an exercise price or purchase price per share which may be lower or higher than the exercise price or purchase price of the cancelled Stock Right, based on such terms and conditions as the Administrator shall establish and the Participant shall accept; and     g.   Adopt any sub-plans applicable to residents of any specified jurisdiction as it deems necessary or appropriate in order to comply with or take advantage of any tax or other laws applicable to the Company or to Plan Participants or to otherwise facilitate the administration of the Plan, which sub-plans may include additional restrictions or conditions applicable to Stock Rights or Shares issuable pursuant to a Stock Right. provided, however, that all such interpretations, rules, determinations, terms and conditions shall be made and prescribed in the context of preserving the tax status under Section 422 of the Code of those Options which are designated as ISOs. Subject to the foregoing, the interpretation and construction by the Administrator of any provisions of the Plan or of any Stock Right granted under it shall be final, unless otherwise determined by the Board of Directors, if the Administrator is the Committee. In addition, if the Administrator is the Committee, the Board of Directors may take any action under the Plan that would otherwise be the responsibility of the Committee.      To the extent permitted under applicable law, the Board of Directors or the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any portion of its responsibilities and powers to any other person selected by it. The Board of Directors or the Committee may revoke any such allocation or delegation at any time. 4 --------------------------------------------------------------------------------   5.   ELIGIBILITY FOR PARTICIPATION.      The Administrator will, in its sole discretion, name the Participants in the Plan, provided, however, that each Participant must be an Employee, director or consultant of the Company or of an Affiliate at the time a Stock Right is granted. Notwithstanding the foregoing, the Administrator may authorize the grant of a Stock Right to a person not then an Employee, director or consultant of the Company or of an Affiliate; provided, however, that the actual grant of such Stock Right shall be conditioned upon such person becoming eligible to become a Participant at or prior to the time of the execution of the Agreement evidencing such Stock Right. ISOs may be granted only to Employees. Non-Qualified Options, Stock Grants and Stock-Based Awards may be granted to any Employee, director or consultant of the Company or an Affiliate. The granting of any Stock Right to any individual shall neither entitle that individual to, nor disqualify him or her from, participation in any other grant of Stock Rights. 6.   TERMS AND CONDITIONS OF OPTIONS.      Each Option shall be set forth in writing in an Option Agreement, duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant. The Administrator may provide that Options be granted subject to such terms and conditions, consistent with the terms and conditions specifically required under this Plan, as the Administrator may deem appropriate including, without limitation, subsequent approval by the shareholders of the Company of this Plan or any amendments thereto. The Option Agreements shall be subject to at least the following terms and conditions:   A.   Non-Qualified Options: Each Option intended to be a Non-Qualified Option shall be subject to the terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company, subject to the following minimum standards for any such Non-Qualified Option:   a.   Option Price: Each Option Agreement shall state the option price (per share) of the Shares covered by each Option, which option price shall be determined by the Administrator but shall not be less than the Fair Market Value per share of Common Stock.     b.   Number of Shares: Each Option Agreement shall state the number of Shares to which it pertains.     c.   Option Periods: Each Option Agreement shall state the date or dates on which it first is exercisable and the date after which it may no longer be exercised, and may provide that the Option rights accrue or become exercisable in installments over a period of months or years, or upon the occurrence of certain conditions or the attainment of stated goals or events. 5 --------------------------------------------------------------------------------     d.   Option Conditions: Exercise of any Option may be conditioned upon the Participant’s execution of a Share purchase agreement in form satisfactory to the Administrator providing for certain protections for the Company and its other shareholders, including requirements that:   i.   The Participant’s or the Participant’s Survivors’ right to sell or transfer the Shares may be restricted; and     ii.   The Participant or the Participant’s Survivors may be required to execute letters of investment intent and must also acknowledge that the Shares will bear legends noting any applicable restrictions.   B.   ISOs: Each Option intended to be an ISO shall be issued only to an Employee and be subject to the following terms and conditions, with such additional restrictions or changes as the Administrator determines are appropriate but not in conflict with Section 422 of the Code and relevant regulations and rulings of the Internal Revenue Service:   a.   Minimum standards: The ISO shall meet the minimum standards required of Non-Qualified Options, as described in Paragraph 6(A) above.     b.   Option Price: Immediately before the ISO is granted, if the Participant owns, directly or by reason of the applicable attribution rules in Section 424(d) of the Code:   i.   10% or less of the total combined voting power of all classes of stock of the Company or an Affiliate, the Option price per share of the Shares covered by each ISO shall not be less than 100% of the Fair Market Value per share of the Shares on the date of the grant of the Option; or     ii.   More than 10% of the total combined voting power of all classes of stock of the Company or an Affiliate, the Option price per share of the Shares covered by each ISO shall not be less than 110% of the Fair Market Value on the date of grant.   c.   Term of Option: For Participants who own:   i.   10% or less of the total combined voting power of all classes of stock of the Company or an Affiliate, each ISO shall terminate not more than ten years from the date of the grant or at such earlier time as the Option Agreement may provide; or     ii.   More than 10% of the total combined voting power of all classes of stock of the Company or an Affiliate, each ISO shall terminate not 6 --------------------------------------------------------------------------------         more than five years from the date of the grant or at such earlier time as the Option Agreement may provide.   d.   Limitation on Yearly Exercise: The Option Agreements shall restrict the amount of ISOs which may become exercisable in any calendar year (under this or any other ISO plan of the Company or an Affiliate) so that the aggregate Fair Market Value (determined at the time each ISO is granted) of the stock with respect to which ISOs are exercisable for the first time by the Participant in any calendar year does not exceed $100,000. 7.   TERMS AND CONDITIONS OF STOCK GRANTS.      Each offer of a Stock Grant to a Participant shall state the date prior to which the Stock Grant must be accepted by the Participant, and the principal terms of each Stock Grant shall be set forth in an Agreement, duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant. The Agreement shall be in a form approved by the Administrator and shall contain terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company, subject to the following minimum standards:   (a)   Each Agreement shall state the purchase price (per share), if any, of the Shares covered by each Stock Grant, which purchase price shall be determined by the Administrator but shall not be less than the minimum consideration required by the Delaware General Corporation Law on the date of the grant of the Stock Grant;     (b)   Each Agreement shall state the number of Shares to which the Stock Grant pertains; and     (c)   Each Agreement shall include the terms of any right of the Company to restrict or reacquire the Shares subject to the Stock Grant, including the time and events upon which such rights shall accrue and the purchase price therefor, if any. 8.   TERMS AND CONDITIONS OF OTHER STOCK-BASED AWARDS.      The Board shall have the right to grant other Stock-Based Awards based upon the Common Stock having such terms and conditions as the Board may determine, including, without limitation, the grant of Shares based upon certain conditions, the grant of securities convertible into Shares and the grant of stock appreciation rights, phantom stock awards or stock units. The principal terms of each Stock-Based Award shall be set forth in an Agreement, duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant. The Agreement shall be in a form approved by the Administrator and shall 7 --------------------------------------------------------------------------------   contain terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company. 9.   EXERCISE OF OPTIONS AND ISSUE OF SHARES.      An Option (or any part or installment thereof) shall be exercised by giving written notice to the Company or its designee, together with provision for payment of the full purchase price in accordance with this Paragraph for the Shares as to which the Option is being exercised, and upon compliance with any other condition(s) set forth in the Option Agreement. Such notice shall be signed by the person exercising the Option, shall state the number of Shares with respect to which the Option is being exercised and shall contain any representation required by the Plan or the Option Agreement. Payment of the purchase price for the Shares as to which such Option is being exercised shall be made (a) in United States dollars in cash or by check, or (b) at the discretion of the Administrator, through delivery of shares of Common Stock having a Fair Market Value equal as of the date of the exercise to the cash exercise price of the Option, or (c) at the discretion of the Administrator, by having the Company retain from the shares otherwise issuable upon exercise of the Option, a number of shares having a Fair Market Value equal as of the date of exercise to the exercise price of the Option, or (d) at the discretion of the Administrator, in accordance with a cashless exercise program established with a securities brokerage firm, and approved by the Administrator, or (e) at the discretion of the Administrator, by any combination of (a), (b), (c), and (d) above or (f) at the discretion of the Administrator, payment of such other lawful consideration as the Administrator may determine. Notwithstanding the foregoing, the Administrator shall accept only such payment on exercise of an ISO as is permitted by Section 422 of the Code.      The Company shall then reasonably promptly deliver the Shares as to which such Option was exercised to the Participant (or to the Participant’s Survivors, as the case may be). In determining what constitutes “reasonably promptly,” it is expressly understood that the issuance and delivery of the Shares may be delayed by the Company in order to comply with any law or regulation (including, without limitation, state securities or “blue sky” laws) which requires the Company to take any action with respect to the Shares prior to their issuance. The Shares shall, upon delivery, be fully paid, non-assessable Shares.      The Administrator shall have the right to accelerate the date of exercise of any installment of any Option; provided that the Administrator shall not accelerate the exercise date of any installment of any Option granted to an Employee as an ISO (and not previously converted into a Non-Qualified Option pursuant to Paragraph 27) if such acceleration would violate the annual vesting limitation contained in Section 422(d) of the Code, as described in Paragraph 6.B.d.      The Administrator may, in its discretion, amend any term or condition of an outstanding Option provided (i) such term or condition as amended is permitted by the Plan, (ii) any such amendment shall be made only with the consent of the Participant to whom the Option was granted, or in the event of the death of the Participant, the Participant’s Survivors, if the amendment is adverse to the Participant, and (iii) any such amendment of any ISO shall be made 8 --------------------------------------------------------------------------------   only after the Administrator determines whether such amendment would constitute a “modification” of any Option which is an ISO (as that term is defined in Section 424(h) of the Code) or would cause any adverse tax consequences for the holder of such ISO. 10.   ACCEPTANCE OF STOCK GRANTS AND STOCK-BASED AWARDS AND ISSUE OF SHARES.      A Stock Grant or Stock-Based Award (or any part or installment thereof) shall be accepted by executing the applicable Agreement and delivering it to the Company or its designee, together with provision for payment of the full purchase price, if any, in accordance with this Paragraph for the Shares as to which such Stock Grant or Stock-Based Award is being accepted, and upon compliance with any other conditions set forth in the applicable Agreement. Payment of the purchase price for the Shares as to which such Stock Grant or Stock-Based Award is being accepted shall be made (a) in United States dollars in cash or by check, or (b) at the discretion of the Administrator, through delivery of shares of Common Stock having a Fair Market Value equal as of the date of acceptance of the Stock Grant or Stock Based-Award to the purchase price of the Stock Grant or Stock-Based Award, or (c) at the discretion of the Administrator, by any combination of (a) and (b) above; or (d) at the discretion of the Administrator, payment of such other lawful consideration as the Administrator may determine.      The Company shall then, if required by the applicable Agreement, reasonably promptly deliver the Shares as to which such Stock Grant or Stock-Based Award was accepted to the Participant (or to the Participant’s Survivors, as the case may be), subject to any escrow provision set forth in the applicable Agreement. In determining what constitutes “reasonably promptly,” it is expressly understood that the issuance and delivery of the Shares may be delayed by the Company in order to comply with any law or regulation (including, without limitation, state securities or “blue sky” laws) which requires the Company to take any action with respect to the Shares prior to their issuance.      The Administrator may, in its discretion, amend any term or condition of an outstanding Stock Grant, Stock-Based Award or applicable Agreement provided (i) such term or condition as amended is permitted by the Plan, and (ii) any such amendment shall be made only with the consent of the Participant to whom the Stock Grant or Stock-Based Award was made, if the amendment is adverse to the Participant. 11.   RIGHTS AS A SHAREHOLDER.      No Participant to whom a Stock Right has been granted shall have rights as a shareholder with respect to any Shares covered by such Stock Right, except after due exercise of the Option or acceptance of the Stock Grant or as set forth in any Agreement, and tender of the full purchase price, if any, for the Shares being purchased pursuant to such exercise or acceptance and registration of the Shares in the Company’s share register in the name of the Participant. 9 --------------------------------------------------------------------------------   12.   ASSIGNABILITY AND TRANSFERABILITY OF STOCK RIGHTS.      By its terms, a Stock Right granted to a Participant shall not be transferable by the Participant other than (i) by will or by the laws of descent and distribution, or (ii) as approved by the Administrator in its discretion and set forth in the applicable Agreement. Notwithstanding the foregoing, an ISO transferred except in compliance with clause (i) above shall no longer qualify as an ISO. The designation of a beneficiary of a Stock Right by a Participant, with the prior approval of the Administrator and in such form as the Administrator shall prescribe, shall not be deemed a transfer prohibited by this Paragraph. Except as provided above, a Stock Right shall only be exercisable or may only be accepted, during the Participant’s lifetime, by such Participant (or by his or her legal representative) and shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, assignment, pledge, hypothecation or other disposition of any Stock Right or of any rights granted thereunder contrary to the provisions of this Plan, or the levy of any attachment or similar process upon a Stock Right, shall be null and void. 13.   EFFECT ON OPTIONS OF TERMINATION OF SERVICE OTHER THAN “FOR CAUSE” OR DEATH OR DISABILITY.      Except as otherwise provided in a Participant’s Option Agreement, in the event of a termination of service (whether as an employee, director or consultant) with the Company or an Affiliate before the Participant has exercised an Option, the following rules apply:   a.   A Participant who ceases to be an employee, director or consultant of the Company or of an Affiliate (for any reason other than termination “for cause”, Disability, or death for which events there are special rules in Paragraphs 14, 15, and 16, respectively), may exercise any Option granted to him or her to the extent that the Option is exercisable on the date of such termination of service, but only within such term as the Administrator has designated in a Participant’s Option Agreement.     b.   Except as provided in Subparagraph (c) below, or Paragraph 15 or 16, in no event may an Option intended to be an ISO, be exercised later than three months after the Participant’s termination of employment.     c.   The provisions of this Paragraph, and not the provisions of Paragraph 15 or 16, shall apply to a Participant who subsequently becomes Disabled or dies after the termination of employment, director status or consultancy; provided, however, in the case of a Participant’s Disability or death within three months after the termination of employment, director status or consultancy, the Participant or the Participant’s Survivors may exercise the Option within one year after the date of the Participant’s termination of service, but in no event after the date of expiration of the term of the Option. 10 --------------------------------------------------------------------------------     d.   Notwithstanding anything herein to the contrary, if subsequent to a Participant’s termination of employment, termination of director status or termination of consultancy, but prior to the exercise of an Option, the Board of Directors determines that, either prior or subsequent to the Participant’s termination, the Participant engaged in conduct which would constitute “cause”, then such Participant shall forthwith cease to have any right to exercise any Option.     e.   A Participant to whom an Option has been granted under the Plan who is absent from the Company or an Affiliate because of temporary disability (any disability other than a Disability as defined in Paragraph 1 hereof), or who is on leave of absence for any purpose, shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated such Participant’s employment, director status or consultancy with the Company or with an Affiliate, except as the Administrator may otherwise expressly provide.     f.   Except as required by law or as set forth in a Participant’s Option Agreement, Options granted under the Plan shall not be affected by any change of a Participant’s status within or among the Company and any Affiliates, so long as the Participant continues to be an employee, director or consultant of the Company or any Affiliate. 14.   EFFECT ON OPTIONS OF TERMINATION OF SERVICE “FOR CAUSE”.      Except as otherwise provided in a Participant’s Option Agreement, the following rules apply if the Participant’s service (whether as an employee, director or consultant) with the Company or an Affiliate is terminated “for cause” prior to the time that all his or her outstanding Options have been exercised:   a.   All outstanding and unexercised Options as of the time the Participant is notified his or her service is terminated “for cause” will immediately be forfeited.     b.   For purposes of this Plan, “cause” shall include (and is not limited to) dishonesty with respect to the Company or any Affiliate, insubordination, substantial malfeasance or non-feasance of duty, unauthorized disclosure of confidential information, breach by the Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or similar agreement between the Participant and the Company, and conduct substantially prejudicial to the business of the Company or any Affiliate. The determination of the Administrator as to the existence of “cause” will be conclusive on the Participant and the Company.     c.   “Cause” is not limited to events which have occurred prior to a Participant’s termination of service, nor is it necessary that the Administrator’s finding of “cause” occur prior to termination. If the Administrator determines, subsequent to a Participant’s termination of service but prior to the exercise of an Option, that either prior or subsequent to the Participant’s termination the Participant engaged 11 --------------------------------------------------------------------------------         in conduct which would constitute “cause”, then the right to exercise any Option is forfeited.   d.   Any provision in an agreement between the Participant and the Company or an Affiliate, which contains a conflicting definition of “cause” for termination and which is in effect at the time of such termination, shall supersede the definition in this Plan with respect to that Participant. 15.   EFFECT ON OPTIONS OF TERMINATION OF SERVICE FOR DISABILITY.       Except as otherwise provided in a Participant’s Option Agreement:   a.   A Participant who ceases to be an employee, director or consultant of the Company or of an Affiliate by reason of Disability may exercise any Option granted to such Participant:      (i) To the extent that the Option has become exercisable but has not been exercised on the date of Disability; and      (ii) In the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion through the date of Disability of any additional vesting rights that would have accrued on the next vesting date had the Participant not become Disabled. The proration shall be based upon the number of days accrued in the current vesting period prior to the date of Disability.   b.   A Disabled Participant may exercise such rights only within the period ending one year after the date of the Participant’s termination of employment, directorship or consultancy, as the case may be, notwithstanding that the Participant might have been able to exercise the Option as to some or all of the Shares on a later date if the Participant had not become Disabled and had continued to be an employee, director or consultant or, if earlier, within the originally prescribed term of the Option.     c.   The Administrator shall make the determination both of whether Disability has occurred and the date of its occurrence (unless a procedure for such determination is set forth in another agreement between the Company and such Participant, in which case such procedure shall be used for such determination). If requested, the Participant shall be examined by a physician selected or approved by the Administrator, the cost of which examination shall be paid for by the Company. 16.   EFFECT ON OPTIONS OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.       Except as otherwise provided in a Participant’s Option Agreement: 12 --------------------------------------------------------------------------------     a.   In the event of the death of a Participant while the Participant is an employee, director or consultant of the Company or of an Affiliate, such Option may be exercised by the Participant’s Survivors:      (i) To the extent that the Option has become exercisable but has not been exercised on the date of death; and      (ii) In the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion through the date of death of any additional vesting rights that would have accrued on the next vesting date had the Participant not died. The proration shall be based upon the number of days accrued in the current vesting period prior to the Participant’s date of death.   b.   If the Participant’s Survivors wish to exercise the Option, they must take all necessary steps to exercise the Option within one year after the date of death of such Participant, notwithstanding that the decedent might have been able to exercise the Option as to some or all of the Shares on a later date if he or she had not died and had continued to be an employee, director or consultant or, if earlier, within the originally prescribed term of the Option. 17.   EFFECT OF TERMINATION OF SERVICE ON UNACCEPTED STOCK GRANTS.      In the event of a termination of service (whether as an employee, director or consultant) with the Company or an Affiliate for any reason before the Participant has accepted a Stock Grant, such offer shall terminate.      For purposes of this Paragraph 17 and Paragraph 18 below, a Participant to whom a Stock Grant has been offered and accepted under the Plan who is absent from work with the Company or with an Affiliate because of temporary disability (any disability other than a Disability as defined in Paragraph 1 hereof), or who is on leave of absence for any purpose, shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated such Participant’s employment, director status or consultancy with the Company or with an Affiliate, except as the Administrator may otherwise expressly provide.      In addition, for purposes of this Paragraph 17 and Paragraph 18 below, any change of employment or other service within or among the Company and any Affiliates shall not be treated as a termination of employment, director status or consultancy so long as the Participant continues to be an employee, director or consultant of the Company or any Affiliate. 13 --------------------------------------------------------------------------------   18.   EFFECT ON STOCK GRANTS OF TERMINATION OF SERVICE OTHER THAN “FOR CAUSE” OR DEATH OR DISABILITY.      Except as otherwise provided in a Participant’s Stock Grant Agreement, in the event of a termination of service (whether as an employee, director or consultant), other than termination “for cause,” Disability, or death for which events there are special rules in Paragraphs 19, 20, and 21, respectively, before all Company rights of repurchase shall have lapsed, then the Company shall have the right to repurchase that number of Shares subject to a Stock Grant as to which the Company’s repurchase rights have not lapsed. 19.   EFFECT ON STOCK GRANTS OF TERMINATION OF SERVICE “FOR CAUSE”.      Except as otherwise provided in a Participant’s Stock Grant Agreement, the following rules apply if the Participant’s service (whether as an employee, director or consultant) with the Company or an Affiliate is terminated “for cause”:   a.   All Shares subject to any Stock Grant shall be immediately subject to repurchase by the Company at the purchase price, if any, thereof.     b.   For purposes of this Plan, “cause” shall include (and is not limited to) dishonesty with respect to the employer, insubordination, substantial malfeasance or non-feasance of duty, unauthorized disclosure of confidential information, breach by the Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or similar agreement between the Participant and the Company, and conduct substantially prejudicial to the business of the Company or any Affiliate. The determination of the Administrator as to the existence of “cause” will be conclusive on the Participant and the Company.     c.   “Cause” is not limited to events that have occurred prior to a Participant’s termination of service, nor is it necessary that the Administrator’s finding of “cause” occur prior to termination. If the Administrator determines, subsequent to a Participant’s termination of service, that either prior or subsequent to the Participant’s termination the Participant engaged in conduct which would constitute “cause,” then the Company’s right to repurchase all of such Participant’s Shares shall apply.     d.   Any provision in an agreement between the Participant and the Company or an Affiliate, which contains a conflicting definition of “cause” for termination and which is in effect at the time of such termination, shall supersede the definition in this Plan with respect to that Participant. 14 --------------------------------------------------------------------------------   20.   EFFECT ON STOCK GRANTS OF TERMINATION OF SERVICE FOR DISABILITY.      Except as otherwise provided in a Participant’s Stock Grant Agreement, the following rules apply if a Participant ceases to be an employee, director or consultant of the Company or of an Affiliate by reason of Disability: to the extent the Company’s rights of repurchase have not lapsed on the date of Disability, they shall be exercisable; provided, however, that in the event such rights of repurchase lapse periodically, such rights shall lapse to the extent of a pro rata portion of the Shares subject to such Stock Grant through the date of Disability as would have lapsed had the Participant not become Disabled. The proration shall be based upon the number of days accrued prior to the date of Disability.      The Administrator shall make the determination both of whether Disability has occurred and the date of its occurrence (unless a procedure for such determination is set forth in another agreement between the Company and such Participant, in which case such procedure shall be used for such determination). If requested, the Participant shall be examined by a physician selected or approved by the Administrator, the cost of which examination shall be paid for by the Company. 21.   EFFECT ON STOCK GRANTS OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.      Except as otherwise provided in a Participant’s Stock Grant Agreement, the following rules apply in the event of the death of a Participant while the Participant is an employee, director or consultant of the Company or of an Affiliate: to the extent the Company’s rights of repurchase have not lapsed on the date of death, they shall be exercisable; provided, however, that in the event such rights of repurchase lapse periodically, such rights shall lapse to the extent of a pro rata portion of the Shares subject to such Stock Grant through the date of death as would have lapsed had the Participant not died. The proration shall be based upon the number of days accrued prior to the Participant’s death. 22.   PURCHASE FOR INVESTMENT.      Unless the offering and sale of the Shares to be issued upon the particular exercise or acceptance of a Stock Right shall have been effectively registered under the Securities Act of 1933, as now in force or hereafter amended (the “1933 Act”), the Company shall be under no obligation to issue the Shares covered by such exercise unless and until the following conditions have been fulfilled:   a.   The person(s) who exercise(s) or accept(s) such Stock Right shall warrant to the Company, prior to the receipt of such Shares, that such person(s) are acquiring such Shares for their own respective accounts, for investment, and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person(s) acquiring such Shares shall be bound by the provisions of the 15 --------------------------------------------------------------------------------         following legend which shall be endorsed upon the certificate(s) evidencing their Shares issued pursuant to such exercise or such grant: “The shares represented by this certificate have been taken for investment and they may not be sold or otherwise transferred by any person, including a pledgee, unless (1) either (a) a Registration Statement with respect to such             shares shall be effective under the Securities Act of 1933, as amended, or (b) the Company shall have received an opinion of counsel satisfactory to it that an exemption from registration under such Act is then available, and (2) there shall have been compliance with all applicable state securities laws.”   b.   At the discretion of the Administrator, the Company shall have received an opinion of its counsel that the Shares may be issued upon such particular exercise or acceptance in compliance with the 1933 Act without registration thereunder. 23.   DISSOLUTION OR LIQUIDATION OF THE COMPANY.      Upon the dissolution or liquidation of the Company, all Options granted under this Plan which as of such date shall not have been exercised and all Stock Grants and Stock-Based Awards which have not been accepted will terminate and become null and void; provided, however, that if the rights of a Participant or a Participant’s Survivors have not otherwise terminated and expired, the Participant or the Participant’s Survivors will have the right immediately prior to such dissolution or liquidation to exercise or accept any Stock Right to the extent that the Stock Right is exercisable or subject to acceptance as of the date immediately prior to such dissolution or liquidation. Upon the dissolution or liquidation of the Company, any outstanding Stock-Based Awards shall immediately terminate unless otherwise determined by the Administrator or specifically provided in the applicable Agreement. 24.   ADJUSTMENTS.      Upon the occurrence of any of the following events, a Participant’s rights with respect to any Stock Right granted to him or her hereunder shall be adjusted as hereinafter provided, unless otherwise specifically provided in a Participant’s Agreement:      A. Stock Dividends and Stock Splits. If (i) the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, or (ii) additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Common Stock, the number of shares of Common Stock deliverable upon the exercise of an Option or acceptance of a Stock Grant may be appropriately increased or decreased proportionately, and appropriate adjustments may be made including, in the purchase price per share, to reflect such events. 16 --------------------------------------------------------------------------------        B. Corporate Transactions. If the Company is to be consolidated with or acquired by another entity in a merger, sale of all or substantially all of the Company’s assets other than a transaction to merely change the state of incorporation (a “Corporate Transaction”), the Administrator or the board of directors of any entity assuming the obligations of the Company hereunder (the “Successor Board”), shall, as to outstanding Options, either (i) make appropriate provision for the continuation of such Options by substituting on an equitable basis for the Shares then subject to such Options either the consideration payable with respect to the outstanding shares of Common Stock in connection with the Corporate Transaction or securities of any successor or acquiring entity; or (ii) upon written notice to the Participants, provide that all Options must be exercised (either (a) to the extent then exercisable or, (b) at the discretion of the Administrator, all Options being made fully exercisable for purposes of this Subparagraph), within a specified number of days of the date of such notice, at the end of which period the Options shall terminate; or (iii) terminate all Options in exchange for a cash payment equal to the excess of the Fair Market Value of the Shares subject to such Options (either (a) to the extent then exercisable or, (b) at the discretion of the Administrator, all Options being made fully exercisable for purposes of this Subparagraph) over the exercise price thereof.      With respect to outstanding Stock Grants, the Administrator or the Successor Board, shall either (i) make appropriate provisions for the continuation of such Stock Grants on the same terms and conditions by substituting on an equitable basis for the Shares then subject to such Stock Grants either the consideration payable with respect to the outstanding Shares of Common Stock in connection with the Corporate Transaction or securities of any successor or acquiring entity; or (ii) terminate all Stock Grants in exchange for a cash payment equal to the excess of the Fair Market Value of the Shares subject to such Stock Grants over the purchase price thereof, if any. In addition, in the event of a Corporate Transaction, the Administrator may waive any or all Company repurchase rights with respect to outstanding Stock Grants.      C. Recapitalization or Reorganization. In the event of a recapitalization or reorganization of the Company other than a Corporate Transaction pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, a Participant upon exercising an Option or accepting a Stock Grant after the recapitalization or reorganization shall be entitled to receive for the purchase price paid upon such exercise or acceptance of the number of replacement securities which would have been received if such Option had been exercised or Stock Grant accepted prior to such recapitalization or reorganization.      D. Adjustments to Stock-Based Awards. Upon the happening of any of the events described in Subparagraphs A, B or C above, any outstanding Stock-Based Award shall be appropriately adjusted to reflect the events described in such Subparagraphs. The Administrator or the Successor Board shall determine the specific adjustments to be made under this Paragraph 24, including, but not limited to the effect if any, of a Change in Control and, subject to Paragraph 4, its determination shall be conclusive.      E. Modification of ISOs. Notwithstanding the foregoing, any adjustments made pursuant to Subparagraph A, B or C above with respect to ISOs shall be made only after the Administrator determines whether such adjustments would constitute a “modification” of such 17 --------------------------------------------------------------------------------   ISOs (as that term is defined in Section 424(h) of the Code) or would cause any adverse tax consequences for the holders of such ISOs. If the Administrator determines that such adjustments made with respect to ISOs would constitute a modification of such ISOs, it may refrain from making such adjustments, unless the holder of an ISO specifically requests in writing that such adjustment be made and such writing indicates that the holder has full knowledge of the consequences of such “modification” on his or her income tax treatment with respect to the ISO. 25.   ISSUANCES OF SECURITIES.      Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to Stock Rights. Except as expressly provided herein, no adjustments shall be made for dividends paid in cash or in property (including without limitation, securities) of the Company prior to any issuance of Shares pursuant to a Stock Right. 26.   FRACTIONAL SHARES.      No fractional shares shall be issued under the Plan and the person exercising a Stock Right shall receive from the Company cash in lieu of such fractional shares equal to the Fair Market Value thereof. 27.   CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.      The Administrator, at the written request of any Participant, may in its discretion take such actions as may be necessary to convert such Participant’s ISOs (or any portions thereof) that have not been exercised on the date of conversion into Non-Qualified Options at any time prior to the expiration of such ISOs, regardless of whether the Participant is an employee of the Company or an Affiliate at the time of such conversion. At the time of such conversion, the Administrator (with the consent of the Participant) may impose such conditions on the exercise of the resulting Non-Qualified Options as the Administrator in its discretion may determine, provided that such conditions shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to give any Participant the right to have such Participant’s ISOs converted into Non-Qualified Options, and no such conversion shall occur until and unless the Administrator takes appropriate action. The Administrator, with the consent of the Participant, may also terminate any portion of any ISO that has not been exercised at the time of such conversion. 28.   WITHHOLDING. 18 --------------------------------------------------------------------------------        In the event that any federal, state, or local income taxes, employment taxes, Federal Insurance Contributions Act (“F.I.C.A.”) withholdings or other amounts are required by applicable law or governmental regulation to be withheld from the Participant’s salary, wages or other remuneration in connection with the exercise or acceptance of a Stock Right or in connection with a Disqualifying Disposition (as defined in Paragraph 29) or upon the lapsing of any right of repurchase, the Company may withhold from the Participant’s compensation, if any, or may require that the Participant advance in cash to the Company, or to any Affiliate of the Company which employs or employed the Participant, the statutory minimum amount of such withholdings unless a different withholding arrangement, including the use of shares of the Company’s Common Stock or a promissory note, is authorized by the Administrator (and permitted by law). For purposes hereof, the fair market value of the shares withheld for purposes of payroll withholding shall be determined in the manner provided in Paragraph 1 above, as of the most recent practicable date prior to the date of exercise. If the fair market value of the shares withheld is less than the amount of payroll withholdings required, the Participant may be required to advance the difference in cash to the Company or the Affiliate employer. The Administrator in its discretion may condition the exercise of an Option for less than the then Fair Market Value on the Participant’s payment of such additional withholding. 29.   NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.      Each Employee who receives an ISO must agree to notify the Company in writing immediately after the Employee makes a Disqualifying Disposition of any shares acquired pursuant to the exercise of an ISO. A Disqualifying Disposition is defined in Section 424(c) of the Code and includes any disposition (including any sale or gift) of such shares before the later of (a) two years after the date the Employee was granted the ISO, or (b) one year after the date the Employee acquired Shares by exercising the ISO, except as otherwise provided in Section 424(c) of the Code. If the Employee has died before such stock is sold, these holding period requirements do not apply and no Disqualifying Disposition can occur thereafter. 30.   TERMINATION OF THE PLAN.      The Plan will terminate on December 21, 2015, the date which is ten years from the earlier of the date of its adoption by the Board of Directors and the date of its approval by the shareholders of the Company. The Plan may be terminated at an earlier date by vote of the shareholders or the Board of Directors of the Company; provided, however, that any such earlier termination shall not affect any Agreements executed prior to the effective date of such termination. 31.   AMENDMENT OF THE PLAN AND AGREEMENTS.      The Plan may be amended by the shareholders of the Company. The Plan may also be amended by the Administrator, including, without limitation, to the extent necessary to qualify any or all outstanding Stock Rights granted under the Plan or Stock Rights to be granted under 19 --------------------------------------------------------------------------------   the Plan for favorable federal income tax treatment (including deferral of taxation upon exercise) as may be afforded incentive stock options under Section 422 of the Code, and to the extent necessary to qualify the shares issuable upon exercise or acceptance of any outstanding Stock Rights granted, or Stock Rights to be granted, under the Plan for listing on any national securities exchange or quotation in any national automated quotation system of securities dealers. Any amendment approved by the Administrator which the Administrator determines is of a scope that requires shareholder approval shall be subject to obtaining such shareholder approval. Any modification or amendment of the Plan shall not, without the consent of a Participant, adversely affect his or her rights under a Stock Right previously granted to him or her. With the consent of the Participant affected, the Administrator may amend outstanding Agreements in a manner which may be adverse to the Participant but which is not inconsistent with the Plan. In the discretion of the Administrator, outstanding Agreements may be amended by the Administrator in a manner which is not adverse to the Participant. 32.   EMPLOYMENT OR OTHER RELATIONSHIP.      Nothing in this Plan or any Agreement shall be deemed to prevent the Company or an Affiliate from terminating the employment, consultancy or director status of a Participant, nor to prevent a Participant from terminating his or her own employment, consultancy or director status or to give any Participant a right to be retained in employment or other service by the Company or any Affiliate for any period of time. 33.   GOVERNING LAW.      This Plan shall be construed and enforced in accordance with the law of the State of Delaware. TRA 2042393v1 20

EMPLOYMENT AGREEMENT THIS AGREEMENT, made and entered into as of this 15th day of May, 2006, by and between The Kansas City Southern Railway Company, a Missouri corporation (“Railway”), Kansas City Southern, a Delaware corporation (“KCS”) and Daniel W. Avramovich, an individual (“Executive”). WHEREAS, Executive has been offered employment by Railway, and Railway, KCS and Executive desire for Railway to continue to employ Executive on the terms and conditions set forth in this Agreement and to provide an incentive to Executive to remain in the employ of Railway hereafter, particularly in the event of any change in control (as herein defined) of KCS, or Railway , thereby establishing and preserving continuity of management of Railway. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, it is agreed by and between Railway, KCS and Executive as follows: 1. Employment. Railway hereby employs Executive as its Executive Vice President Sales & Marketing to serve at the pleasure of the Board of Directors of Railway (the “Railway Board”) and to have such duties, powers and responsibilities as may be prescribed or delegated from time to time by the President or other officer to whom Executive reports, subject to the powers vested in the Railway Board and in the stockholders of Railway. Executive shall faithfully perform his duties under this Agreement to the best of his ability and shall devote substantially all of his working time and efforts to the business and affairs of Railway and its affiliates. 2. Compensation. (a) Base Compensation. Railway shall pay Executive as compensation for his services hereunder an annual base salary at the rate approved by the Railway’s Compensation Committee. Such rate shall not be reduced except as agreed by the parties or except as part of a general salary reduction program imposed by Railway for non-union employees and applicable to all officers of Railway, not related to a Change of Control. 3. Benefits. During the period of his employment hereunder, Railway shall provide Executive with coverage under such benefit plans and programs as are made generally available to similarly situated employees of Railway, provided (a) Railway shall have no obligation with respect to any plan or program if Executive is not eligible for coverage thereunder, and (b) Executive acknowledges that stock options and other stock and equity participation awards are granted in the discretion of the Railway Board or the Compensation Committee of the Railway Board and that Executive has no right to receive stock options or other equity participation awards or any particular number or level of stock options or other awards. In determining contributions, coverage and benefits under any disability insurance policy and under any cash compensation-based plan provided to Executive by Railway, it shall be assumed that the value of Executive’s annual compensation, pursuant to this Agreement, is 175% of Executive’s annual base salary. Executive acknowledges that all rights and benefits under benefit plans and programs shall be governed by the official text of each plan or program and not by any summary or description thereof or any provision of this Agreement (except to the extent that this Agreement expressly modifies such benefit plans or programs) and that neither KCS, nor Railway is under any obligation to continue in effect or to fund any such plan or program, except as provided in Paragraph 7 hereof. 4. Term and Termination. The “Term” of this Agreement shall begin on the date first written above and continue until terminated as provided in (a) through (d) of this Section 4. (a) Termination by Executive. Executive may terminate this Agreement and his employment hereunder by providing at least thirty (30) days advance written notice to Railway, except that in the event of any material breach of this Agreement by Railway, Executive may terminate this Agreement and his employment hereunder immediately upon notice to Railway. (b) Death or Disability. This Agreement and Executive’s employment hereunder shall terminate automatically on the death or disability of Executive, except to the extent employment is continued under Railway’s disability plan. For purposes of this Agreement, Executive shall be deemed to be disabled if he qualifies for disability benefits under Railway’s long-term disability plan. (c) Termination by Railway For Cause. Railway may terminate this Agreement and Executive’s employment “for cause” immediately upon notice to Executive. For purposes of this Agreement (except for Paragraph 7), termination “for cause” shall mean termination based upon any one or more of the following: (i) Any material breach of this Agreement by Executive; (ii) Executive’s dishonesty involving Railway, KCS, or any subsidiary of Railway or KCS; (iii) Gross negligence or willful misconduct in the performance of Executive’s duties as determined in good faith by the Railway Board; (iv) Executive’s failure to substantially perform his duties and responsibilities hereunder, including without limitation Executive’s willful failure to follow reasonable instructions of the President or other officer to whom Executive reports; (v) Executive’s breach of an express employment policy of Railway or its affiliates; (vi) Executive’s fraud or criminal activity; (vii) Embezzlement or misappropriation by Executive; or (viii) Executive’s breach of his fiduciary duty to Railway, or KCS, or their affiliates. (d) Termination by Railway Other Than For Cause. (i) Railway may terminate this Agreement and Executive’s employment other than for cause immediately upon notice to Executive, and in such event, Railway shall provide severance benefits to Executive in accordance with Paragraph 4(d)(ii) below. Executive acknowledges and agrees that such severance benefits constitute the exclusive remedy of Executive upon termination of employment other than for cause. Notwithstanding any other provision of this Agreement, as a condition to receiving such severance benefits, Executive shall execute a full release of claims in favor of Railway and KCS and their affiliates in the form Attached hereto as Appendix A. (ii) Unless the provisions of Paragraph 7 of this Agreement are applicable, if Executive’s employment is terminated under Paragraph 4(d)(i), Railway shall continue, for a period of one (1) year following such termination, (a) to pay to Executive as severance pay a monthly amount equal to one-twelfth (1/12th) of the annual base salary referenced in Paragraph 2(a) above, at the rate in effect immediately prior to termination, and, (b) to reimburse Executive for the cost (including state and federal income taxes payable with respect to this reimbursement) of continuing the health insurance coverage provided pursuant to this Agreement or obtaining health insurance coverage comparable to the health insurance provided pursuant to this Agreement, and obtaining coverage comparable to the life insurance provided pursuant to this Agreement, unless Executive is provided comparable health or life insurance coverage in connection with other employment. The foregoing obligations of Railway shall continue until the end of such one (1) year period notwithstanding the death or disability of Executive during said period (except, in the event of death, the obligation to reimburse Executive for the cost of life insurance shall not continue). In the year in which termination of employment occurs, Executive shall be eligible to receive benefits under the Railway Incentive Compensation Plan and any Executive Plan in which Executive participates (the “Executive Plan”) (if such Plans then are in existence and Executive was entitled to participate immediately prior to termination) in accordance with the provisions of such plans then applicable, and severance pay received in such year shall be taken into account for the purpose of determining benefits, if any, under the Railway Incentive Compensation Plan but not under the Executive Plan. After the year in which termination occurs, Executive shall not be entitled to accrue or receive benefits under the Railway Incentive Compensation Plan or the Executive Plan with respect to the severance pay provided herein, notwithstanding that benefits under such plan there are still generally available to executive employees of Railway. After termination of employment, Executive shall not be entitled to accrue or receive benefits under any other employee benefit plan or program, except that Executive shall be entitled to participate in the KCS Section 401(k) and Profit Sharing Plan and the KCS Employee Stock Ownership Plan (if Railway employees then still participate in such plans) in the year of termination of employment only if Executive meets all requirements of such plans for participation in such year. 5. Confidentiality and Non-Disclosure. (a) Executive understands and agrees that he will be given Confidential Information (as defined below) during his employment with Railway relating to the business of Railway, KCS and/or their affiliates, in exchange for his agreement herein. Executive hereby expressly agrees to maintain in strictest confidence and not to use in any way (including without limitation in any future business relationship of Executive), publish, disclose or authorize anyone else to use, publish or disclose in any way, any Confidential Information relating in any manner to the business or affairs of Railway, KCS and/or their affiliates. Executive agrees further not to remove or retain any figures, calculations, letters, documents, lists, papers, or copies thereof, which embody Confidential Information of Railway, KCS and/or their affiliates, and to return, prior to Executive’s termination of employment for any reason, any such information in Executive’s possession. If Executive discovers, or comes into possession of, any such information after his termination he shall promptly return it to Railway. Executive acknowledges that the provisions of this paragraph are consistent with Railway’s policies and procedures to which Executive, as an employee of Railway, is bound. (b) For purposes of this Agreement, “Confidential Information” includes, but is not limited to, information in the possession of, prepared by, obtained by, compiled by, or that is used by Railway, KCS or their affiliates or customers, and: (i) is proprietary to, about, or created by Railway, KCS or their affiliates or customers; (ii) gives Railway, KCS or their affiliates or customers some competitive business advantage, the opportunity of obtaining such advantage, or disclosure of which might be detrimental to the interest of Railway, KCS or their affiliates or customers; and (iii) is not typically disclosed by Railway, KCS or their affiliates or customers, or known by persons who are not employed by Railway, KCS or their affiliates or customers. Without in any way limiting the foregoing and by way of example, Confidential Information shall include: information pertaining to Railway’s, KCS’s or their affiliates’ business operations such as financial and operational information and data, operational plans and strategies, business and marketing strategies, pricing information, plans for various products and services, and acquisition and divestiture planning. (c). In the event of any breach of this Paragraph 5 by Executive, Railway shall be entitled to terminate any and all remaining severance benefits under Paragraph 4(d)(ii) and shall be entitled to pursue such other legal and equitable remedies as may be available. Executive acknowledges, understands and agrees that Railway, KCS and/or their affiliates will suffer immediate and irreparable harm if Executive fails to comply with any of his obligations under Paragraph 5 of this Agreement, and that monetary damages alone will be inadequate to compensate Railway, KCS or their affiliates for such breach. Accordingly, Executive agrees that Railway, KCS and/or their affiliates shall, in addition to any other remedies available to it at law or in equity, be entitled to temporary, preliminary, and permanent injunctive relief and specific performance to enforce the terms of Paragraph 5 without the necessity of proving inadequacy of legal remedies or irreparable harm or posting bond. 6. Duties Upon Termination; Survival. (a) Duties. Upon termination of this Agreement by Railway or Executive for any reason, Executive shall immediately sign such written resignations from all positions as an officer, director or member of any committee or board of Railway and all direct and indirect subsidiaries and affiliates of Railway as may be requested by Railway and shall sign such other documents and papers relating to Executive’s employment, benefits and benefit plans as Railway may reasonably request. (b) Survival. The provisions of Paragraphs 5, 6(a) and 7 of this Agreement shall survive any termination of this Agreement by Railway or Executive, and the provisions of Paragraph 4(d)(ii) shall survive any termination of this Agreement by Railway under Paragraph 4(d)(i). 7. Continuation of Employment Upon Change in Control. (a) Continuation of Employment. Subject to the terms and conditions of this Paragraph 7, in the event of a Change in Control (as defined in Paragraph 7(d)) at any time during the term of this Agreement, Executive agrees to remain in the employ of Railway for a period of three years (the “Three Year Period”) from the date of such Change in Control (the “Control Change Date”). Railway agrees to continue to employ Executive for the Three Year Period. During the Three Year Period, (i) the Executive’s position (including offices, titles, reporting requirements and responsibilities), authority and duties shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 12 month period immediately before the Control Change Date and (ii) the Executive’s services shall be performed at the location where Executive was employed immediately before the Control Change Date or at any other location less than 40 miles from such former location. During the Three Year Period, Railway shall continue to pay to Executive an annual base salary on the same basis and at the same intervals as in effect prior to the Control Change Date at a rate not less than 12 times the highest monthly base salary paid or payable to the Executive by Railway in respect of the 12-month period immediately before the Control Change Date. (b) Benefits. During the Three-Year Period, Executive shall be entitled to participate, on the basis of his executive position, in each of the following KCS, or Railway plans (together, the “Specified Benefits”) in existence, and in accordance with the terms thereof, at the Control Change Date: (i) any benefit plan, and trust fund associated therewith, related to: (A) life, health, dental, disability, accidental death and dismemberment insurance or accrued but unpaid vacation time; (B) profit sharing, thrift or deferred savings (including deferred compensation, such as under Sec. 401(k) plans); (C) retirement or pension benefits; (D) ERISA excess benefits and similar plans and (E) tax favored employee stock ownership (such as under ESOP, and Employee Stock Purchase programs); and (ii) any other benefit plans hereafter made generally available to executives of Executive’s level or to the employees of Railway generally. In addition, Railway and KCS shall use their best efforts to cause all outstanding options held by Executive under any stock option plan of KCS or its affiliates to become immediately exercisable on the Control Change Date and to the extent that such options are not vested and are subsequently forfeited, the Executive shall receive a lump-sum cash payment within 5 days after the options are forfeited equal to the difference between the fair market value of the shares of stock subject to the non-vested, forfeited options determined as of the date such options are forfeited and the exercise price for such options. During the Three-Year Period Executive shall be entitled to participate, on the basis of his executive position, in any incentive compensation plan of KCS, or Railway in accordance with the terms thereof at the Control Change Date; provided that if under KCS, or Railway programs or Executive’s Employment Agreement in existence immediately prior to the Control Change Date, there are written limitations on participation for a designated time period in any incentive compensation plan, such limitations shall continue after the Control Change Date to the extent so provided for prior to the Control Change Date. If the amount of contributions or benefits with respect to the Specified Benefits or any incentive compensation is determined on a discretionary basis under the terms of the Specified Benefits or any incentive compensation plan immediately prior to the Control Change Date, the amount of such contributions or benefits during the Three Year Period for each of the Specified Benefits shall not be less than the average annual contributions or benefits for each Specified Benefit for the three plan years ending prior to the Control Change Date and, in the case of any incentive compensation plan, the amount of the incentive compensation during the Three Year Period shall not be less than 75% of the maximum that could have been paid to the Executive under the terms of the incentive compensation plan. (c) Payment. With respect to any plan or agreement under which Executive would be entitled at the Control Change Date to receive Specified Benefits or incentive compensation as a general obligation of Railway which has not been separately funded (including specifically, but not limited to, those referred to under Paragraph 7(b)(i)(D) above), Executive shall receive within five (5) days after such date full payment in cash of all amounts to which he is then entitled thereunder. (d) Change in Control. For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred if: (i) for any reason at any time less than seventy-five percent (75%) of the members of the KCS Board shall be individuals who fall into any of the following categories: (A) individuals who were members of the KCS Board on the date of the Agreement; or (B) individuals whose election, or nomination for election by KCS’s stockholders, was approved by a vote of at least seventy-five percent (75%) of the members of the KCS Board then still in office who were members of the KCS Board on the date of the Agreement; or (C) individuals whose election, or nomination for election, by KCS’s stockholders, was approved by a vote of at least seventy-five percent (75%) of the members of the KCS Board then still in office who were elected in the manner described in (A) or (B) above, or (ii) any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”)) other than KCS shall have become after September 18, 1997, according to a public announcement or filing, the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Railway or KCS representing thirty percent (30%) (or, with respect to Paragraph 7(c) hereof, 40%) or more (calculated in accordance with Rule 13d-3) of the combined voting power of Railway’s or KCS’s then outstanding voting securities; or (iii) the stockholders of Railway or KCS shall have approved a merger, consolidation or dissolution of Railway or KCS or a sale, lease, exchange or disposition of all or substantially all of Railway’s or KCS’s assets, if persons who were the beneficial owners of the combined voting power of Railway’s or KCS’s voting securities immediately before any such merger, consolidation, dissolution, sale, lease, exchange or disposition do not immediately thereafter, beneficially own, directly or indirectly, in substantially the same proportions, more than 60% of the combined voting power of any corporation or other entity resulting from any such transaction. (e) Termination After Control Change Date. Notwithstanding any other provision of this Paragraph 7, at any time after the Control Change Date, Railway may terminate the employment of Executive (the “Termination”), but unless such Termination is for Cause as defined in subparagraph (g) or for disability, within five (5) days of the Termination Railway shall pay to Executive his full base salary through the Termination, to the extent not theretofore paid, plus a lump sum amount (the “Special Severance Payment”) equal to the product of (i) 175% of his annual base salary specified in Paragraph 7(a) multiplied by (ii) Three; and Specified Benefits (excluding any incentive compensation) to which Executive was entitled immediately prior to Termination shall continue until the end of the 3-year period (“Benefits Period”) beginning on the date of Termination. If any plan pursuant to which Specified Benefits are provided immediately prior to Termination would not permit continued participation by Executive after Termination, then Railway shall pay to Executive within five (5) days after Termination a lump sum payment equal to the amount of Specified Benefits Executive would have received under such plan if Executive had been fully vested in the average annual contributions or benefits in effect for the three plan years ending prior to the Control Change Date (regardless of any limitations based on the earnings or performance of KCS, or Railway) and a continuing participant in such plan to the end of the Benefits Period. Following the end of the Benefits Period, Railway shall continue to provide to the Executive and the Executive’s family the following benefits (“Post-Period Benefits”): (1) prior to the Executive’s attainment of age sixty (60), health, prescription and dental benefits equivalent to those then applicable to active peer executives of Railway) and their families, as the same may be modified from time to time, and (2) following the Executive’s attainment of age sixty (60) (and without regard to the Executive’s period of service with Railway) health and prescription benefits equivalent to those then applicable to retired peer executives of Railway and their families immediately prior to the Change of Control. The cost to the Executive of such Post-Period Benefits shall not exceed the cost of such benefits to active or retired (as applicable) peer executives immediately prior to the Change of Control. Notwithstanding the preceding two sentences of this Paragraph 7(e), if the Executive is covered under any health, prescription or dental plan provided by a subsequent employer, then the corresponding type of plan coverage (i.e., health, prescription or dental), required to be provided as Post-Period Benefits under this Paragraph 7(e) shall cease. The Executive’s rights under this Paragraph 7(e) shall be in addition to, and not in lieu of, any post-termination continuation coverage or conversion rights the Executive may have pursuant to applicable law, including without limitation continuation coverage required by Section 4980 of the Code. Nothing in this Paragraph 7(e) shall be deemed to limit in any manner the reserved right of Railway, in its sole and absolute discretion, to at any time amend, modify or terminate health, prescription or dental benefits for active or retired employees generally. (f) Resignation After Control Change Date. In the event of a Change in Control as defined in Paragraph 7(d), thereafter, upon good reason (as defined below), Executive may, at any time during the three-year period following the Change in Control, in his sole discretion, on not less than thirty (30) days’ written notice (the “Notice of Resignation”) to the Secretary of Railway and effective at the end of such notice period, resign his employment with Railway (the “Resignation”). Within five (5) days of such a Resignation, Railway shall pay to Executive his full base salary through the effective date of such Resignation, to the extent not theretofore paid, plus a lump sum amount equal to the Special Severance Payment (computed as provided in the first sentence of Paragraph 7(e), except that for purposes of such computation all references to “Termination” shall be deemed to be references to “Resignation”). Upon Resignation of Executive, Specified Benefits to which Executive was entitled immediately prior to Resignation shall continue on the same terms and conditions as provided in Paragraph 7(e) in the case of Termination (including equivalent payments provided for therein), and Post-Period Benefits shall be provided on the same terms and conditions as provided in Paragraph 7(e) in the case of Termination. For purposes of this Agreement, “good reason” means any of the following: (i) the assignment of the Executive of any duties inconsistent in any respect with the Executive’s position (including offices, titles, reporting requirements or responsibilities), authority or duties as contemplated by Section 7(a)(i), or any other action by Railway which results in a diminution or other material adverse change in such position, authority or duties; (ii) any failure by Railway to comply with any of the provisions of Paragraph 7; (iii) Railway’s requiring the Executive to be based at any office or location other than the location described in Section 7(a)(ii); (iv) any other material adverse change to the terms and conditions of the Executive’s employment; or (v) any purported termination by Railway of the Executive’s employment other than as expressly permitted by this Agreement (any such purported termination shall not be effective for any other purpose under this Agreement). A passage of time prior to delivery of the Notice of Resignation or a failure by the Executive to include in the Notice of Resignation any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Executive under this Agreement or preclude the Executive from asserting such fact or circumstance in enforcing rights under this Agreement. (g) Termination for Cause After Control Change Date. Notwithstanding any other provision of this Paragraph 7, at any time after the Control Change Date, Executive may be terminated by Railway “for cause.” Cause means commission by the Executive of any felony or willful breach of duty by the Executive in the course of the Executive’s employment; except that Cause shall not mean: (i) bad judgment or negligence; (ii) any act or omission believed by the Executive in good faith to have been in or not opposed to the interest of Railway (without intent of the Executive to gain, directly or indirectly, a profit to which the Executive was not legally entitled); (iii) any act or omission with respect to which a determination could properly have been made by the Railway Board that the Executive met the applicable standard of conduct for indemnification or reimbursement under Railway’s by-laws, any applicable indemnification agreement, or applicable law, in each case in effect at the time of such act or omission; or (iv) any act or omission with respect to which Notice of Termination of the Executive is given, more than 12 months after the earliest date on which any member of the Railway Board, not a party to the act or omission, knew or should have known of such act or omission. Any Termination of the Executive’s employment by Railway for Cause shall be communicated to the Executive by Notice of Termination. (h) Gross-up for Certain Taxes. If it is determined (by the reasonable computation of Railway’s independent auditors, which determinations shall be certified to by such auditors and set forth in a written certificate (“Certificate”) delivered to the Executive) that any benefit received or deemed received by the Executive from Railway, or KCS pursuant to this Agreement or otherwise (collectively, the “Payments”) is or will become subject to any excise tax under Section 4999 of the Code or any similar tax payable under any United States federal, state, local or other law (such excise tax and all such similar taxes collectively, “Excise Taxes”), then Railway shall, immediately after such determination, pay the Executive an amount (the “Gross-up Payment”) equal to the product of: (i) the amount of such Excise Taxes; multiplied by (ii) the Gross-up Multiple (as defined in Paragraph 7(k)). The Gross-up Payment is intended to compensate the Executive for the Excise Taxes and any federal, state, local or other income or excise taxes or other taxes payable by the Executive with respect to the Gross-up Payment. Railway shall cause the preparation and delivery to the Executive of a Certificate upon request at any time. Railway shall, in addition to complying with this Paragraph 7(h), cause all determinations and certifications under Paragraphs 7(h)-(o) to be made as soon as reasonably possible and in adequate time to permit the Executive to prepare and file the Executive’s individual tax returns on a timely basis. (i) Determination by the Executive. (i) If Railway shall fail to: (A) deliver a Certificate to the Executive or (B) pay to the Executive the amount of the Gross-up Payment, if any, within 14 days after receipt from the Executive of a written request for a Certificate, or if at any time following receipt of a Certificate the Executive disputes the amount of the Gross-up Payment set forth therein, the Executive may elect to demand the payment of the amount which the Executive, in accordance with an opinion of counsel to the Executive (“Executive Counsel Opinion”), determines to be the Gross-up Payment. Any such demand by the Executive shall be made by delivery to Railway of a written notice which specifies the Gross-up Payment determined by the Executive and an Executive Counsel Opinion regarding such Gross-up Payment (such written notice and opinion collectively, the “Executive’s Determination”). Within 14 days after delivery of the Executive’s Determination to Railway, Railway shall either: (A) pay the Executive the Gross-up Payment set forth in the Executive’s Determination (less the portion of such amount, if any, previously paid to the Executive by Railway) or (B) deliver to the Executive a Certificate specifying the Gross-up Payment determined by Railway’s independent auditors, together with an opinion of Railway’s counsel (“Railway Counsel Opinion”), and pay the Executive the Gross-up Payment specified in such Certificate. If for any reason Railway fails to comply with clause (B) of the preceding sentence, the Gross-up Payment specified in the Executive’s Determination shall be controlling for all purposes. (ii) If the Executive does not make a request for, and Railway does not deliver to the Executive, a Certificate, Railway shall, for purposes of Paragraph 7(j), be deemed to have determined that no Gross-up Payment is due. (j) Additional Gross-up Amounts. If, despite the initial conclusion of Railway and/or the Executive that certain Payments are neither subject to Excise Taxes nor to be counted in determining whether other Payments are subject to Excise Taxes (any such item, a “Non-Parachute Item”), it is later determined (pursuant to subsequently-enacted provisions of the Code, final regulations or published rulings of the IRS, final IRS determination or judgment of a court of competent jurisdiction or Railway’s independent auditors) that any of the Non-Parachute Items are subject to Excise Taxes, or are to be counted in determining whether any Payments are subject to Excise Taxes, with the result that the amount of Excise Taxes payable by the Executive is greater than the amount determined by Railway or the Executive pursuant to Paragraph 7(h) or Paragraph 7(i), as applicable, then Railway shall pay the Executive an amount (which shall also be deemed a Gross-up Payment) equal to the product of: (i) the sum of (A) such additional Excise Taxes and (B) any interest, fines, penalties, expenses or other costs incurred by the Executive as a result of having taken a position in accordance with a determination made pursuant to Paragraph 7(h); multiplied by (ii) the Gross-up Multiple. (k) Gross-up Multiple. The Gross-up Multiple shall equal a fraction, the numerator of which is one (1.0), and the denominator of which is one (1.0) minus the sum, expressed as a decimal fraction, of the rates of all federal, state, local and other income and other taxes and any Excise Taxes applicable to the Gross-up Payment; provided that, if such sum exceeds 0.8, it shall be deemed equal to 0.8 for purposes of this computation. (If different rates of tax are applicable to various portions of a Gross-up Payment, the weighted average of such rates shall be used.) (l) Opinion of Counsel. “Executive Counsel Opinion” means a legal opinion of nationally recognized executive compensation counsel that there is a reasonable basis to support a conclusion that the Gross-up Payment determined by the Executive has been calculated in accord with this Paragraph 7 and applicable law. “Company Counsel Opinion” means a legal opinion of nationally recognized executive compensation counsel that (i) there is a reasonable basis to support a conclusion that the Gross-up Payment set forth in the Certificate of Railway’s independent auditors has been calculated in accord with this Paragraph 7 and applicable law, and (ii) there is no reasonable basis for the calculation of the Gross-up Payment determined by the Executive. (m) Amount Increased or Contested. The Executive shall notify Railway in writing of any claim by the IRS or other taxing authority that, if successful, would require the payment by Railway of a Gross-up Payment. Such notice shall include the nature of such claim and the date on which such claim is due to be paid. The Executive shall give such notice as soon as practicable, but no later than 10 business days, after the Executive first obtains actual knowledge of such claim; provided, however, that any failure to give or delay in giving such notice shall affect Railway’s obligations under this Paragraph 7 only if and to the extent that such failure results in actual prejudice to Railway. The Executive shall not pay such claim less than 30 days after the Executive gives such notice to Railway (or, if sooner, the date on which payment of such claim is due). If Railway notifies the Executive in writing before the expiration of such period that it desires to contest such claim, the Executive shall: (i) give Railway any information that it reasonably requests relating to such claim; (ii) take such action in connection with contesting such claim as Railway reasonably requests in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by Railway; (iii) cooperate with Railway in good faith to contest such claim; and (iv) permit Railway to participate in any proceedings relating to such claim; provided, however, that Railway shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax, including related interest and penalties, imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing, Railway shall control all proceedings in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner. The Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Railway shall determine; provided, however, that if Railway directs the Executive to pay such claim and sue for a refund, Railway shall advance the amount of such payment to the Executive, on are interest-free basis and shall indemnify the Executive, on an after-tax basis, for any Excise Tax or income tax, including related interest or penalties, imposed with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. The Railway’s control of the contest shall be limited to issues with respect to which a Gross-up Payment would be payable. The Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the IRS or other taxing authority. (n) Refunds. If, after the receipt by the Executive of an amount advanced by Railway pursuant to Paragraph 7(m), the Executive receives any refund with respect to such claim, the Executive shall (subject to Railway’s complying with the requirements of Paragraph 7(m)) promptly pay Railway the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by Railway pursuant to Paragraph 7(m), a determination is made that the Executive shall not be entitled to a full refund with respect to such claim and Railway does not notify the Executive in writing of its intent to contest such determination before the expiration of 30 days after such determination, then the applicable part of 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. Any contest of a denial of refund shall be controlled by Paragraph 7(m). (o) Expenses. If any dispute should arise under this Agreement after the Control Change Date involving an effort by Executive to protect, enforce or secure rights or benefits claimed by Executive hereunder, Railway shall pay (promptly upon demand by Executive accompanied by reasonable evidence of incurrence) all reasonable expenses (including attorneys’ fees) incurred by Executive in connection with such dispute, without regard to whether Executive prevails in such dispute except that Executive shall repay Railway any amounts so received if a court having jurisdiction shall make a final, nonappealable determination that Executive acted frivolously or in bad faith by such dispute. To assure Executive that adequate funds will be made available to discharge Railway’s obligations set forth in the preceding sentence, Railway has established a trust and upon the occurrence of a Change in Control shall promptly deliver to the trustee of such trust to hold in accordance with the terms and conditions thereof that sum which the Railway Board shall have determined is reasonably sufficient for such purpose. (p) Prevailing Provisions. On and after the Control Change Date, the provisions of this Paragraph 7 shall control and take precedence over any other provisions of this Agreement which are in conflict with or address the same or a similar subject matter as the provisions of this Paragraph 7. 8. Mitigation and Other Employment. After a termination of Executive’s employment pursuant to Paragraph 4(d)(i) or a Change in Control as defined in Paragraph 7(d), Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, and except as otherwise specifically provided in Paragraph 4(d)(ii) with respect to health and life insurance and in Paragraph 7(e) with respect to health, prescription and dental benefits, no such other employment, if obtained, or compensation or benefits payable in connection therewith shall reduce any amounts or benefits to which Executive is entitled hereunder. Such amounts or benefits payable to Executive under this Agreement shall not be treated as damages but as severance compensation to which Executive is entitled because Executive’s employment has been terminated. 9. KCS Not An Obligor. Notwithstanding that KCS has executed this Agreement, it shall have no obligation for the payment of salary, benefits, or other compensation hereunder, and all such obligations shall be the sole responsibility of Railway. 10. Notice. Notices and all other communications to either party pursuant to this Agreement shall be in writing and shall be deemed to have been given when personally delivered, delivered by facsimile or deposited in the United States mail by certified or registered mail, postage prepaid, addressed, in the case of Railway or KCS, to Railway or KCS at P.O. Box 219335, Kansas City, Missouri 64121-9335,, Attention: Secretary, or, in the case of the Executive, to him at P.O. Box 219335, Kansas City, Missouri 64121-9335,, or to such other address as a party shall designate by notice to the other party. 11. Amendment. No provision of this Agreement may be amended, modified, waived or discharged unless such amendment, waiver, modification or discharge is agreed to in writing signed by Executive, the President of Railway and the President of KCS. No waiver by any party hereto at any time of any breach by another party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the time or at any prior or subsequent time. 12. Successors in Interest. The rights and obligations of KCS and Railway under this Agreement shall inure to the benefit of and be binding in each and every respect upon the direct and indirect successors and assigns of KCS and Railway, regardless of the manner in which such successors or assigns shall succeed to the interest of KCS or Railway hereunder, and this Agreement shall not be terminated by the voluntary or involuntary dissolution of KCS or Railway or by any merger or consolidation or acquisition involving KCS or Railway, or upon any transfer of all or substantially all of KCS’s or Railway’s assets, or terminated otherwise than in accordance with its terms. In the event of any such merger or consolidation or transfer of assets, the provisions of this Agreement shall be binding upon and shall inure to the benefit of the surviving corporation or the corporation or other person to which such assets shall be transferred. Neither this Agreement nor any of the payments or benefits hereunder may be pledged, assigned or transferred by Executive either in whole or in part in any manner, without the prior written consent of Railway. 13. Severability. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted. 14. Controlling Law and Jurisdiction. The validity, interpretation and performance of this Agreement shall be subject to and construed under the laws of the State of Missouri, without regard to principles of conflicts of law. 15. Entire Agreement. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and terminates and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the terms of Executive’s employment or severance arrangements. IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Agreement as of the 15 day of May, 2006. THE KANSAS CITY SOUTHERN RAILWAY COMPANY By: /s/ Arthur L. Shoener Arthur L. Shoener, President and CEO KANSAS CITY SOUTHERN By:  /s/ Michael R. Haverty Michael R. Haverty, Chairman, President, and CEO EXECUTIVE /s/ Daniel W. Avramovich Daniel W. Avramovich 1 Appendix A WAIVER AND RELEASE In consideration of the benefits described in the Employment Agreement, I do hereby fully waive all claims and release The Kansas City Southern Railway Company (KCSR), and its affiliates, parents, subsidiaries, successors, assigns, directors and officers, fiduciaries, employees and agents, as well as any employee benefit plans from liability and damages related in any way to any claim I may have against or KCSR. This waiver and release includes, but is not limited to all claims, causes of action and rights under Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended; the Civil Rights Act of 1866; the American with Disabilities Act of 1990; the Rehabilitation Act of 1973; the Older Workers Benefit Protection Act of 1990; the Employee Retirement Income Security Act of 1974, as amended; the Worker Adjustment and Retraining Notification Act; the Family and Medical Leave Act; the Federal Employers Liability Act; the Railway Labor Act, including bumping rights, rights to file a grievance, rights to a hearing (whether before any company official, any system, group, regional or special adjustment board, the National Railroad Adjustment Board, or any other entity), and any rights to arbitration thereunder; the Missouri Human Rights Act, the Kansas Act Against Discrimination, the Kansas and Missouri Workers’ Compensation acts, and all local state and federal statutes and regulations; all claims arising from labor protective conditions imposed by the Interstate Commerce Commission or the Surface Transportation Board; all any KCSR incentive or benefit plan or program, and any rights under any collective bargaining agreement, including seniority rights, bumping rights and reinstatement rights, rights to file or assert a grievance or other complaint, rights to a hearing, or rights to arbitration under such agreement; and all rights under common law such as breach of contract, tort or personal injury of any sort. I understand that this Agreement and Release also precludes me from recovering any relief as a result of any lawsuit, grievance or claims brought on my behalf and arising out of my employment or resignation of, or separation from employment, provided that nothing in this Agreement and this Release may affect my entitlement, if any, to workers’ compensation or unemployment compensation. Additionally, nothing in this Agreement and Release prohibits me from communications with, filing a complaint with, or full cooperation in the investigations of, any governmental agency on matters within their jurisdictions. However, as stated above, this Agreement and Release does prohibit me from recovering any relief, including monetary relief, as a result of such activities. If any term, provision, covenant, or restriction of this Agreement and Release is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of this Agreement and Release and the other terms, provisions, covenants and restrictions hereof shall remain in full force and effect and shall in no way be affected, impaired or invalidated. I understand and agree that, in the event of breach by me of any of the terms and conditions of this Agreement and Release, the Railway will be entitled to recover all costs and expenses as a result of my breach, including but not limited to, reasonable attorneys’ fees and costs. I have read this Agreement and Release and I understand all of its terms. I enter into and sign this Agreement and Release knowingly and voluntarily, with full knowledge of what it means.             Employee Signature         Date            - Employee Name(Please Print)         Social Security Number       2

Exhibit 10.1   [g51671kgi001.jpg] FIELDSTONE INVESTMENT CORPORATION   11000 BROKEN LAND PARKWAY, SUITE 600   COLUMBIA, MARYLAND 21044 February 14, 2006 TELEPHONE (410) 772 7211 FACSIMILE (443) 367 2060   Mr. Nayan V. Kisnadwala 401 Red Clay Drive Kennett Square, Pennsylvania 19348   Re:                     Proposed Employment Terms   Dear Nayan:   This letter sets forth the proposed terms of your employment by Fieldstone Investment Corporation (“Fieldstone”). As we have discussed, we are excited about the prospect of working together with you to continue to build Fieldstone’s residential mortgage business and investment portfolio. You will be a key member of our senior management team, and we look forward to working with you to build the long term value of Fieldstone.   1.                                      scope of responsibility:   a)                                      you will be the Chief Financial Officer for Fieldstone and will be responsible for:   i)                                         balance sheet, liquidity and cash management   ii)                                      all financial reporting, planning and budgeting for Fieldstone and its affiliates   iii)                                   SEC, Tax, REIT and regulatory accounting and reporting   iv)                                  Corporate capital markets transactions, including analysis and execution   v)                                     Operations and financial reporting controls, including compliance with the requirements of the Sarbanes-Oxley Act   vi)                                  Investor Relations, and preparation of materials and presentations to investors, underwriters and rating agencies   vii)                               Other management responsibilities, including participation in senior management committees regarding capital markets, credit and resource allocations   b)                                     your title will be Executive Vice President, Chief Financial Officer   c)                                      you will report to the President of Fieldstone   2.                                      compensation: you will receive:   a)                                      a base salary of $32,916.68 per month, payable semi-monthly   b)                                     you will be eligible to earn current-year annual incentive compensation upon achieving incentive goals agreed in writing with the President of Fieldstone and approved by the Compensation Committee of the Board of Directors of Fieldstone, payable within 90 days following the end of the year; for 2006, the targeted incentive compensation available to you will be:   i)                                         up to 100% of your base salary, based on the achievement of a combination of Net Income targets for Fieldstone and Critical Objectives for you and your staff, and   ii)                                      up to an additional 75% of your base salary if Fieldstone exceeds its targeted Net Income and achieves the maximum Net Income targets established by the Board of Directors, in its discretion   iii)                                   for 2006 only, you will receive a bonus of at least $355,500 under Fieldstone’s Executive Incentive Compensation plan, regardless of Fieldstone’s results, provided you remain an officer of Fieldstone in good standing through March 31, 2007 and you achieve a rating of at least   --------------------------------------------------------------------------------   “meets expectations” on your personal Critical Objectives for 2006 under that plan   c)                                      you will receive the following award of restricted shares within ten days of the commencement of your employment with Fieldstone, subject to the terms of the Fieldstone Investment Corporation Equity Incentive Plan:       shares   price   vest   vest%   i)              Restricted Shares   45,000   $ 0   4 yrs   25%/yr     d)                                     you will receive within ten days of the commencement of your employment with Fieldstone the following grants as your 2006 awards of long term equity based compensation, subject to the terms of the Fieldstone Investment Corporation Equity Incentive Plan (future annual awards will be determined in the discretion of the Compensation Committee of the Board of Directors):       shares   price   vest   vest%   ii)             Options w/ DERs   15,000   mkt price*   4 yrs   100% @ yr 4   iii)            Performance Shares   7,500   $ 0   2 yr +   perf. period               2 yr   vest period     -------------------------------------------------------------------------------- *                 the market price will be the end of day closing price on the day your employment with Fieldstone commences   e)                                      you will be eligible to participate in the future in Fieldstone’s long-term incentive plans for senior managers, on terms as may be approved by the Board of Directors of Fieldstone in its discretion   f)                                        the Fieldstone Investment Corporation Equity Incentive Plan includes terms that provide that the restricted shares, earned performance shares and options will vest upon the consummation of change of control events, as defined in the Plan   3.                                      additional reimbursement:   a)                                      Fieldstone will reimburse you for reasonable and customary business expenses incurred by you during the course of business   b)                                     you will receive $150 per month toward your cellular telephone expenses   c)                                      if you move to Maryland prior to September 30, 2006 while you remain an employee of Fieldstone, you will be reimbursed for your reasonable out of pocket relocation expenses, up to a total of $75,000, based on your actual expenditures, including amounts relative to sales commissions, recording and title insurance fees on your new house, temporary housing and moving expenses in connection with your relocation to Maryland   4.                                      benefits: subject to the terms outlined in Fieldstone’s Employee Handbook, Fieldstone currently offers the following package of benefits:   a)                                      standard health and dental plans   b)                                     life and disability insurance, subject to qualification   c)                                      defined contribution or savings plan, as possible under the tax rules, after your third month of employment, including a 401(k) plan; currently, Fieldstone matches 100% of the contributions made by employees to the 401(k) plan, up to 6% of their respective annual compensation or up to such other amount allowed under the applicable laws and regulations   d)                                     four weeks’ paid vacation each calendar year, pro rated for partial years   e)                                      if your position with Fieldstone is terminated by Fieldstone other than for cause prior to December 31, 2006, you will receive a severance payment equal to your   2 --------------------------------------------------------------------------------   annual base salary, payable within 30 days following the termination of your employment   f)                                        if your employment with Fieldstone is terminated other than for cause in connection with a change of control of Fieldstone following December 31, 2006, and within one year following the change of control, you will receive as extended severance compensation two years’ severance, paid at your annual base salary, paid in a single lump sum payment, subject to any delay in payment required by section 409A of the Internal Revenue Code   5.                                      additional terms:   a)                                      you will begin work for Fieldstone on or before February 16, 2006   b)                                     you will work in Fieldstone’s office in Columbia, Maryland   c)                                      you will devote your full time efforts to making Fieldstone successful, and you will avoid any action or behavior that is detrimental to Fieldstone   d)                                     you will hold all information and materials relating to the business plans, customers and financial results of Fieldstone, its customers or affiliates of any of them in strictest confidence   e)                                      your continued employment and your compensation are subject to verification of the information provided by you to Fieldstone on your employment application   f)                                        you will be subject to the terms of employment outlined in Fieldstone’s Employee Handbook, as that may be amended from time to time, including the provision that you will be an “at will” employee of Fieldstone (as are all other employees) and this letter shall in no way be deemed to constitute an employment contract   g)                                     you agree not to solicit or aid in the solicitation of Fieldstone’s employees for a period of two years following the date of any termination of your employment with Fieldstone   h)                                     the terms of this letter are revoked automatically if you do not return an executed copy of this letter to me on or before February 16, 2006   If you have any questions regarding the above please call me at (410) 772 7211 or, if you would like a further explanation of the benefits, please contact Jeanie Arnold at (410) 772 3188.   I trust the foregoing represents your understanding of the terms that we have discussed. I am excited about our opportunity and the prospect of working with you. I look forward to talking with you soon and to working together in the future.   Sincerely, ACKNOWLEDGED AND AGREED:         /s/ Michael J. Sonnenfeld   /s/ Mr. Nayan V. Kisnadwala   Michael J. Sonnenfeld Mr. Nayan V. Kisnadwala     President     2/14/06   cc: Jonathan E. Michael Date Jeffrey R. Springer     3 --------------------------------------------------------------------------------

Exhibit 10.13 GENERAL DYNAMICS CORPORATION SUPPLEMENTAL SAVINGS AND STOCK INVESTMENT PLAN Amended and restated on December 24, 2005 -------------------------------------------------------------------------------- GENERAL DYNAMICS CORPORATION SUPPLEMENTAL SAVINGS AND STOCK INVESTMENT PLAN Table of Contents   SECTION 1    Introduction and Plan History   1 SECTION 2    Definitions   1 SECTION 3    Supplemental Benefits Due to Limitations Under the Qualified SSIP   3 SECTION 4    Credited Earnings   5 SECTION 5    Payment, Nonforfeitability of Benefits and Maintenance of Accounts   6 SECTION 6    Special Supplemental Benefits   7 SECTION 7    Miscellaneous Provisions   8 SECTION 8    Amendment and Termination of the Plan   9 SECTION 9    American Jobs Creation Act Compliance   10 -------------------------------------------------------------------------------- SECTION 1 INTRODUCTION AND PLAN HISTORY 1.1 Introduction. This Plan is maintained so as to strengthen the ability of the Company and its Subsidiaries to attract and retain persons of outstanding competence upon which, in large measure, continued growth and profitability depend. The Plan is intended to supplement Qualified Salary Deferrals and Qualified Matching Contributions. The Plan is intended to be an unfunded deferred compensation plan for a select group of management or highly compensated employees within the meanings of Sections 201(2), 301(a)(3) and 401(a)(4) of ERISA and shall be construed and interpreted accordingly. 1.2 Effective Date. This Plan was established effective January 1, 1983, and previously amended and restated as of January 1, 1987, January 1, 1998, and August 1, 2003. The Plan was further amended as of March 1, 2005. The Plan is amended and restated on December 24, 2005, and such amendment and restatement of the Plan is effective as of January 1, 2005, except as otherwise specifically provided herein. 1.3 Plan Appendices. From time to time, the Company may adopt Appendices to the Plan for the purpose of setting forth specific provisions or providing documentation necessary to determine benefits under the Plan for certain Employee groups. Each such Appendix shall be attached to and form a part of the Plan. Each such Appendix shall specify the population to which it applies and shall supersede the provisions of the Plan document to the extent necessary to eliminate any inconsistencies between the Plan document and such Appendix. 1.4 Applicability of Plan Provisions. The provisions of this Plan shall apply to any person who is a Participant on or after January 1, 2005, and to any Account in existence on or after January 1, 2005. Pre-2005 Accounts are considered to be “grandfathered” under Section 409A and, except as otherwise specifically provided under this Plan by reference to Pre-2005 Accounts, the benefits and rights existing as of October 3, 2004, under the prior version of the Plan applicable to any Pre-2005 Account shall continue to apply. For purposes of clarity, except as otherwise specifically provided by this Plan by reference to Pre-2005 Accounts, to the extent that benefits or rights of Pre-2005 Accounts are governed by reference to corresponding Qualified SSIP provisions, the Qualified SSIP provisions in effect as of October 3, 2004, shall apply. SECTION 2 DEFINITIONS Where the following words and phrases appear in the Plan, they shall have the respective meanings set forth below, unless the context clearly indicates to the contrary. Some of the words and phrases used in the Plan are not defined in this Section 2, but, for convenience, are defined as they are introduced into the text. 2.1 Account shall mean the recordkeeping account to which Salary Deferrals, Matching Contributions and Credited Earnings are credited (or debited for Credited Earnings reflecting an investment loss) under the Plan. An Account may be divided into two or more subaccounts to the extent necessary or desirable, as determined by the Company, for Plan recordkeeping and accounting purposes. Such subaccounts are referred to herein collectively as the “Account” or “Accounts,” and sometimes individually as the “Account.”   1 -------------------------------------------------------------------------------- 2.2 Accounting Date shall mean each day on which the U.S. financial markets are open for business. 2.3 Beneficiary shall mean the Participant’s beneficiary, who shall be determined by the following order: (1) the Participant’s designated beneficiary under the Qualified SSIP, (2) the Participant’s spouse, and (3) the Participant’s estate. 2.4 Change of Control shall mean a “Change of Control” as that term is defined in the Company’s Equity Compensation Plan, as amended from time to time. 2.5 Code shall mean the Internal Revenue Code of 1986, as amended from time to time. 2.6 Company shall mean General Dynamics Corporation, a Delaware corporation, and any successor thereof. 2.7 Credited Earnings shall have the meaning set forth in Section 4.1. 2.8 Eligible Employee shall mean an Employee who satisfies the eligibility criteria described at Section 3.1. 2.9 Employee shall mean any person who is regularly employed as a full-time, salaried employee by the Company or its Subsidiaries, and who is not covered by a collective bargaining agreement (except where such collective bargaining agreement specifically provides for participation). Individuals not initially treated and classified by the Company as common-law employees, including, but not limited to, leased employees, independent contractors or any other contract employees, shall be excluded from participation irrespective of whether a court, administrative agency or other entity determines that such individuals are common-law employees. 2.10 ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. 2.11 Key Employee shall mean a “key employee” as that term is used under Section 409A. 2.12 Matching Contributions shall mean amounts credited to a Participant’s Account with reference to the Participant’s Salary Deferrals pursuant to Section 3.4. 2.13 Participant shall mean any current or former Employee who has an Account that has not been fully paid or otherwise discharged. 2.14 Plan shall mean the General Dynamics Corporation Supplemental Savings and Stock Investment Plan, established January 1, 1983, and amended and restated as set forth herein, as it may be amended from time to time, and its Appendices. 2.15 Plan Year shall mean the 12 month period beginning on January 1st and ending on the following December 31st.   2 -------------------------------------------------------------------------------- 2.16 Post-2004 Account shall mean a Participant’s subaccount to which Salary Deferrals and Matching Contributions are credited if not earned and vested by December 31, 2004, and any Credited Earnings with respect to such amounts. 2.17 Pre-2005 Account shall mean a Participant’s subaccount to which Salary Deferrals and Matching Contributions are credited to the extent they were earned and vested on or before December 31, 2004, and any Credited Earnings with respect to such amounts. 2.18 Qualified Matching Contributions shall mean amounts contributed to the Qualified SSIP by the Company or its Subsidiaries which are determined with reference to amounts of Qualified Salary Deferrals. 2.19 Qualified Plan Limitations shall mean limitations imposed (i) pursuant to Code Sections 401(a)(17), 402(g), 415 or any other section of the Code or (ii) by the Company in order to assure compliance with the actual deferral percentage or actual contribution percentage requirements of the Qualified SSIP. 2.20 Qualified Salary Deferrals shall mean pre-tax salary deferrals made by an Employee pursuant to the Qualified SSIP. 2.21 Qualified SSIP shall mean the General Dynamics Corporation Savings and Stock Investment Plan, as it may be amended from time to time. 2.22 Salary shall mean an Employee’s “Deferral Pay,” as that term is used in the Qualified SSIP, without taking into account the limitation on annual compensation under Code Section 401(a)(17) or any successor provision thereto, or any incentive plan payments, bonuses or commissions. 2.23 Salary Deferrals shall mean amounts credited to a Participant’s Account corresponding to Salary reductions elected pursuant to Section 3.2. 2.24 Section 409A shall mean Section 409A of the Code, including, without limitation, applicable transition guidance provided by the Internal Revenue Service. 2.25 Separation from Service shall mean a “separation from service” as that term is defined in Section 409A. 2.26 Subsidiary shall mean any corporation of which the Company owns, directly or indirectly, fifty percent (50%) or more of the outstanding voting stock. SECTION 3 SUPPLEMENTAL BENEFITS DUE TO LIMITATIONS UNDER THE QUALIFIED SSIP 3.1 Eligibility. (a) Unless otherwise directed by the Chairman of the Board of Directors of the Company (the “Chairman”), eligibility for participation in any benefits provided under this Section 3 for a given Plan Year shall be extended to selected Employees (i) who are eligible to   3 -------------------------------------------------------------------------------- participate in the Qualified SSIP, (ii) whose Qualified Salary Deferrals to the Qualified SSIP are restricted due to any of the Qualified Plan Limitations, and (iii) whose Salary in effect on November 1 of the year immediately preceding the given Plan Year (or such other date prescribed by the Company from time to time) equals or exceeds the annual compensation limitation of Code Section 401(a)(17) for the Plan Year. (b) The selection of eligible Employees who may participate in the Plan shall be in the sole discretion of the Company, and participation may be limited to such otherwise eligible Employees as the Company shall determine by the application of minimum compensation levels or otherwise. All determinations shall be made prior to the given Plan Year and may be made as of a given date at the sole discretion of the Company. (c) Notwithstanding anything to the contrary, to the extent that an Employee meets the requirements of this Section 3.1 during a Plan Year, such Employee shall not become an Eligible Employee during that Plan Year except as directed by the Chairman. 3.2 Salary Deferral Elections. Salary Deferrals shall be credited to an Eligible Employee’s Post-2004 Account in accordance with such Eligible Employee’s election and subject to the following rules: (a) An Eligible Employee may elect to defer up to the maximum amount described in Section 3.3. (b) An Eligible Employee’s Salary Deferral election under this Plan shall be irrevocable for the 2005 Plan Year after March 15, 2005. (c) For Plan Years commencing after 2005, an Eligible Employee may make an irrevocable Salary Deferral election at the time and in the form prescribed by the Company, but in no event later than December 31 of the year preceding a given Plan Year. (d) For purposes of clarity, and without limitation, the Company may prescribe a “negative” election for Salary Deferrals, meaning that it may impose an automatic or default Salary Deferral election, provided the Eligible Employee has an opportunity during the election period to affirmatively change such election. (e) Notwithstanding the preceding requirements, in the event an Employee becomes eligible to participate during the Plan Year in accordance with Section 3.1(c) above, such Eligible Employee may make an irrevocable Salary Deferral election within 30 days from the date of eligibility with respect to any Salary earned after such election. For purposes of clarity, and without limitation, the Company may prescribe a “negative” election for Salary Deferrals, meaning that it may impose an automatic Salary Deferral election, provided the Eligible Employee has an opportunity during the election period to affirmatively change such election. 3.3 Maximum Amount of Salary Deferrals. The maximum amount of Salary Deferrals that an Eligible Employee may elect for a given Plan Year is equal to (X times Y) minus Z, where: X is the Eligible Employee’s annual Salary in effect as of the November 1st of the year immediately preceding the Plan Year (or such other date prescribed by the Company from time to time).   4 -------------------------------------------------------------------------------- Y is the Eligible Employee’s percentage deferral limit under the Qualified SSIP (using the limit applicable to the business unit at which the Eligible Employee is assigned as of the December 15th of the year immediately preceding the Plan Year, or such other date prescribed by the Company from time to time). Z is the Code Section 402(g) limit for such Plan Year. 3.4 Matching Contributions. An Eligible Employee may be eligible for a Matching Contribution under this Plan, which shall be credited to an Eligible Employee’s Post-2004 Account, based on his or her Salary Deferrals under this Plan. Eligibility for, and the amount of any Matching Contribution under this Plan, shall be determined by the Qualified Matching Contribution provisions in the Qualified SSIP that are applicable to the business unit to which the Eligible Employee is assigned as of the end of the Salary Deferral election period prescribed by the Company for a given Plan Year. 3.5 Transfer. For purposes of clarity, should an Eligible Employee transfer business units during a Plan Year, such Eligible Employee’s Salary Deferrals and Matching Contributions, if any, shall not change during that Plan Year to account for different deferral or matching provisions under the Qualified SSIP applicable to the Eligible Employee’s new business unit. SECTION 4 CREDITED EARNINGS 4.1 Initial Credited Earnings. Effective for the Plan Years commencing on and after January 1, 2006, Salary Deferrals and Matching Contributions credited to the Participant’s Post-2004 Account shall be deemed invested in the same investment funds that the Participant’s Qualified Salary Deferrals are invested in as of the December 15th of the preceding Plan Year (or such other date as determined from time to time by the Company) under the Qualified SSIP. For 2005, Credited Earnings shall be determined under the prior provisions of the Plan. 4.2 Account Adjustments. Each Account shall be adjusted to reflect investment gain or loss on any balance in the Account as of the close of the immediately preceding Accounting Date. The adjustment shall be the same as what would actually have been recognized if the Account had been invested in the Qualified SSIP under the investment options actually selected by the Participant thereunder (or, with respect to initial Salary Deferrals, as determined by Section 4.1). 4.3 Investment Fund Transfers. If a Participant makes an investment fund transfer pursuant to the provisions of the Qualified SSIP, the identical investment fund transfer shall be performed in this Plan, but no such transfer shall be permitted in this Plan unless made in the Qualified SSIP. Notwithstanding the foregoing, the Company may, in its discretion, approve transfers in this Plan where no transfer is possible in the Qualified SSIP due to loans and withdrawals. 4.4 Coordination with Qualified SSIP. The Company may adopt such rules, in its sole discretion, to coordinate the crediting of earnings under the Plan with the investment of funds under the Qualified SSIP.   5 -------------------------------------------------------------------------------- SECTION 5 PAYMENT, NONFORFEITABILITY OF BENEFITS AND MAINTENANCE OF ACCOUNTS 5.1 Pre-2005 Accounts: Payment and Nonforfeitability of Benefits and Maintenance of Accounts. This Section 5.1 shall be effective as of January 1, 2005, and shall only apply to Pre-2005 Accounts. Except as otherwise provided in this Plan, a Participant’s Pre-2005 Account, if any, shall be paid under the same conditions, rules and restrictions as would apply to the benefits as if they were provided under the Qualified SSIP. The following rules shall apply to such Pre-2005 Accounts, notwithstanding the conditions, rules and restrictions of the Qualified SSIP: (a) Participants shall not be entitled to receive distributions or loans or to make withdrawals of any portion of their Pre-2005 Account balances while employed by the Company or any of its Subsidiaries. (b) Upon termination of employment with the Company and its Subsidiaries, the entire balance of a Participant’s Pre-2005 Account (valued as of the Accounting Date coincident with or immediately preceding the date of payment) shall be paid to the Participant as soon as administratively practicable. However, any Participant may, by a written statement (including internet and telephone methods approved by the Company for this purpose) filed with the Company or its delegated agent on or before one year prior to the termination of employment, irrevocably elect to defer commencement of such payments until a specific date which may be as late as the Participant attaining age 70 1/2. If a deferral is elected, the Participant may choose to have his or her Pre-2005 Account balance subsequently paid in a lump sum or in such number of equal annual installments (not to exceed 15) as he or she may request (which will commence as soon as practicable after the conclusion of the deferral period and will be payable annually thereafter). To the extent consistent with the above requirements, deferrals and installment payments of distributions shall be governed by the applicable provisions of the Qualified SSIP. (c) All Pre-2005 Account balances shall be paid in cash. No Participant shall have any right to receive payment in any other form. (d) Upon the death of a Participant prior to the entire balance of the Participant’s Pre-2005 Account having been paid, the remaining unpaid balance shall be payable to the Beneficiary. (e) In the event that a Subsidiary ceases to meet the definition of Subsidiary (e.g., on account of a sale of its stock to an unrelated third party), or an unincorporated business unit ceases to be owned by the Company or a Subsidiary, such cessation shall not, by itself, be treated as a termination of employment by the Participants employed by such Subsidiary or business unit unless the Company shall so determine. In those circumstances, the Company may also determine whether the Pre-2005 Accounts of the Participants employed by such Subsidiary or business unit will be vested or distributed. (f) The Company shall promulgate such other additional rules and procedures governing the operation of this Plan in relation to such Pre-2005 Accounts as it may, from time to time and in its sole discretion, determine are necessary or desirable.   6 -------------------------------------------------------------------------------- (g) Pursuant to transition guidance under Section 409A, Participants in the Plan (i) who are former Employees (as of November 30, 2005) and (ii) whose Pre-2005 Account is worth less than $100,000 (as of November 30, 2005), shall be terminated from participation in the Plan and such Participants shall be paid their respective Accounts in a single lump sum payment on or before December 31, 2005. 5.2 Post-2004 Accounts: Payment and Nonforfeitability of Benefits and Maintenance of Accounts. This Section 5.2 shall be effective as of January 1, 2005, and shall apply to Post-2004 Accounts. (a) Upon a Separation from Service from the Company and its Subsidiaries, the entire balance of a Participant’s Post-2004 Account (valued as of the Accounting Date coincident with or immediately preceding the date of payment) shall be paid to the Participant as soon as administratively practicable provided that any Key Employee shall not receive a payment earlier than 6 months following his or her Separation from Service. (b) All Post-2004 Account balances shall be paid in cash. No Participant shall have any right to receive payment in any other form. (c) In the event that a Subsidiary ceases to meet the definition of Subsidiary (e.g., on account of a sale of its stock to an unrelated third party), or an unincorporated business unit ceases to be owned by the Company or a Subsidiary, the Company, in its sole discretion, may fully vest the Post-2004 Account balances of Participants employed by such Subsidiary or business unit and the Post-2004 Account shall be paid in accordance with Section 5.2(a). (d) The Company shall promulgate such other additional rules and procedures governing the operation of this Plan in relation to such Post-2004 Accounts as it may, from time to time and in its sole discretion, determine are necessary or desirable. (e) Upon the death of a Participant prior to the entire balance of the Participant’s Post-2004 Account having been paid, the remaining unpaid balance shall be payable to the Beneficiary. (f) Notwithstanding anything to the contrary contained in this Section 5.2, payment to a Participant shall be delayed should the Company reasonably anticipate that the making of such payment would violate federal securities laws or other applicable law. In such an event, payment shall be made at the earliest date at which the Company reasonably anticipates that the making of the payment would not cause such violation. SECTION 6 SPECIAL SUPPLEMENTAL BENEFITS 6.1 Participation. Recognizing the need to make special retirement and other compensation or employee benefit provisions for certain Employees, the Company may, from time to time and in its best judgment, designate such other individual Employees or groups of select management or highly compensated Employees as being eligible to receive benefits under this Plan. Any such Employees or groups of Employees, and the benefits applicable to them, will be described in the Appendices attached to this Plan.   7 -------------------------------------------------------------------------------- 6.2 Benefits. Such supplemental benefits may be provided in such amounts as the Company determines are appropriate. Such benefits need not be uniform among such Employees. SECTION 7 MISCELLANEOUS PROVISIONS 7.1 Construction. In the construction of the Plan, the masculine shall include the feminine and the singular the plural in all cases where such meanings would be appropriate. Except as may be governed by ERISA or other applicable federal law, this Plan shall be construed, governed, regulated and administered according to the laws of the Commonwealth of Virginia. 7.2 Employment. Participation in the Plan shall not give any Employee the right to be retained in the employ of the Company or its Subsidiaries, or upon dismissal or upon his or her voluntary termination of employment, to have any right, legal or equitable, under the Plan or any portion thereof, except as expressly granted by the Plan. 7.3 Nonalienability of Benefits. No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to do so shall be void, and no such benefit shall in any manner be liable for or subject to the debts, liabilities, engagements or torts of the person entitled to such benefit, except as specifically provided in the Plan. 7.4 Facility of Payment. If the Company judges any recipient of benefits, in its sole discretion, to be legally incapable of personally receiving and giving a valid receipt for any payment due him or her under the Plan, the Company may, unless and until claims shall have been made by a duly appointed guardian or committee of such person, make such payment or any part thereof to such person’s spouse, children or other legal entity deemed by the Company to have incurred expenses or assumed responsibility for the expenses of such person. Any payment so made shall be a complete discharge of any liability under the Plan for such payment.   7.5 Obligation to Pay Amounts Hereunder. (a) No trust fund, escrow account or other segregation of assets need be established or made by the Company to guarantee, secure or assure the payment of any amount payable hereunder. The Company’s obligation to make payments pursuant to this Plan shall constitute only a general contractual liability of the Company to individuals entitled to benefits hereunder and other actual or possible payees hereunder in accordance with the terms hereof. Payments hereunder shall be made only from such funds of the Company as it shall determine, and no individual entitled to benefits hereunder shall have any interest in any particular asset of the Company by reason of the existence of this Plan. No provision of the Plan shall be interpreted so as to give any individual any right in any assets of the Company greater than the rights of a general unsecured creditor of the Company. It is expressly understood as a condition for receipt of any benefits under this Plan that the Company is not obligated to create a trust fund or escrow account or to segregate any asset of the Company in any fashion. (b) The Company may, in its sole discretion, establish segregated funds, escrow accounts or trust funds whose primary purpose would be for the provision of benefits under this Plan. If such funds or accounts are established, however, individuals entitled to benefits hereunder shall not have any identifiable interest in any such funds or accounts nor shall such   8 -------------------------------------------------------------------------------- individuals be entitled to any preference or priority with respect to the assets of such funds or accounts. These funds and accounts would still be available to judgment creditors of the Company and to all creditors in the event of the Company’s insolvency or bankruptcy. 7.6 Administration. The Plan shall be administered by the Company. The Company shall have the discretionary authority to construe and interpret the provisions of the Plan and make factual determinations thereunder, including the power to determine the rights or eligibility of Employees or Participants and any other persons, and the amounts of their benefits under the Plan, and to remedy ambiguities, inconsistencies or omissions, and any such determinations shall be binding on all parties. Benefits will only be paid if the Company, in its sole discretion, determines that the Participant or Beneficiary is entitled to them. The Company has the authority to delegate any of its powers under this Plan (including, without limitation, Section 7.7) to any other person, persons, or committee. This person, persons, or committee may further delegate its reserved powers to another person, persons, or committee as they see fit. Any delegation or subsequent delegation shall include the same full, final and discretionary authority that the Company has listed herein and any decisions, actions or interpretations made by any delegate shall have the same ultimate binding effect as if made by the Company. 7.7 Claims Appeal Procedure. Upon receipt of a claim for benefits under the Plan, the Company shall notify the Participant, Beneficiary or authorized representative of any action taken within 90 days of receiving the claim. If the claim is denied, the denial shall be set forth in writing and shall include the specific reasons for the denial, with reference to pertinent Plan provisions on which the denial is based, and shall describe the procedure for perfecting the claim, or for requesting a review of the denial. Within 60 days after receiving a notification of denial of a claim, a Participant, Beneficiary or authorized representative may request that the Company make a full and fair review of the denial. In connection with this request, the Participant may review pertinent documents and submit issues or comments in writing. The Company will make a final decision on the claim within 120 days of the request for review. Any decision made by the Company in good faith shall be final and binding on all parties. 7.8 Change of Control. Notwithstanding any provision herein to the contrary, immediately prior to the occurrence of a Change of Control, all allocations made to Accounts of Participants who are then active Employees shall become fully vested and nonforfeitable. 7.9 Action by the Company. Any action or authorization by the Company hereunder shall be made by the Chairman or its Board of Directors, or any delegate of either. SECTION 8 AMENDMENT AND TERMINATION OF THE PLAN 8.1 Amendment. The Company has the right to modify or amend this Plan in whole or in part, effective as of any specified date; provided, however, that the Company shall have no authority to modify or amend the Plan to: (a) Reduce any benefit accrued hereunder based on service and compensation to the date of amendment unless such action is necessary to prevent this Plan from being subject to any provision of Title 1, Subtitle B, Parts 2, 3 or 4 of ERISA;   9 -------------------------------------------------------------------------------- (b) Permit the accrual, holding or payment of actual shares of common stock of the Company under the Plan (such right to amend being reserved to the Board of Directors of the Company or its delegate); or (c) Adversely affect any accrued benefits hereunder (and any benefits that will accrue upon a Change of Control) and any rights attaching thereto after or in anticipation of the occurrence of a Change of Control. No benefit hereunder shall be deemed to be adversely affected or otherwise reduced to the extent that any amendment or action affects the tax treatment of Plan benefits or an interest in future investment returns.   8.2 Termination. (a) The Company reserves the right to terminate this Plan, in whole or in part. This Plan shall be automatically terminated upon (i) a dissolution of the Company (but not upon a merger, consolidation, reorganization, recapitalization or acquisition of a controlling interest in the voting stock of the Company by another person or entity); (ii) the Company being legally adjudicated bankrupt; (iii) the appointment of a receiver or trustee in bankruptcy with respect to the Company’s assets and business if such appointment is not set aside within ninety (90) days thereafter; or (iv) the making by the Company of an assignment for the benefit of creditors. (b) Upon a termination of this Plan, (i) no additional Employees shall become entitled to benefits hereunder; (ii) all benefits accrued through the date of termination will become immediately nonforfeitable as to each Participant; and (iii) no additional benefits (except that the Company, in its sole discretion, may provide for an allocation of “income” or “earnings” on the Participant’s contributions) shall be accrued hereunder for subsequent payment. (c) Pre-2005 Accounts accrued to the date of termination of the Plan shall be paid to the Participants as soon as practicable. (d) Post-2004 Accounts accrued to the date of termination of the Plan shall be paid to the Participants as soon as practicable to the extent permitted under Section 409A and otherwise shall remain payable in accordance with Section 5.2. SECTION 9 AMERICAN JOBS CREATION ACT COMPLIANCE To the extent any provision of the Plan or action by the Company would subject any Participant to liability for interest or additional taxes under Code Section 409A(a)(1)(B), it will be deemed null and void, to the extent permitted by law and deemed advisable by the Company. It is intended that the Plan will comply with Section 409A, and the Plan shall be interpreted and construed on a basis consistent with such intent. The Plan may be amended in any respect deemed necessary (including retroactively) by the Company in order to preserve compliance with Section 409A. The preceding shall not be construed as a guarantee of any particular tax effect for Plan benefits.   10 -------------------------------------------------------------------------------- Following a Change of Control or a “change in control” as defined under Section 409A, no action shall be taken under the Plan that will cause a Participant’s benefit that has previously been determined to be (or is determined to be) subject to Section 409A, to fail to comply in any respect with Section 409A without the written consent of such Participant.   11 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Plan is hereby adopted as of the date set forth herein.   GENERAL DYNAMICS CORPORATION /s/ Walter M. Oliver -------------------------------------------------------------------------------- Walter M. Oliver Senior Vice President, Human Resources and Administration   12

Exhibit 10.3 EQUITY COMMITMENT AGREEMENT May 10, 2006 J.P. Morgan Securities Inc. 270 Park Avenue New York, New York 10017 Ladies and Gentlemen: Subject to the approval of this Agreement by the Bankruptcy Court (as defined below), Owens Corning, a Delaware corporation (as a debtor-in-possession and a reorganized debtor, as applicable, the “Company”), proposes to offer and sell shares of its new common stock, par value $0.10 per share, to be issued pursuant to its Amended Plan (as defined below) (together with any associated share purchase rights other than the Rights (as defined below), “New Common Stock”), pursuant to a rights offering (the “Rights Offering”) whereby each holder of a Bondholder Claim, and each Holder of an Allowed Class A6-A Claim or an Allowed Class A6-B Claim (each an “Eligible Holder”), as of the date (the “Record Date”) fixed by the Bankruptcy Court for the solicitation of acceptances and rejections of the Amended Plan, shall be offered the right (each, a “Right”) to purchase up to its Pro Rata share of 72,900,000 shares (each a “Share”) of New Common Stock at a purchase price of $30.00 per Share (the “Purchase Price”). Each capitalized term used but not defined in this letter (the “Agreement”) shall have the meaning given to it in the Fifth Amended Joint Plan of Reorganization for Owens Corning and its Affiliated Debtors and Debtors-In-Possession filed on December 31, 2005 (as it may have been amended or supplemented, the “Existing Plan”). In order to facilitate the Rights Offering, pursuant to this Agreement, and subject to the terms, conditions and limitations set forth herein, J.P. Morgan Securities Inc. (the “Investor”), agrees to purchase on the Closing Date (as defined in Section 2), and the Company agrees to sell, for the Purchase Price per share, a number of shares of New Common Stock equal to 72,900,000 minus the number of shares of New Common Stock offered pursuant to the Rights Offering purchased on or before the Expiration Time (as defined below) in the Rights Offering (such Shares in the aggregate, the “Unsubscribed Shares”). The Company will conduct the Rights Offering pursuant to an amended plan of reorganization (the “Amended Plan”), which shall include only those revisions, modifications and amendments to the Existing Plan as necessary to incorporate the Company’s proposed restructuring transactions described in the term sheet attached hereto as Exhibit A (the “Settlement Term Sheet”) and such other revisions, modifications and amendments that the Company and the other proponents of the Amended Plan (“Amended Plan Proponents”) deem necessary or appropriate and that shall not (i) materially adversely affect the obligations or rights of the Investor hereunder, (ii) cause any representation or warranty contained herein to be incorrect or (iii) be inconsistent with the terms of the Settlement Term Sheet, and shall be approved by the court (together with the applicable District Court, to the extent District Court approval of the Amended Plan is sought or required, the “Bankruptcy Court”) administering the Company’s proceedings (the “Proceedings”) under the United States Bankruptcy Code, 11 U.S.C. §§ 101, et seq. (the “Bankruptcy Code”). -------------------------------------------------------------------------------- Simultaneously with the delivery of this Agreement, (i) the Company (subject, however, to Bankruptcy Court approval), the Asbestos Claimants Committee, the Future Claimants’ Representative and certain Bondholders have entered into the Lockup Agreement, attached hereto as Exhibit B (the “Lock-Up Agreement”) and (ii) the Investor and certain Persons (collectively, the “Ultimate Purchasers”) have entered into a syndication agreement (the “Syndication Agreement”), pursuant to which the Ultimate Purchasers have agreed to purchase certain Unsubscribed Shares from the Investor in the event the Investor purchases Unsubscribed Shares under this Agreement. In consideration of the foregoing, and the representations, warranties and covenants set forth herein, and other good and valuable consideration, the Company and the Investor agree as follows: 1. The Rights Offering. The Rights Offering will be conducted as follows: (a) Subject to the terms and conditions of this Agreement (including Bankruptcy Court approval), the Company hereby undertakes to offer Shares for subscription by holders of Rights as set forth in this Agreement. (b) In connection with the Amended Plan the Company shall issue Rights to purchase 72,900,000 Shares in the aggregate. Each Eligible Holder as of the Record Date will receive a Right to purchase up to its Pro Rata share of 72,900,000 Shares. The ballot form(s) (the “Ballots”) distributed in connection with the solicitation of acceptance of the Amended Plan shall provide a place whereby each Eligible Holder may exercise its Right. The Rights may be exercised during a period (the “Rights Exercise Period”) specified in the Amended Plan, which period will commence on the date the Ballots are distributed and will end at the Expiration Time. For the purposes of this Agreement, the “Expiration Time” means 5:00 p.m. New York City time on the 20th calendar day (or if such day is not a Business Day, the next Business Day) after the date the Ballots are distributed under the Amended Plan, or such later date as the Company, subject to the approval of the Investor (which shall not be unreasonably withheld) and the reasonable consent of the other Amended Plan Proponents, may specify in a notice provided to the Investor before 9:00 a.m. New York City time on the Business Day before the then-effective Expiration Time. For the purposes of this Agreement, “Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York City are generally authorized or obligated by law or executive order to close. Subject to the approval of this Agreement by the Bankruptcy Court, the Amended Plan shall provide that in order to exercise a Right, each Eligible Holder shall, prior to the Expiration Time, (i) return a duly executed Ballot to the Subscription Agent (as defined below) and (ii) pay an amount equal to the full purchase price of the number of shares of New Common Stock elected to be purchased by such Eligible Holder by wire transfer of immediately available funds reasonably in advance of the date on which the hearing to confirm the Amended Plan is scheduled to commence (the “Confirmation Hearing”) to an escrow account established for the Rights Offering.   -2- -------------------------------------------------------------------------------- (c) There will be no over-subscription rights provided in connection with the Rights Offering. (d) The Company will issue the Shares to the Eligible Holders with respect to which Rights were validly exercised by such holder upon the effective date of the Amended Plan (the “Effective Date”). If the exercise of a Right would result in the issuance of a fractional share of New Common Stock, then the number of shares of New Common Stock to be issued in respect of such Right will be calculated to one decimal place and rounded down to the next lower whole share. (e) The Amended Plan will provide that the Company or the Subscription Agent (as defined below) will give notice to each Eligible Holder with respect to which Rights were validly exercised by such holder, advising them of (i) the number of whole shares of New Common Stock that they are bound to purchase pursuant to the Rights Offering, and the aggregate purchase price thereof and (ii) the date or time after the notice by which a wire transfer of such purchase price must be received and (iii) wire transfer instructions for wiring such purchase price to the subscription agent for the Rights Offering (the “Subscription Agent”) or another person designated by the Company. (f) The Company hereby agrees and undertakes to give the Investor by electronic facsimile transmission the certification by an executive officer of the Company conforming to the requirements specified herein for such certification of either (i) the number of Unsubscribed Shares and the aggregate Purchase Price therefor (a “Purchase Notice”) or (ii) in the absence of any Unsubscribed Shares, the fact that there are no Unsubscribed Shares and that the Backstop Commitment (as defined below) is terminated (a “Satisfaction Notice”) as soon as practicable after the Expiration Time and, in any event, reasonably in advance of the Closing Date (to be specified in the Agreement Order) (the date of transmission of confirmation of a Purchase Notice or a Satisfaction Notice, the “Determination Date”).   -3- -------------------------------------------------------------------------------- 2. The Backstop Commitment. (a) On the basis of the representations and warranties contained herein, but subject to the conditions set forth in Section 7 (including without limitation the entry of the Agreement Order (as defined below) and the Agreement Order becoming a Final Agreement Order), the Investor agrees to subscribe for and purchase on the Closing Date, and the Company agrees to sell and issue, at the aggregate Purchase Price therefor, all Unsubscribed Shares as of the Expiration Time (the “Backstop Commitment”). For purposes of this Agreement, “Final Agreement Order” shall mean an order or judgment of the Bankruptcy Court, which has not been reversed, stayed, modified or amended, and as to which (a) the time to appeal, seek certiorari or request reargument or further review or rehearing has expired and no appeal, petition for certiorari or request for reargument or further review or rehearing has been timely filed, or (b) any appeal that has been or may be taken or any petition for certiorari or request for reargument or further review or rehearing that has been or may be filed has been resolved by the highest court to which the order or judgment was appealed, from which certiorari was sought or to which the request was made and no further appeal or petition for certiorari has been or can be taken or granted. (b) On the basis of the representations and warranties herein contained, but subject to the entry of the Agreement Order, the Company will pay to the Investor a backstop fee of $100,000,000 (the “Backstop Fee”) to compensate the Investor for the risk of its undertaking herein. The Backstop Fee will be paid in U.S. dollars on the first Business Day after the tenth day after the entry of the Agreement Order; it being understood that in the event the Agreement Order is appealed, and the highest court to which the Agreement Order was appealed issues an order vacating or reversing the Agreement Order and further orders disgorgement of all or a portion of the Backstop Fee, the Investor shall promptly return to the Company the portion of the Backstop Fee required to be so disgorged. Subject to the entry of the Agreement Order, the Extension Fee (as defined below), if any, will be paid by the Company as provided in Section 10(a)(ii); it being understood that in the event the Agreement Order is appealed, and the highest court to which the Agreement Order was appealed issues an order vacating or reversing the Agreement Order and further orders disgorgement of all or a portion of the Extension Fee, the Investor shall promptly return to the Company the portion of the Extension Fee required to be so disgorged. Payment of the Backstop Fee and the Extension Fee, if any, will be made by wire transfer of federal (same day) funds to the account specified by the Investor to the Company at least 24 hours in advance; provided, that if the Investor receives the Backstop Fee, the Investor shall waive any of its rights to receive indirect, consequential or punitive damages in connection with this Agreement and the transactions contemplated hereby. Except as set forth herein, the Backstop Fee and the Extension Fee, if any, will be nonrefundable when paid. (c) Upon the entry of the Agreement Order, the Company will reimburse or pay, as the case may be, the out-of-pocket expenses reasonably incurred by the Investor with respect to the transactions contemplated hereby and all Bankruptcy Court and other judicial and regulatory proceedings related to such transactions (collectively, “Transaction Expenses”), including all reasonable fees and expenses of both Simpson Thacher & Bartlett LLP and Stroock & Stroock & Lavan LLP, counsel to the Investor, and reasonable fees and expenses of any other professionals to be retained by the Investor with the prior approval of the Company (which approval shall not be unreasonably withheld) in connection with the transactions contemplated by the Settlement   -4- -------------------------------------------------------------------------------- Term Sheet, within 10 days of presentation of an invoice approved by the Investor, without Bankruptcy Court review or further Bankruptcy Court order, whether or not the transactions contemplated hereby are consummated; it being understood that in the event the Agreement Order is appealed, and the highest court to which the Agreement Order was appealed issues an order vacating or reversing the Agreement Order and further orders disgorgement of all or a portion of the Transaction Expenses, the Investor shall promptly return to the Company the portion of the Transaction Expenses required to be so disgorged. Subject to the entry of the Agreement Order, the filing fee, if any, required by the HSR Act (as defined below) shall be paid by the Company on behalf of the Investor when filings under the HSR Act are made, together with all expenses of the Investor incurred to comply therewith. These obligations are in addition to, and do not limit, the Company’s obligations under Section 8. (d) As promptly as practicable, but in any event at least four (4) Business Days prior to the Closing Date, the Company will provide a Purchase Notice or a Satisfaction Notice to the Investor as provided above, setting forth a true and accurate determination of the aggregate number of Unsubscribed Shares, if any; provided, that on the Closing Date the Investor will purchase, and the Company will sell, only such number of Unsubscribed Shares as are listed in the Purchase Notice, without prejudice to the rights of the Investor to seek later an upward or downward adjustment if the number of Unsubscribed Shares in such Purchase Notice is inaccurate. (e) Delivery of the Unsubscribed Shares will be made by the Company to the account of the Investor (or to such other accounts as the Investor may designate) at 9:00 a.m., New York City time, on the Effective Date (the “Closing Date”) against payment of the aggregate Purchase Price for the Shares by wire transfer of federal (same day) funds to the account specified by the Company to the Investor at least 24 hours in advance. (f) All Unsubscribed Shares will be delivered with any and all issue, stamp, transfer or similar taxes or duties payable in connection with such delivery duly paid by the Company to the extent required under the Confirmation Order or applicable law. (g) The documents to be delivered on the Closing Date by or on behalf of the parties hereto and the Unsubscribed Shares will be delivered at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Ave, New York, New York 10017 on the Closing Date. (h) Notwithstanding anything to the contrary in this Agreement, the Investor, in its sole discretion, may designate that some or all of the Shares be issued in the name of, and delivered to, one or more of its Affiliates or to any other Person, including any Ultimate Purchaser. 3. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, the Investor as set forth below. Except for representations, warranties and agreements that are expressly limited as to their date, each representation, warranty and agreement is made as of the date hereof and as of the Closing Date: (a) Incorporation and Qualification. The Company and each of its Subsidiaries has been duly incorporated and is validly existing as a corporation in good standing under the laws of   -5- -------------------------------------------------------------------------------- their respective jurisdictions of incorporation, with the requisite power and authority to own its properties and conduct its business as currently conducted. Each of the Company and its Subsidiaries has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except to the extent the failure to be so qualified or be in good standing has not had or could not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, results of operations, property or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole or on the ability of the Company, subject to the approvals and other authorizations set forth in Section 3(g) below, to consummate the transactions contemplated by this Agreement or the Amended Plan (a “Material Adverse Effect”). (b) Corporate Power and Authority. (i) (A) The Company has the requisite corporate power and authority to enter into, execute and deliver this Agreement and, subject to entry of the Agreement Order and the Confirmation Order (together, the “Court Orders”) and the expiration, or waiver by the Bankruptcy Court, of the 10-day period set forth in Rules 6004(h) and 3020(e) of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) respectively, to perform its obligations hereunder and thereunder, including the issuance of the Rights and Shares. The Company has taken all necessary corporate action required for the due authorization, execution, delivery and performance by it of this Agreement, including the issuance of the Rights and Shares, other than board of directors’ approval of, or other board action to be taken with respect to, the documents to implement the Rights Offering. (B) When executed and delivered, the Company will have the requisite corporate power and authority to enter into, execute and deliver the Registration Rights Agreement (as defined in Section 5(n) hereof) and all necessary corporate action required for the due authorization, execution, delivery and, subject to entry of the Court Orders and the expiration, or waiver by the Bankruptcy Court, of the 10-day period set forth in Bankruptcy Rules 6004(h) and 3020(e), respectively, performance of the Registration Rights Agreement will have been taken by the Company. (ii) Prior to the entry of the Agreement Order, the Company will have the requisite corporate power and authority to execute the Amended Plan and to file the Amended Plan with the Bankruptcy Court and, subject to entry of the Confirmation Order and the expiration, or waiver by the Bankruptcy Court, of the 10-day period set forth in Bankruptcy Rule 3020(e), to perform its obligations thereunder, and will have taken all necessary corporate actions required for the due authorization, execution, delivery and performance by it of the Amended Plan. (c) Execution and Delivery; Enforceability. (i) This Agreement has been and the Registration Rights Agreement will be duly and validly executed and delivered by the Company, and, upon the entry of the Agreement Order and the expiration, or waiver by the Bankruptcy Court, of the 10-day period set forth in Bankruptcy Rule 6004(h), each such document will constitute the valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms.   -6- -------------------------------------------------------------------------------- (ii) The Amended Plan will be duly and validly filed with the Bankruptcy Court by the Company and, upon the entry of the Confirmation Order and the expiration, or waiver by the Bankruptcy Court, of the 10-day period set forth in Bankruptcy Rule 3020(e), will constitute the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. (d) Authorized Capital Stock. Upon the Effective Date, the authorized capital stock of the Company will conform to the authorized capital stock set forth in the Disclosure Statement and the issued and outstanding shares of capital stock of the Company will conform to the description set forth in the Settlement Term Sheet. (e) Issuance. Subject to the approval of this Agreement by the Bankruptcy Court, the distribution of the Rights and issuance of the Shares, including the Shares to be issued and sold by the Company to the Investor hereunder, have been duly and validly authorized and, when the Shares are issued and delivered against payment therefor in the Rights Offering or to the Investor hereunder, will be duly and validly issued, fully paid and non-assessable, and free and clear of all taxes, liens, pre-emptive rights, rights of first refusal, subscription and similar rights. (f) No Conflict. Subject to the entry of the Court Orders and the expiration, or waiver by the Bankruptcy Court, of the 10-day period set forth in Bankruptcy Rules 6004(h) and 3020(e), as applicable, the distribution of the Rights, the sale, issuance and delivery of the Shares upon exercise of the Rights and the consummation of the Rights Offering by the Company and the execution and delivery (or, with respect to the Amended Plan, the filing) by the Company of this Agreement and the Amended Plan and compliance by the Company with all of the provisions hereof and thereof and the consummation of the transactions contemplated herein and therein (including compliance by the Investor with its obligations hereunder and thereunder) (i) will not conflict with or result in a breach or violation of, any of the terms or provisions of, or constitute a default under (with or without notice or lapse of time, or both), or result, except to the extent provided in or contemplated by the Amended Plan, in the acceleration of, or the creation of any lien 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, (ii) will not result in any violation of the provisions of the Certificate of Incorporation or Bylaws of the Company included in the Amended Plan and as applicable to the Company from and after the Effective Date and (iii) will not result in any violation of, or any termination or material impairment of any rights under, any statute or any license, authorization, injunction, judgment, order, decree, 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 in any such case described in subclause (i) or (iii) as will not have or could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and except in any such case described in subclause (i), for (w) the registration under the Securities Act of 1933 and the rules and regulations of the Commission thereunder (collectively, the “Securities Act”) of resales of the Shares following exercise of Rights, (x) the approval by the Bankruptcy Court of the Company’s authority to enter into and   -7- -------------------------------------------------------------------------------- implement this Agreement, (y) filings with respect to and the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Act (the “HSR Act”) relating to the placement of Shares with the Investor and (z) such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase of the Shares by the Investor. (g) Consents and Approvals. No consent, approval, authorization, order, registration or qualification of or with any court or governmental agency or body having jurisdiction over the Company or any of its Subsidiaries or any of their properties is required for the distribution of the Rights, the sale, issuance and delivery of the Shares upon exercise of the Rights or to Investor hereunder and the consummation of the Rights Offering by the Company and the execution and delivery by the Company of this Agreement, the Registration Rights Agreement or the Amended Plan and performance of and compliance by the Company with all of the provisions hereof and thereof and the consummation of the transactions contemplated herein and therein, except (i) the entry of the Court Orders and the expiration, or waiver by the Bankruptcy Court, of the 10-day period set forth in Bankruptcy Rules 6004(h) and 3020(e), as applicable, (ii) the registration under the Securities Act of resales of the Unsubscribed Shares, (iii) filings with respect to and the expiration or termination of the waiting period under the HSR Act relating to the placement of Shares with the Investor, (iv) the filing with the Secretary of State of the State of Delaware of the Certificate of Incorporation to be applicable to the Company from and after the Effective Date and (v) such consents, approvals, authorizations, registrations or qualifications (x) as may be required under NYSE or Nasdaq rules and regulations in order to consummate the transactions contemplated herein, (y) as may be required under state securities or Blue Sky laws in connection with the purchase of the Shares by the Investor or (z) the absence of which will not have or could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (h) Arm’s Length. The Company acknowledges and agrees that the Investor is acting solely in the capacity of an arm’s length contractual counterparty to the Company with respect to the transactions contemplated hereby (including in connection with determining the terms of the offering) and not as a financial advisor or a fiduciary to, or an agent of, the Company or any other person. Additionally, the Investor is not advising the Company or any other person as to any legal, tax, investment, accounting or regulatory matters in any jurisdiction. The Company shall consult with its own advisors concerning such matters and shall be responsible for making their own independent investigation and appraisal of the transactions contemplated hereby, and the Investor shall have no responsibility or liability to the Company with respect thereto. Any review by the Investor of the Company, the transactions contemplated hereby or other matters relating to such transactions will be performed solely for the benefit of the Investor and shall not be on behalf of the Company. (i) Non-public information. As of the date hereof, all material non-public information relevant to the valuation of the Company which has been made available to the Investor has also been made available to the representatives of the Asbestos Claimants Committee. (j) Financial Statements. The financial statements and the related notes thereto of the Company and its consolidated Subsidiaries included or incorporated by reference in the   -8- -------------------------------------------------------------------------------- Disclosure Statement, the Exchange Act Documents (as defined below), and to be included or incorporated by reference in the Registration Statement (as defined below) and the Prospectus, comply in all material respects with the applicable requirements of the Securities Act, the Securities Exchange Act of 1934 and the rules and regulation of the Commission thereunder (the “Exchange Act”) and the Bankruptcy Code, as applicable, and present fairly in all material respects the financial position of the Company and its Subsidiaries as of the dates indicated and the results of their operations and the changes in their cash flows for the periods specified; such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods covered thereby (except as disclosed in the Exchange Act Documents), and the supporting schedules included or incorporated by reference in the Disclosure Statement and the Exchange Act Documents, and to be included or incorporated by reference in the Registration Statement and the Prospectus, present fairly the information required to be stated therein; and the other financial information included or incorporated by reference in the Disclosure Statement and the Exchange Act Documents, and to be included or incorporated by reference in the Registration Statement and the Prospectus, has been derived from the accounting records of the Company and its Subsidiaries and presents fairly the information shown thereby; and the pro forma financial information and the related notes thereto included or incorporated by reference in the Disclosure Statement and the Exchange Act Documents, and to be included in the Registration Statement and the Prospectus, has been prepared in accordance with the applicable requirements of the Securities Act and the Exchange Act, as applicable, and the assumptions underlying such pro forma financial information are reasonable and are set forth in the Disclosure Statement and the Exchange Act Documents and will be set forth in the Registration Statement and the Prospectus when they become effective. Notwithstanding the foregoing, the Investor acknowledges that the financial position of the Company reflected in the financial information included or incorporated by reference in the Disclosure Statement and the Exchange Act Documents, to be included or incorporated by reference in the Registration Statement and the Prospectus, does not reflect implementation of “fresh start” accounting pursuant to Statement of Position 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code” by the American Institute of Certified Public Accountants. (k) Disclosure Statement and Exchange Act Documents. The Disclosure Statement, when it was filed with the Bankruptcy Court, and the documents filed under the Exchange Act with the Commission prior to the date of this Agreement (the “Exchange Act Documents”), when they became effective or were filed with the Commission, as the case may be, conformed in all material respects, in the case of the Disclosure Statement, to the Bankruptcy Code, and in the case of the Exchange Act Documents, to the requirements of the Securities Act or the Exchange Act, as applicable, and none of such Disclosure Statement or Exchange Act Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and any further documents so filed and incorporated by reference in the Disclosure Statement or the Prospectus, as the case may be, when such documents become effective or are filed with the Bankruptcy Court or the Commission, as the case may be, will conform in all material respects to, in the case of the Disclosure Statement, the requirements of the Bankruptcy Code, and in the case of documents filed under the Exchange Act, the requirements of the Exchange Act, as applicable, and will not   -9- -------------------------------------------------------------------------------- contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (l) Preliminary Prospectus. Each Preliminary Prospectus, at the time of filing thereof, will comply in all material respects with the Securities Act and will not contain any 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 the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation and warranty with respect to any statements or omissions made in reliance upon and in conformity with information relating to the Investor furnished to the Company in writing by the Investor expressly for use in any Preliminary Prospectus. As used herein, the term “Preliminary Prospectus” means each prospectus included in such registration statement (and any amendments thereto) before it becomes effective, any prospectus filed with the Commission pursuant to Rule 424(a) under the Securities Act and the prospectus included in the Registration Statement, at the time of their respective effectiveness that omits Rule 430A Information, and the term “Prospectus” means the prospectus in the form first used to confirm sales of the Shares. (m) Registration Statement and Prospectus. As of the effective date of the Registration Statement, the Registration Statement will comply in all material respects with the Securities Act, and will not contain any 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 not misleading; and as of the applicable filing date of the Prospectus and any amendment or supplement thereto and as of the Closing Date, the Prospectus will not contain any 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 the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation and warranty with respect to any statements or omissions made in reliance upon and in conformity with information relating to the Investor or the Ultimate Purchasers furnished to the Company in writing by the Investor or the Ultimate Purchasers expressly for use in the Registration Statement and the Prospectus and any amendment or supplement thereto. (n) No Material Adverse Change. As of the date hereof, since December 31, 2005, (i) there has not been any change in the capital stock or long-term debt of the Company or any of its Subsidiaries, or any dividend or distribution of any kind declared, set aside for payment, paid or made by the Company on any class of capital stock, or any material adverse change, or any development involving a material adverse change, in or affecting the business, properties, management, financial position, stockholders’ equity or results of operations of the Company and its Subsidiaries taken as a whole; (ii) neither the Company nor any of its Subsidiaries has entered into any transaction or agreement that is material to the Company and its Subsidiaries taken as a whole or incurred any liability or obligation, direct or contingent, that is material to the Company and its Subsidiaries taken as a whole; and (iii) neither the Company nor any of its Subsidiaries has sustained 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 disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority, except in each case (x) as otherwise disclosed in the Disclosure Statement or the Exchange Act Documents and (y) the transactions contemplated hereby or by the Settlement Term Sheet.   -10- -------------------------------------------------------------------------------- (o) Descriptions of the Transaction Documents. Each of this Agreement, the Registration Rights Agreement, the Syndication Agreement, the Collars, the Amended Plan, the Agreement Order and the Confirmation Order (collectively, the “Transaction Documents”) will conform in all material respects to the description thereof contained in the Registration Statement and the Prospectus. (p) No Violation or Default. As of the date hereof, neither the Company nor any of its Significant Subsidiaries is in violation of its charter or by-laws or similar organizational documents. As of the date hereof, neither the Company nor any of its Subsidiaries is: (i) except as a result of the Proceedings, in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in 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; or (ii) in violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of clauses (i) and (ii) above, for any such default or violation that would not, individually or in the aggregate, have a Material Adverse Effect. (q) Legal Proceedings. Except as described in the Disclosure Statement or the Exchange Act Documents, as of the date hereof, there are no legal, governmental or regulatory investigations, actions, suits or proceedings pending to which the Company or any of its Subsidiaries is or may be a party or to which any property of the Company or any of its Subsidiaries is or may be the subject that, individually or in the aggregate, if determined adversely to the Company or any of its Subsidiaries, could reasonably be expected to have a Material Adverse Effect or materially and adversely affect the ability of the Company to perform its obligations under the Transaction Documents; as of the date hereof, no such investigations, actions, suits or proceedings are threatened or, to the best knowledge of the Company, contemplated by any governmental or regulatory authority or threatened by others; and as of the date hereof, (i) there are no current or pending legal, governmental or regulatory actions, suits or proceedings that are required under the Exchange Act to be described in the Exchange Act Documents that are not so described and (ii) there are no statutes, regulations or contracts or other documents that are required under the Exchange Act to be filed as exhibits to the Exchange Act Documents or described in the Exchange Act Documents that are not so filed or described. (r) Independent Accountants. PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”), who have certified certain financial statements of the Company and its Subsidiaries are independent public accountants with respect to the Company and its Subsidiaries as required by the Securities Act. (s) Title to Intellectual Property. As of the date hereof, the Company and its Subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented and/or   -11- -------------------------------------------------------------------------------- unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their respective businesses, except where the failure to own or possess any such rights could not reasonably be expected to have a Material Adverse Effect; and as of the date hereof, except as could not reasonably be expected to have a Material Adverse Effect, the conduct of their respective businesses will not conflict in any material respect with any such rights of others, and the Company and its Subsidiaries have not received any notice of any material claim of infringement or conflict with any such material rights of others. (t) No Undisclosed Relationships. As of the date hereof, no relationship, direct or indirect, exists between or among the Company or any of its Subsidiaries, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any of its Subsidiaries, on the other, that is required by the Exchange Act to be described in the Exchange Act Documents and that are not described. (u) Investment Company Act. As of the date hereof, the Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus, will not be required to register as an “investment company” or an entity “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder. (v) Licenses and Permits. As of the date hereof, the Company and its Subsidiaries possess all licenses, certificates, permits and other authorizations issued by, and have made all declarations and filings with, the appropriate federal, state, local or foreign governmental or regulatory authorities that are necessary for the ownership or lease of their respective properties or the conduct of their respective businesses as described in the Disclosure Statement and the Exchange Act Documents, except where the failure to possess or make the same would not, individually or in the aggregate, have a Material Adverse Effect; and as of the date hereof, except as described in the Disclosure Statement and the Exchange Act Documents and except as would not reasonably be expected to have a Material Adverse Effect, neither the Company nor any of its Subsidiaries has received notice of any revocation or modification of any such license, certificate, permit or authorization or has any reason to believe that any such license, certificate, permit or authorization will not be renewed in the ordinary course. (w) Compliance With Environmental Laws. As of the date hereof, the Company and its Subsidiaries (i) are in compliance with any and all applicable federal, state, local and foreign laws, rules, regulations, decisions and orders relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (collectively, “Environmental Laws”); (ii) have received and are in compliance with all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) have not received notice of any actual or potential liability for the investigation or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, except, in the case of each of the clauses (i), (ii) and (iii), as would not, individually or in the aggregate, have a Material Adverse Effect. (x) Compliance With ERISA. As of the date hereof, each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), that is maintained, administered or contributed to by the Company or any   -12- -------------------------------------------------------------------------------- of its affiliates for employees or former employees of the Company and its affiliates has been maintained in compliance with its terms and the requirements of any applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Internal Revenue Code of 1986, as amended (the “Code”), except where the failure to comply with such applicable statutes, orders, rules and regulations would not, individually or in the aggregate, have a Material Adverse Effect, as of the date hereof, no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any such plan excluding transactions effected pursuant to a statutory or administrative exemption, except such transactions that would not, individually or in the aggregate, have a Material Adverse Effect; and for each such plan that is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, no “accumulated funding deficiency” as defined in Section 412 of the Code has, as of the date hereof, been incurred, whether or not waived, and, as of the date hereof, the fair market value of the assets of each such plan (excluding for these purposes accrued but unpaid contributions) exceeds the present value of all benefits accrued under such plan determined using reasonable actuarial assumptions. (y) Accounting Controls. As of the date hereof, the Company and its Subsidiaries maintain systems 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 generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (z) Insurance. As of the date hereof, the Company and its Subsidiaries have insurance covering their respective properties, operations, personnel and businesses, including business interruption insurance, which insurance is in amounts and insures against such losses and risks as are customary for companies whose businesses are similar to the Company and its Subsidiaries; and, as of the date hereof, neither the Company nor any of its Subsidiaries has (i) received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance or (ii) any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage at reasonable cost from similar insurers as may be necessary to continue its business. (aa) No Unlawful Payments. As of the date hereof, neither the Company nor any of its Subsidiaries nor, to the best knowledge of the Company, any director, officer, agent, employee or other person associated with or acting on behalf of the Company or any of its Subsidiaries has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. (bb) No Restrictions on Subsidiaries. Except as described in the Disclosure Statement or otherwise set forth in the record of the Proceedings, and subject to the Bankruptcy Code, no   -13- -------------------------------------------------------------------------------- Subsidiary of the Company is currently prohibited, directly or indirectly, under any agreement or other instrument to which it is a party or is subject, from paying any dividends to the Company, from making any other distribution on such Subsidiary’s capital stock, from repaying to the Company any loans or advances to such Subsidiary from the Company or from transferring any of such Subsidiary’s properties or assets to the Company or any other Subsidiary of the Company. (cc) No Broker’s Fees. Neither the Company nor any of its Subsidiaries is a party to any contract, agreement or understanding with any person (other than this Agreement) that would give rise to a valid claim against the Company or any of its Subsidiaries or the Investor for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Rights or the Shares. (dd) No Registration Rights. Except as will be expressly provided in the Registration Rights Agreement or the Disclosure Statement, no person has the right to require the Company or any of its Subsidiaries to register any securities for sale under the Securities Act by reason of the filing of the Registration Statement with the Commission or the issuance and sale of the Rights and the Shares. (ee) No Stabilization. The Company has not taken, directly or indirectly, any action designed to or that could reasonably be expected to cause or result in any stabilization or manipulation of the price of the Shares. (ff) Business With Cuba. The Company has complied with all provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida) relating to doing business with the Government of Cuba or with any person or affiliate located in Cuba. (gg) Margin Rules. Neither the issuance, sale and delivery of the Rights or the Shares nor the application of the proceeds thereof by the Company as to be described in the Registration Statement and the Prospectus will violate Regulation T, U or X of the Board of Governors of the Federal Reserve System or any other regulation of such Board of Governors. (hh) Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the case of the Disclosure Statement and the Exchange Act Documents, has been made or reaffirmed, and in the case of the Registration Statement and the Prospectus, will be made or reaffirmed, without a reasonable basis or has been disclosed other than in good faith. (ii) Statistical and Market Data. Nothing has come to the attention of the Company that has caused the Company to believe that the statistical and market-related data to be included in the Disclosure Statement, Registration Statement and the Prospectus is not based on or derived from sources that are reliable and accurate in all material respects. 4. Representations and Warranties of the Investor. The Investor represents and warrants to, and agrees with, the Company as set forth below. Each representation, warranty and agreement is made as of the date hereof and as of the Closing Date: (a) Incorporation. The Investor has been duly incorporated and is validly existing as a corporation in good standing under the laws of Delaware.   -14- -------------------------------------------------------------------------------- (b) Corporate Power and Authority. The Investor has the requisite corporate power and authority to enter into, execute and deliver this Agreement and to perform its obligations hereunder and thereunder and has taken all necessary corporate action required for the due authorization, execution, delivery and performance by it of this Agreement and the Registration Rights Agreement. (c) Execution and Delivery. This Agreement has been duly and validly executed and delivered by the Investor and constitutes its valid and binding obligation, enforceable against it in accordance with its terms. (d) Securities Laws Compliance. The Unsubscribed Shares will not be offered for sale, sold or otherwise transferred by the Investor except pursuant to a registration statement or in a transaction exempt from or not subject to registration under the Securities Act and any applicable state securities laws. (e) Sophistication. The Investor has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its investment in the Shares being acquired hereunder. The Investor is an “accredited investor” within the meaning of Rule 501(a) under the Securities Act. The Investor understands and is able to bear any economic risks associated with such investment (including, without limitation, the necessity of holding the Shares for an indefinite period of time). (f) Information. The Investor acknowledges that it has been afforded the opportunity to ask questions and receive answers concerning the Company and to obtain additional information that it has requested to verify the accuracy of the information contained herein. Notwithstanding the foregoing, nothing contained herein will operate to modify or limit in any respect the representations and warranties of the Company or to relieve it from any obligations to the Investor for breach thereof or the making of misleading statements or the omission of material facts in connection with the transactions contemplated herein. 5. Additional Covenants of the Company. The Company agrees with the Investor: (a) Agreement Motion and Agreement Order. To file a motion and supporting papers (the “Agreement Motion”) (including an order in form and substance satisfactory to each of the Company and the Investor) seeking an order of the Bankruptcy Court (the “Agreement Order”) approving this Agreement and the exhibits attached hereto, the Syndication Agreement, the payment of the Backstop Fee, Extension Fee and Termination Fee provided for herein, and the release and exculpation of the Investor, its affiliates, representatives and advisors from any liability for participation in the transactions contemplated hereby, by the Registration Rights Agreement, the Amended Plan and the Syndication Agreement to the fullest extent permitted under applicable law. The Company agrees that it shall use its reasonable best efforts, subject to any applicable fiduciary duties, to (i) fully support the Agreement Motion, and any application seeking Bankruptcy Court approval and authorization to pay the fees and expenses hereunder including the Termination Fee, if any, as an administrative expense of the estate, including, but   -15- -------------------------------------------------------------------------------- not limited to, filing supporting affidavits on behalf of the Company and/or its financial advisor and providing the testimony of the affiants if needed and (ii) obtain approval of the Agreement Order as soon as practicable following the filing of the motion therefor. (b) Amended Plan and Amended Disclosure Statement. To file the Amended Plan (and a related disclosure statement (the “Amended Disclosure Statement”)) in a form that is reasonably satisfactory to the Company and the other Amended Plan Proponents, and that is consistent in all material respects with the Settlement Term Sheet, and to use its reasonable best efforts to obtain the entry of the Confirmation Order by the Bankruptcy Court. The Company will, subject to the reasonable consent of the other Amended Plan Proponents, authorize, execute, file with the Bankruptcy Court and seek confirmation of, an Amended Plan that (i) is consistent in all material respects with this Agreement, (ii) provides for the release and exculpation of the Investor, its affiliates, representatives and advisors to the fullest extent permitted under applicable law, and (iii) has conditions to confirmation and the effective date of the Amended Plan (and to what extent any such conditions can be waived and by whom) that are reasonably consistent with this Agreement. The Company will provide to the Investor and its counsel a copy of the Amended Plan and the Amended Disclosure Statement and a reasonable opportunity to review and comment on such documents prior to such documents being filed with the Bankruptcy Court. In addition, the Company will provide to the Investor and its counsel a copy of the Confirmation Order and a reasonable opportunity to review and comment on such order prior to such order being filed with the Bankruptcy Court. (c) Rights Offering. To effectuate the Rights Offering as provided herein and to use reasonable best efforts to seek entry of an order of the Bankruptcy Court, prior to the commencement of the Rights Offering, authorizing the Company to conduct the Rights Offering pursuant to the securities exemption provisions set forth in section 1145(a) of the Bankruptcy Code. (d) Listing. To use reasonable best efforts to list and maintain the listing of the New Common Stock (and any applicable associated share purchase rights) on the NYSE or the quotation of the New Common Stock (and any applicable associated share purchase rights) on the Nasdaq National Market. (e) Notification. To notify, or to cause the Subscription Agent to notify, on each Friday during the Rights Exercise Period and on each Business Day during the five Business Days prior to the Expiration Time (and any extensions thereto), or more frequently if reasonably requested by the Investor, the Investor of the aggregate number of Rights known by the Company or the Subscription Agent to have been exercised pursuant to the Rights Offering as of the close of business on the preceding Business Day or the most recent practicable time before such request, as the case may be. (f) Unsubscribed Shares. To determine the number of Unsubscribed Shares, if any, in good faith, to provide a Purchase Notice or a Satisfaction Notice that accurately reflects the number of Unsubscribed Shares as so determined and to provide to the Investor a certification by the Subscription Agent of the Unsubscribed Shares or, if such certification is not available, such written backup to the determination of the Unsubscribed Shares as Investor may reasonably request.   -16- -------------------------------------------------------------------------------- (g) Stock Splits, Dividends, etc. In the event of any stock split, stock dividend, stock combination or similar transaction affecting the number of issued and outstanding shares of New Common Stock, the Purchase Price and the number of Unsubscribed Shares to be purchased hereunder will be proportionally adjusted to reflect the increase or decrease in the number of issued and outstanding shares of New Common Stock. (h) HSR. To use its reasonable best efforts to promptly prepare and file all necessary documentation and to effect all applications that are necessary or advisable under the HSR Act so that the applicable waiting period shall have expired or been terminated thereunder with respect to the purchase of Shares hereunder, and not to take any action that is intended or reasonably likely to materially impede or delay the ability of the parties to obtain any necessary approvals required for the transactions contemplated by this Agreement. (i) Effectiveness of the Registration Statement. To use its reasonable best efforts to prepare and file, in cooperation with the Investor, a shelf registration statement (the “Registration Statement”) covering resales of New Common Stock held by the Investor and the Ultimate Purchasers as soon as practicable after the date hereof and provide the Investor with a reasonable opportunity to review and propose changes to the Registration Statement before any filing with the Commission; to advise the Investor, promptly after it receives notice thereof, of the time when the Registration Statement has been filed or has become effective or any prospectus or prospectus supplement has been filed and to furnish the Investor with copies thereof; to advise the Investor promptly after it receives notice thereof of any comments or inquiries by the Commission (and to furnish the Investor with copies of any correspondence related thereto), of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any prospectus, 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. The foregoing provisions, as well as provisions applicable to customary demand and piggyback registration rights, shall be set forth in the Registration Rights Agreement. (j) Clear Market. For a period of 180 days after the Closing Date (unless the Put Agreement (as defined in Section 5(n)) has been entered into, in which case, until the end of the exercise period under the Put Agreements (as defined below)) (the “Restricted Period”), the Company will not (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for capital stock of the Company or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the capital stock of the Company, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of capital stock of the Company or such other securities, in cash or otherwise, without the prior written consent of the Investor, except for (i) Rights and New Common Stock issuable upon exercise of Rights, (ii) shares of New Common Stock issued upon the exercise of any stock options outstanding as of the Effective Date, (iii) the issuance of New Common Stock and other equity interests as set forth in the Settlement Term Sheet and pursuant to the Amended Plan and (iv) the issuance in the aggregate of up to 5% of the outstanding New Common Stock as of the Closing Date. Notwithstanding the foregoing, if (1) during the last 17 days of the Restricted   -17- -------------------------------------------------------------------------------- Period, the Company issues an earnings release or material news or a material event relating to the Company occurs; or (2) prior to the expiration of the Restricted Period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the Restricted Period, the restrictions imposed by this Agreement shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. (k) Use of Proceeds. The Company will apply the net proceeds from the sale of the Rights or the Shares as provided in the Settlement Term Sheet under the heading “Use of Proceeds”. (l) No Stabilization. The Company will not take, directly or indirectly, any action designed to or that could reasonably be expected to cause or result in any stabilization or manipulation of the price of the Shares. (m) Reports. So long as the Investor holds Shares, the Company will furnish to the Investor, as soon as they are available, copies of all reports or other communications (financial or other) furnished to holders of the Rights or the Shares, as the case may be, and copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange or automatic quotation system. (n) Put Agreements; Call Agreements; and Registration Rights Agreements. The Company agrees that it shall file with the Bankruptcy Court no less than 5 Business Days prior to the hearing to approve the Amended Disclosure Statement forms of (i) definitive agreements, reasonably satisfactory to the Investor, relating to obligations of the Ultimate Purchasers to purchase 28.6 million shares of New Common Stock from the Asbestos PI Trust (the “Put Agreements”), and relating to obligations of the Asbestos PI Trust to sell 28.6 million shares of New Common Stock to the Ultimate Purchasers (the “Call Agreements” and together with the Put Agreement, the “Collars”), and (ii) a registration rights agreement (the “Registration Rights Agreement”) in form and substance reasonably satisfactory to the Company and the Investor and which shall include the terms set forth in Exhibit C hereto. The Company and the Investor shall use reasonable best efforts to negotiate and execute, and seek Bankruptcy Court approval of, the Registration Rights Agreement as promptly as practicable; provided that, the Company shall not be required to seek an approval outside of the Confirmation Hearing to approve the Registration Rights Agreement. 6. Additional Covenants of the Investor. The Investor agrees with the Company: (a) Information. To provide the Company with such information as the Company reasonably requests regarding the Investor for inclusion in the Registration Statement and the Disclosure Statement. (b) HSR Act. To use reasonable best efforts to promptly prepare and file all necessary documentation and to effect all applications that are necessary or advisable under the HSR Act so that the applicable waiting period shall have expired or been terminated thereunder with respect to the purchase of Shares hereunder, and not to take any action that is intended or reasonably likely to materially impede or delay the ability of the parties to obtain any necessary approvals required for the transactions contemplated by this Agreement.   -18- -------------------------------------------------------------------------------- (c) To use reasonable efforts to facilitate the entry of the Agreement Order. (d) To not file any pleading or take any other action in the Bankruptcy Court with respect to this Agreement, the Amended Plan, the Amended Disclosure Statement or the Confirmation Order of the consummation of the transactions contemplated hereby or thereby that is inconsistent in any material respect with this Agreement or the Company’s efforts to obtain the entry of court orders consistent with this Agreement. (e) Document Approval. To approve the documents listed in subparts (i) through (iii) of Section 7(b) within the time limits set forth therein so long as such documents satisfy the criteria set forth in subparts (i) through (iii) of such section. 7. Conditions to the Obligations of the Investor. The obligation of the Investor to purchase the Unsubscribed Shares pursuant to the Backstop Commitment on the Closing Date are subject to the following conditions: (a) Agreement Order. The Agreement Order shall have been entered by the Bankruptcy Court in the form satisfactory to each of the Company and the Investor, and the Agreement Order shall have become a Final Agreement Order. (b) Approval of Amended Plan. The Investor shall have approved in writing (i) prior to filing with the Bankruptcy Court, a draft of the Amended Plan that (A) is consistent in all material respects with this Agreement, (B) is consistent in all material respects with the Settlement Term Sheet, (C) provides for the release and exculpation of the Investor, its affiliates, representatives and advisors to the fullest extent permitted under applicable law, and (D) has conditions to confirmation and the effective date of the plan (and to what extent any such conditions can be waived and by whom) that are consistent with this Agreement in all material respects; (ii) prior to filing with the Bankruptcy Court, a draft of the Amended Disclosure Statement that is consistent in all material respects with the Amended Plan as it relates to this Agreement; (iii) prior to filing with the Bankruptcy Court, a draft of the Confirmation Order, that is consistent in all material respects with the provisions of the Amended Plan specified in 7(b)(i)(A)-(D) above; and (iv) prior to filing with the Bankruptcy Court, drafts of any amendments or supplements to any of the foregoing, to the extent any such amendment or supplement effects a material change to the Amended Plan as it relates to this Agreement or any change to the total amount of or conditions to the payments made or to be made under this Agreement. (c) Inconsistent Transaction. Subject to the approval of this Agreement by the Bankruptcy Court, the Company shall not have made a public announcement, entered into an agreement, or filed any pleading or document with the Bankruptcy Court, evidencing its intention to support, or otherwise supported, any transaction inconsistent with the Amended Plan approved by the Investor in accordance with Section 7(b) or this Agreement (a “Competing Transaction”).   -19- -------------------------------------------------------------------------------- (d) Confirmation Order. The Confirmation Order shall have been entered by the Bankruptcy Court and such order shall be non-appealable, shall not have been appealed within ten calendar days of entry or, if such order is appealed, shall not have been stayed pending appeal, and there shall not have been entered by any court of competent jurisdiction any reversal, modification or vacatur, in whole or in part, of the Confirmation Order. (e) Amended Plan and Confirmation Order. The Amended Plan, as approved, and the Confirmation Order as entered, by the Bankruptcy Court, shall be in the form approved by Investor in accordance with Section 7(b), with such amendments, modifications or changes that (i) are consistent in all respects with this Agreement, (ii) are consistent in all material respects with the form of the Amended Plan and the Confirmation Order approved by the Investor pursuant to Section 7(b), (iii) provide for the release and exculpation of the Investor, its affiliates, representatives and advisors to the fullest extent permitted under applicable law and (iv) otherwise are consistent in all material respects with the Settlement Term Sheet. (f) Conditions to Confirmation. The conditions to confirmation and the conditions to the effective date of the Amended Plan have been satisfied or waived by the Company and the other Amended Plan Proponents in accordance with the Amended Plan, and the Effective Date shall have occurred or will occur on the Closing Date. (g) Registration Statement. The Registration Statement shall be effective not later than the Effective Date and no stop order shall have been entered by the Commission with respect thereto. (h) Rights Offering. The Company shall have commenced the Rights Offering, the Rights Offering shall have been conducted in accordance with Section 1145 under the Bankruptcy Code and in all material respects in accordance with this Agreement and the Expiration Time shall have occurred. (i) Purchase Notice. The Investor shall have received a Purchase Notice in accordance with Section 1(f) from the Company, dated as of the Determination Date, certifying as to the number of Unsubscribed Shares to be purchased pursuant to the Backstop Commitment. (j) Valid Issuance. The New Common Stock shall be, upon payment of the aggregate Purchase Price as provided herein, validly issued, fully paid, non-assessable and free and clear of all taxes, liens, pre-emptive rights, rights of first refusal, subscription and similar rights. (k) No Restraint. No judgment, injunction, decree or other legal restraint shall prohibit the consummation of the Amended Plan, the Rights Offering or the transactions contemplated by this Agreement. (l) Extension Fee. If required by Section 10(a)(ii), the Investor shall have received payment of the Extension Fee; the Extension Fee, if any, shall not have been required to be repaid, by the Bankruptcy Court or otherwise, to the Company.   -20- -------------------------------------------------------------------------------- (m) HSR Act. If any of the purchase of Shares by the Investor pursuant to this Agreement, the purchase of Shares from the Asbestos PI Trust (as defined in the Settlement Term Sheet) pursuant to the agreements referred to in Section 10(a)(vi) hereof or the purchases from the Investor under the Syndication Agreement is subject to the terms of the HSR Act, the applicable waiting period shall have expired or been terminated thereunder with respect to such purchase. (n) Enforceability. This Agreement shall be valid and enforceable against the Company and the Company shall not be in breach of this Agreement. (o) NYSE/Nasdaq. The New Common Stock issuable upon exercise of the Rights shall be approved for trading on the NYSE or Nasdaq, subject to official notice of issuance. (p) Comfort Letters. On the date of this Agreement and on the Closing Date, PricewaterhouseCoopers shall have furnished to the Investor, at the request of the Company, letters, dated the respective dates of delivery thereof and addressed to the Investor, in form and substance reasonably satisfactory to the Investor, containing statements and information of the type customarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained or incorporated by reference in the Registration Statement and the Prospectus; provided, that the letter delivered on the Closing Date shall use a “cut-off” date no more than three business days prior to such Closing Date. (q) Opinion of Counsel for the Company. Sidley Austin LLP, counsel for the Company, shall have furnished to the Investor, at the request of the Company, their written opinion and negative assurance statement relating to the Registration Statement and Prospectus1, dated the Closing Date and addressed to the Investor, in form and substance reasonably satisfactory to the Investor. (r) No Legal Impediment to Issuance. No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued in each by any federal, state or foreign governmental or regulatory authority that, as of the Closing Date, prohibits the issuance or sale of the Rights or the Shares or the resale of the Shares pursuant to the Syndication Agreement; and no injunction or order of any federal, state or foreign court shall have been issued that, as of the Closing Date, prohibits the issuance or sale of the Rights or the Shares or the resale of the Shares pursuant to the Syndication Agreement. (s) Good Standing. The Investor shall have received on and as of the Closing Date satisfactory evidence of the good standing of the Company and its Significant Subsidiaries (as such term is defined in Article 1, Rule 1-02 of Regulation S-X promulgated pursuant to the Securities Act) in their respective jurisdictions of organization, in each case in writing or any standard form of telecommunication from the appropriate governmental authorities of such jurisdictions. (t) Representations and Warranties and Covenants. The representations and warranties of the Company in paragraphs (a)-(h), (j)-(m), (o), (r) and (bb)-(ii) of Section 3 shall   -------------------------------------------------------------------------------- 1 Containing a 10b-5 statement.   -21- -------------------------------------------------------------------------------- be true and correct on the date hereof and as if made on the Closing Date, the representations and warranties of the Company in paragraphs (i), (n), (p), (q) and (s)-(aa) of Section 3 shall be true and correct on the date hereof (and shall not be required to be true on any subsequent date) and the Company shall have complied in all material respects with all covenants to this Agreement and the Registration Rights Agreement. (u) Officer’s Certificate. The Investor shall have received on and as of the Closing Date a certificate of the chief financial officer or chief accounting officer of the Company and one additional senior executive officer of the Company who is satisfactory to the Investor (i) confirming that such officers have carefully reviewed the Registration Statement and the Prospectus and, to the best knowledge of such officers, the information set forth therein is true and correct, (ii) confirming that the Company has satisfied all conditions on its part to be performed or satisfied hereunder at or prior to such Closing Date and (iii) to the effect set forth in Sections 7(g) and 7(t) above. (v) Bankruptcy Court Approval. The Collars and the Registration Rights Agreement shall have been approved by the Bankruptcy Court and shall have been executed by the parties thereto in substantially the same form as the forms thereof filed with the Bankruptcy Court. 8. Indemnification. (a) Subject to the approval of this Agreement by the Bankruptcy Court, whether or not the Rights Offering is consummated or this Agreement or the Backstop Commitment is terminated, the Company (in such capacity, the “Indemnifying Party”) shall indemnify and hold harmless the Investor and Ultimate Purchasers, their respective affiliates and their respective officers, directors, employees, agents and controlling persons (each an “Indemnified Person”) from and against any and all losses, claims, damages, liabilities and reasonable expenses, joint or several, to which any such Indemnified Person may become subject arising out of or in connection with any claim, challenge, litigation, investigation or proceeding with respect to the Rights Offering, the Backstop Commitment, the Transaction Documents, the Registration Statement or the Prospectus or the transactions contemplated thereby, including without limitation, payment of the Extension Fee, the Backstop Fee, or Termination Fee (as defined below), if any, distribution of Rights, purchase and sale of Shares in the Rights Offering and purchase and sale of Shares pursuant to the Backstop Commitment, or any breach of the Company of this Agreement or the Registration Rights Agreement, regardless of whether any of such Indemnified Persons is a party thereto, and to reimburse such Indemnified Persons for any reasonable legal or other reasonable out-of-pocket expenses as they are incurred in connection with investigating, responding to or defending any of the foregoing, provided that the foregoing indemnification will not, as to any Indemnified Person, apply to losses, claims, damages, liabilities or expenses to the extent that they are finally judicially determined to have resulted from (i) bad faith, gross negligence or willful misconduct on the part of such Indemnified Person or (ii) statements or omissions in the Registration Statement or Prospectus or any amendment or supplement thereto made in reliance upon or in conformity with information relating to the Investor or the Ultimate Purchaser furnished to the Company in writing by or on behalf of the Investor or the Ultimate Purchaser expressly for use in the Registration Statement or Prospectus or any amendment or supplement thereto. If for any reason the foregoing indemnification is unavailable to any Indemnified Person or insufficient to hold it harmless, then the Indemnifying   -22- -------------------------------------------------------------------------------- Party shall contribute to the amount paid or payable by such Indemnified Person as a result of such loss, claim, damage, liability or expense in such proportion as is appropriate to reflect not only the relative benefits received by the Indemnifying Party on the one hand and such Indemnified Person on the other hand but also the relative fault of the Indemnifying Party, on the one hand, and such Indemnified Person, on the other hand, as well as any relevant equitable considerations. It is hereby agreed that the relative benefits to the Indemnifying Party on the one hand and all Indemnified Persons on the other hand shall be deemed to be in the same proportion as (i) the total value received or proposed to be received by the Company pursuant to the sale of Shares contemplated by this Agreement bears to (ii) the fee paid or proposed to be paid to the Investor in connection with such sale. The Indemnifying Party also agree that no Indemnified Person shall have any liability based on their exclusive or contributory negligence or otherwise to the Indemnifying Party, any person asserting claims on behalf of or in right of any of the Indemnifying Party, or any other person in connection with or as a result of the Rights Offering, the Backstop Commitment, the Transaction Documents, the Registration Statement, the Prospectus or the transactions contemplated thereby, except as to any Indemnified Person to the extent that any losses, claims, damages, liability or expenses incurred by the Company are finally judicially determined to have resulted from (i) bad faith, gross negligence or willful misconduct of such Indemnified Person in performing the services that are the subject of this Agreement or the Registration Rights Agreement or (ii) statements or omissions in the Registration Statement or Prospectus or any amendment or supplement thereto made in reliance upon or in conformity with information relating to the Investor or the Ultimate Purchaser furnished to the Company in writing by or on behalf of the Investor or the Ultimate Purchaser expressly for use in the Registration Statement or Prospectus or any amendment or supplement thereto; provided, however, that in no event shall an Indemnified Person or such other parties have any liability for any indirect, consequential or punitive damages in connection with or as a result of any of their activities related to the foregoing. The indemnity, reimbursement and contribution obligations of the Indemnifying Party under this Section 8 shall be in addition to any liability that the Indemnifying Party may otherwise have to an Indemnified Person and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Indemnifying Party and any Indemnified Person. (b) Promptly after receipt by an Indemnified Person of notice of the commencement of any claim, litigation, investigation or proceeding relating to the Transaction Documents, the Registration Statement, the Prospectus or any of the transactions contemplated thereby (“Proceedings”), such Indemnified Person will, if a claim is to be made hereunder against the Indemnifying Party in respect thereof, notify the Indemnifying Party in writing of the commencement thereof; provided that (i) the omission so to notify the Indemnifying Party will not relieve it from any liability that it may have hereunder except to the extent it has been materially prejudiced by such failure and (ii) the omission so to notify the Indemnifying Party will not relieve it from any liability that it may have to an Indemnified Person otherwise than on account of this Section 8. In case any such Proceedings are brought against any Indemnified Person 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 elect by written notice delivered to such Indemnified Person, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Person, provided that if the defendants in any such Proceedings include both such Indemnified Person and the Indemnifying Party and such Indemnified Person   -23- -------------------------------------------------------------------------------- shall have concluded that there may be legal defenses available to it that are different from or additional to those available to the Indemnifying Party, such Indemnified Person shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such Proceedings on behalf of such Indemnified Person. Upon receipt of notice from the Indemnifying Party to such Indemnified Person of its election so to assume the defense of such Proceedings and approval by such Indemnified Person of counsel, the Indemnifying Party shall not be liable to such Indemnified Person for expenses incurred by such Indemnified Person in connection with the defense thereof (other than reasonable costs of investigation) unless (i) such Indemnified Person shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the Indemnifying Party shall not be liable for the expenses of more than one separate counsel, approved by Investor, representing the Indemnified Persons who are parties to such Proceedings), (ii) the Indemnifying Party shall not have employed counsel reasonably satisfactory to such Indemnified Person to represent such Indemnified Person within a reasonable time after notice of commencement of the Proceedings or (iii) the Indemnifying Party shall have authorized in writing the employment of counsel for such Indemnified Person. (c) The Indemnifying Party shall not be liable for any settlement of any Proceedings effected without its written consent (which consent shall not be unreasonably withheld). If any settlement of any Proceeding is consummated with the written consent of the Indemnifying Party or if there is a final judgment for the plaintiff in any such Proceedings, the Indemnifying Party agrees to indemnify and hold harmless each Indemnified Person from and against any and all losses, claims, damages, liabilities and expenses by reason of such settlement or judgment in accordance with, and subject to the limitations of, the provisions of this Section 8. Notwithstanding anything in this Section 8 to the contrary, if at any time an Indemnified Person shall have requested the Indemnifying Party to reimburse such Indemnified Person for legal or other expenses in connection with investigating, responding to or defending any Proceedings as contemplated by this Section 8, the Indemnifying Party shall be liable for any settlement of any Proceedings effected without its written consent if (i) such settlement is entered into more than (x) 60 days after receipt by the Indemnifying Party of such request for reimbursement and (y) 30 days after receipt by the Indemnified Party of the material terms of such settlement and (ii) the Indemnifying Party shall not have reimbursed such Indemnified Person in accordance with such request prior to the date of such settlement. The Indemnifying Party shall not, without the prior written consent of an Indemnified Person (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened Proceedings in respect of which indemnity has been sought hereunder by such Indemnified Person unless (a) such settlement includes an unconditional release of such Indemnified Person in form and substance satisfactory to such Indemnified Person from all liability on the claims that are the subject matter of such Proceedings and (b) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person. 9. Survival of Representations and Warranties, Etc. Notwithstanding any investigation at any time made by or on behalf of any party hereto, all representations and warranties made in this Agreement will survive the execution and delivery of this Agreement and the Closing Date, except that the representations and warranties made in Sections 3(i), (n), (p) (q) and (s)-(aa) will only survive for a period of three (3) years after the Closing Date.   -24- -------------------------------------------------------------------------------- 10. Termination. (a) The Investor may terminate this Agreement: (i) On or after June 30, 2006, if the Bankruptcy Court has not entered the Agreement Order; (ii) On or after October 31, 2006; provided that if the Company notifies the Investor in writing by 3:00 p.m. New York City time on or before October 24, 2006 that it wishes to extend such date until December 15, 2006, then the Investor may not terminate pursuant to this paragraph (a)(ii) until December 15, 2006, provided that, as a condition to the effectiveness of such extension, the Company has paid to the Investor not later than 3:00 p.m. New York City time on October 31, 2006, a fee (the “Extension Fee”) in the amount of $30,000,000, which amount will be paid to the Investor by the Company by wire transfer of immediately available funds; (iii) Upon the failure of the Company to pay the Extension Fee, if any, when due; (iv) Upon the failure of any of the conditions set forth in Section 7 hereof to be satisfied, which failure cannot be cured by October 31, 2006 or, if the Extension Fee has been paid, December 15, 2006; or (v) If the Company makes a public announcement, enters into an agreement, or files any pleading or document with the Bankruptcy Court, evidencing its intention to support, or otherwise supports, any Competing Transaction. (b) Prior to the entry of the Agreement Order, the Company may provide written notice to the Investor of its determination not to proceed with the transactions contemplated hereby, whereupon this Agreement will terminate. (c) If this Agreement is terminated pursuant to Section 10(b) and at the time of such termination the Investor is in compliance in all material respects with this Agreement, then, subject to the approval of the Bankruptcy Court, the Company shall pay the Investor $20,000,000 (the “Termination Fee”), and, in any case, the Company shall pay to the Investor any Transaction Expenses and any other amounts certified by the Investor to be due and payable hereunder that have not been paid theretofore. Payment of the amounts due under this Section 10(c), will be made by wire transfer of federal (same day) funds to the account specified by the receiving party at least 24 hours in advance to the other party hereto. The provision for the payment of the Termination Fee is an integral part of the transactions contemplated by this Agreement and without this provision the Investor would not have entered into this Agreement and shall, subject to the approval of the Bankruptcy Court, constitute an administrative expense of the Company under section 364(c)(1) of the Bankruptcy Code. Accordingly, if payment shall become due and payable pursuant to this Section, and suit is commenced which results in a final judgment against the Company no longer subject to appeal, the Company shall pay to the Investor its costs and expenses, including attorneys’ fees, in connection with collecting or enforcing its rights and remedies hereunder.   -25- -------------------------------------------------------------------------------- (d) In no event will the Termination Fee, if any, be refundable upon termination of this Agreement pursuant to this Section 10. (e) Upon termination under this Section 10, the covenants and agreements made by the parties herein under Sections 8, 9 and 11 through 18 will survive indefinitely in accordance with their terms. 11. Notices. All notices and other communications in connection with this Agreement will be in writing and will be deemed given (and will be deemed to have been duly given upon receipt) if delivered personally, sent via electronic facsimile (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with confirmation) to the parties at the following addresses (or at such other address for a party as will be specified by like notice):   (a) If to Investor, to: J.P. Morgan Securities Inc. 270 Park Avenue, 17th Floor New York, New York 10017 Attention: Mr. Stanley Lim, Operations Group Fax: (212) 270-2157 with copies to: Stroock & Stroock & Lavan LLP 180 Maiden Lane New York, New York 10038 Attention: Lewis Kruger                     Brett Lawrence Fax: (212) 806-6006 and to: Simpson Thacher & Bartlett LLP 425 Lexington Ave, New York New York 10017 Attention: Michael D. Nathan                     Mark Thompson Fax: (212) 455-2502   (b) If to the Company, to: Owens Corning One Owens Corning Parkway Toledo, Ohio 43659 Attention: Michael Thaman                     Stephen Krull Fax:                        -26- -------------------------------------------------------------------------------- with a copy to: Sidley Austin LLP One South Dearborn Chicago, Illinois 60603 Attention: Larry A. Barden       James R. Looman Fax: (312) 853-7036 12. Assignment; Third Party Beneficiaries. Neither this Agreement nor any of the rights, interests or obligations under this Agreement will be assigned by any of the parties (whether by operation of law or otherwise) without the prior written consent of the other party. Notwithstanding the previous sentence, this Agreement, or the Investor’s obligations hereunder, may be assigned, delegated or transferred, in whole or in part, by the Investor to any Affiliate (as defined in Rule 12b-2 under the Exchange Act) of the Investor over which the Investor or any of its Affiliates exercises investment authority, including, without limitation, with respect to voting and dispositive rights; provided, that any such assignee assumes the obligations of the Investor hereunder and agrees in writing to be bound by the terms of this Agreement in the same manner as the Investor. Notwithstanding the foregoing or any other provisions herein, no such assignment will relieve the Investor of its obligations hereunder if such assignee fails to perform such obligations. Except as provided in Section 8 with respect to the Indemnified Parties, this Agreement (including the documents and instruments referred to in this Agreement) is not intended to and does not confer upon any person other than the parties hereto any rights or remedies under this Agreement. 13. Prior Negotiations; Entire Agreement. This Agreement (including the agreements attached as exhibits to and the documents and instruments referred to in this Agreement) constitutes the entire agreement of the parties and supersedes all prior agreements, arrangements or understandings, whether written or oral, between the parties with respect to the subject matter of this Agreement, except that the parties hereto acknowledge that any confidentiality agreements heretofore executed among the parties will continue in full force and effect. 14. GOVERNING LAW; VENUE. THIS AGREEMENT WILL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE. THE INVESTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF, AND VENUE IN, THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS. 15. Counterparts. This Agreement may be executed in any number of counterparts, all of which will be considered one and the same agreement and will become effective when counterparts have been signed by each of the parties and delivered to the other party (including via facsimile or other electronic transmission), it being understood that each party need not sign the same counterpart.   -27- -------------------------------------------------------------------------------- 16. Waivers and Amendments. This Agreement may be amended, modified, superseded, cancelled, renewed or extended, and the terms and conditions of this Agreement may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance, and subject, to the extent required, to the approval of the Bankruptcy Court. No delay on the part of any party in exercising any right, power or privilege pursuant to this Agreement will operate as a waiver thereof, nor will any waiver on the part of any party of any right, power or privilege pursuant to this Agreement, nor will any single or partial exercise of any right, power or privilege pursuant to this Agreement, preclude any other or further exercise thereof or the exercise of any other right, power or privilege pursuant to this Agreement. The rights and remedies provided pursuant to this Agreement are cumulative and are not exclusive of any rights or remedies which any party otherwise may have at law or in equity. 17. Headings. The headings in this Agreement are for reference purposes only and will not in any way affect the meaning or interpretation of this Agreement. 18. Specific Performance. The parties acknowledge and agree that any breach of the terms of this Agreement would give rise to irreparable harm for which money damages would not be an adequate remedy, and, accordingly, the parties agree that, in addition to any other remedies, each will be entitled to enforce the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy of money damages as a remedy and without the necessity of posting bond. 19. Modifications Necessary to Reflect Corporate Restructuring. The Amended Plan currently contemplates that, on the Effective Date, the Company intends to effect a restructuring plan which would organize the Company and its subsidiaries along the Company’s major business lines. This restructuring plan may result in the creation of a new Delaware company to serve as the parent corporation and holding company for the Company and its subsidiaries (“Holdco”). To the extent that such plan to create the Holdco structure is pursued with the approval of the Bankruptcy Court, the parties hereto shall consider in good faith making appropriate modifications to this Agreement and the Registration Rights Agreement to accommodate the Holdco structure. [Signature Page Follows]   -28- -------------------------------------------------------------------------------- If the foregoing is in accordance with your understanding, please sign and return to us a counterpart hereof, and upon the acceptance hereof by you, this letter and such acceptance hereof will constitute a binding agreement between you and (subject to the approval of the Bankruptcy Court) the Company.   Very truly yours, OWENS CORNING By:     Name:   Title:     Accepted as of the date hereof: J.P. MORGAN SECURITIES INC. By:     Name:   Title:   [Signature Page of Equity Commitment Agreement]

  Exhibit 10.2 CHANGE-IN-CONTROL EXECUTIVE SEVERANCE AGREEMENT This Change-in-Control Executive Severance Agreement (this “Agreement”), dated and effective January 23, 2006, is between Ace Cash Express, Inc., a Texas corporation (the “Company”), and Jay B. Shipowitz (the “Executive”). Statement of Purpose The Company desires, for its continued success, to have the benefit of services of experienced management personnel like the Executive. The Board of Directors of the Company therefore believes that it is in the best interest of the Company that, in the event of any prospective change in control of the Company, the Executive be reasonably secure in his employment and position with the Company, so that the Executive can exercise independent judgment as to the best interest of the Company and its shareholders, without distraction by any personal uncertainties or risks regarding the Executive’s continued employment with the Company created by the possibility of a change in control of the Company. Therefore, the Company and the Executive entered into a Change-in-Control Executive Severance Agreement dated August 20, 1998, which was amended and superseded by a Change-in-Control Executive Severance Agreement dated July 1, 2004 (the “Previous Severance Agreement”), to assure severance benefits to the Executive in connection with certain terminations of employment upon or after a change in control of the Company, and they now wish to amend and supersede the Previous Severance Agreement with this Agreement to effect the same purpose. Agreement In consideration of the statements made in the Statement of Purpose and the mutual agreements set forth below, the Company and the Executive agree as follows: 1.   Definitions and Interpretation. Various terms used in this Agreement are defined in Exhibit A; each of the defined terms used in this Agreement begins with a capital letter. Various interpretative matters for this Agreement are also set forth in Exhibit A. Exhibit A is an integral part of this Agreement and is incorporated in this Agreement by reference.   2.   Term of Agreement. This Agreement will continue in effect until the earlier of:   (a)   The termination or cessation of the Executive’s employment with the Company under the Employment Agreement, or the termination of the Employment Agreement, before a Change in Control.     (b)   The Company’s performance of all of its obligations, and the Executive’s receipt of all of the payments and benefits to which he is entitled, under this Agreement after a Severance Payment Event. 3.   Severance Benefits. Upon a Severance Payment Event, in addition to any other -1- --------------------------------------------------------------------------------       severance or employment-termination compensation or benefits to which the Executive may be entitled from the Company or any Subsidiary under the terms of any Plan of which the Executive was a participant or a beneficiary immediately before the Severance Payment Event, the Company shall:   (a)   Pay the Executive in cash, within five Business Days after the Severance Payment Event, all of his Base Salary and all other earned but unpaid cash compensation or entitlements due to the Executive through (and including) the date of the Severance Payment Event, including unused earned and accrued vacation pay and unreimbursed reimbursable business expenses.     (b)   Make the Severance Payment in cash within five Business Days after the Severance Payment Event.     (c)   Provide or arrange to provide the Executive (whether or not under any Welfare Benefit Plan then maintained), at the Company’s sole expense and for the Benefit Continuation Period, Welfare Benefits that are substantially the same the Welfare Benefits provided to the Executive (and the Executive’s dependents and beneficiaries) immediately before the Severance Payment Event, except that the Welfare Benefits to which the Executive is entitled under this subsection (c) will be subject to the Executive’s compliance with Section 4 and will be reduced to the extent that comparable welfare benefits are received by the Executive from an employer other than the Company or any Subsidiary during the Benefit Continuation Period. (The fact that the cost of the participation by the Executive, or the Executive’s dependents or beneficiaries, in any Welfare Benefit Plan was paid indirectly by the Company, as a reimbursement or a credit to the Executive, before the Severance Payment Event does not mean that the corresponding Welfare Benefits were not “provided to the Executive” by the Company for the purpose of this subsection (c).) (d)   In addition, each Stock Award outstanding immediately before the Severance Payment Event and not yet exercised or forfeited (as the case may be) will accelerate and become fully vested, exercisable, or nonforfeitable upon the Severance Payment Event, as though all requisite time had passed to vest the Stock Award or cause it to become exercisable or nonforfeitable. 4.   Nondisclosure and Noncompetition. As an inducement to the Company to enter into this Agreement, the Executive represents to and covenants with or in favor of the Company as follows:   (a)   The Executive has acquired and will acquire during his employment with the Company knowledge or awareness of various Trade Secrets. All of the Trade Secrets are valuable, special, and unique assets of the Company, and the disclosure of any of them, or their use in any manner, other than on behalf of the Company would cause substantial injury, loss of profits, and loss of goodwill to the Company.     (b)   During his employment with the Company and at all times thereafter, the Executive shall not, directly or indirectly, disclose or disseminate any Trade -2- --------------------------------------------------------------------------------         Secret to any other Person or lecture upon, publish articles concerning, or otherwise use or employ any Trade Secret, except (in any case) to the extent required in the course of his employment with the Company or by applicable law, rule, or regulation (including legal process). In addition, all Trade Secrets and materials containing Trade Secrets prepared or compiled by the Executive or furnished or made available to him during his employment with the Company are the sole and exclusive property of the Company, and none of those Trade Secrets or materials containing Trade Secrets may be retained by the Executive upon or following any termination of his employment with the Company.     (c)   If the Executive’s employment with the Company terminates (other than because of the Executive’s death or Disability) upon or before the termination of this Agreement, the Executive shall not, at any time during the first year after that termination of employment anywhere in the Restricted Territory, directly or indirectly engage in any activity which, or any activity for any enterprise or entity a material part of the business of which, is competitive with the business conducted, or proposed during his employment with the Company to be conducted, by the Company. The activity prohibited by the preceding sentence includes any kind of ownership (other than ownership of securities of a publicly held entity of which the Executive owns less than 1% of a class of outstanding securities) in or of, or acting as a director, officer, agent, employee, or consultant of or for, any enterprise or entity referred to in the preceding sentence.     (d)   The Executive acknowledges and agrees that the restrictions in this Section 4 are reasonable and not unduly burdensome to him under the circumstances.     (e)   The Executive’s compliance with this Section 4 and with the post-employment restrictive covenants in the Employment Agreement is a condition to the Company’s obligation to continue to provide Welfare Benefits to the Executive under subsection (c) of Section 3 and to make one or more Gross-Up Payments to the Executive under Section 5; the Company may refuse to continue providing those Welfare Benefits or to make all or any Gross-Up Payment if there is any such noncompliance, as reasonably determined by the Board. For the purpose of this Agreement only, the Company shall have the burden of proof regarding any question of the Executive’s compliance or noncompliance with this Section 4 or to make all or any Gross-Up Payment.      5. Excise Taxes.   (a)   If all or any portion of the Total Severance Benefits, determined without regard to any additional payments required under this Section 5 (a “Payment”), would be subject to the Excise Tax, then the Executive shall be entitled to receive an additional payment (“Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment, multiplied by the percentage set forth -3- --------------------------------------------------------------------------------         below corresponding to the Per Share Change-in-Control Price:           Per Share Change-in-Control Price   Percentage Less than $29     0 % $29 to less than $33     25 % $33 to less than $37     50 % $37 to less than $41     75 % $41 or more     100 %   (b)   Subject to subsection (c) of this Section 5, all determinations required to be made under this Section 5, including whether and when a Gross-Up Payment is required, the amount of any Gross-Up Payment, and the assumptions to be used in arriving at such determination, shall be made by the Accounting Firm, which shall be retained to provide detailed supporting calculations to the Parties within 15 Business Days of the Accounting Firm’s receipt of written notice from the Company or the Executive that there has been a Payment or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be paid solely by the Company. Each determination by the Accounting Firm shall be binding upon the Parties. Any Gross-Up Payment determined to be due to the Executive shall be paid by the Company within five Business Days of the Company’s receipt of the Accounting Firm’s determination. 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, it is possible that Gross-Up Payments which will not have been made by the Company should have been made consistent with the calculations required to be made under this Section 5 (“Underpayment”). If the Company exhausts its remedies under subsection (c) of this Section 5 and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred, and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.     (c)   The Executive shall Notify the Company of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. That Notice shall be given as soon as practicable, but no later than ten Business Days, after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid or appealed. The Executive shall not pay any amount required by such claim before the expiration of the 30-day period following the date on which he gives such Notice (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company Notifies the Executive before the expiration of such period that it desires to contest such claim, the Executive shall: -4- --------------------------------------------------------------------------------     (i)   give the Company any information reasonably requested by the Company relating to such claim,     (ii)   take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including accepting representation with respect to such claim by counsel or accountants (or both) selected by the Company and reasonably acceptable to the Executive,     (iii)   cooperate with the Company in good faith in order to effectively contest such claim, and     (iv)   permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify the Executive, 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 limiting the foregoing provisions of this subsection (c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings, and conferences with the taxing authority in respect of such claim and may, at its sole option, direct the Executive either to pay the tax claimed and sue for a refund or to contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction, and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify the Executive, 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 provided further, however, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Further, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable under this Section 5, and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.   (d)   If, after the Executive’s receipt of an amount advanced by the Company under subsection (c) of this Section 5, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company’s -5- --------------------------------------------------------------------------------         complying with the requirements of subsection (c) of this Section 5) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the Executive’s receipt of an amount advanced by the Company under subsection (c) of this Section 5, a determination is made that the Executive is not entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund within 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 the Gross-Up Payment required to be paid. 6.   Executive’s Legal Expenses. The Company shall pay the Executive an amount equal to the reasonable legal fees and other expenses incurred in good faith by him in obtaining or retaining payments and benefits under this Agreement, including all such fees and expenses (if any) in enforcing, in good faith, any right or benefit provided by this Agreement or in connection with the contest or defense of any tax audit or proceeding by the Internal Revenue Service to the extent that Section 4999 of the Code is alleged or claimed to apply to any payment or benefit provided under this Agreement. The Company will be obligated under the preceding sentence even if the Executive is not successful in any enforcement claim or counterclaim by him, or in any such tax contest or defense, so long as he acted in good faith. The Company shall make any payment required by this Section 6 within five Business Days after Notice from the Executive requesting payment and providing such evidence of the incurrence of those fees and expenses as the Company may reasonably request. 7.   No Mitigation. If a Severance Payment Event occurs, the Executive need not seek other employment or attempt in any way to reduce the amount of any payments or benefits to the Executive by the Company under this Agreement. The amount of the Severance Payment and, except as stated in subsection (c) of Section 3 and in subsection (e) of Section 4, any other severance benefit provided or to be provided to the Executive by the Company under Section 3 or under Section 5 shall not be reduced by any compensation earned by the Executive as the result of any other employment, consulting relationship, or other business activity. 8.   No Set-off. The Company’s obligations under this Agreement are absolute and unconditional, and not subject to any set-off, counterclaim, recoupment, defense, or other right that the Company or any Subsidiary may have against the Executive, except as stated in subsection (c) of Section 3 and in subsection (e) of Section 4. 9.   Tax Withholding. The Company shall withhold from any payments or benefits under this Agreement (whether or not otherwise acknowledged under this Agreement) all federal, state, local, or other taxes as may be legally required to be withheld. 10.   Employment Status. Nothing in this Agreement provides the Executive with any continued employment with the Company or any Subsidiary or shall interfere with the Company’s right to terminate the Executive’s employment at any time and for any (or no) reason (subject to the Company’s obligations under the Employment Agreement). -6- --------------------------------------------------------------------------------   11.   No Exclusivity. Nothing in this Agreement prevents or limits the Executive’s participation in any Plan for which the Executive may qualify or shall impair any rights that the Executive may have under any other contract or agreement with the Company or any Subsidiary. 12.   Governing Law; Jurisdiction. All matters or issues relating to the interpretation, construction, validity, and enforcement of this Agreement shall be governed by the laws of Texas, without giving effect to any choice-of-law principle that would cause the application of the laws of any jurisdiction other than Texas. Jurisdiction and venue of any action or proceeding relating to this Agreement or any Dispute (to the extent arbitration is not required under Section 13) shall be exclusively in Dallas County, Texas. 13.   Arbitration. Except as provided in subsection (h) of this Section 13, any Dispute must be resolved by binding arbitration in accordance with the following:   (a)   A Party may begin arbitration by filing a demand for arbitration in accordance with the Arbitration Rules and concurrently Notifying the other Party of that demand. If the Parties are unable to agree upon a panel of three arbitrators within ten days after the demand for arbitration was filed (and do not agree to an extension of that ten-day period), either Party may request the Dallas office of the American Arbitration Association to appoint the arbitrator or arbitrators necessary to complete the panel in accordance with the Arbitration Rules. Each arbitrator so appointed shall be deemed accepted by the Parties as part of the panel.     (b)   The arbitration shall be conducted in the Dallas-Fort Worth, Texas metropolitan area at a place and time agreed upon by the Parties with the panel, or if the Parties cannot agree, as designated by the panel. The panel may, however, call and conduct hearings and meetings at such other places as the Parties may agree or as the panel may, on the motion of one Party, determine to be necessary to obtain significant testimony or evidence.     (c)   The panel may authorize any and all forms of discovery upon a Party’s showing of need that the requested discovery is likely to lead to material evidence needed to resolve the Dispute and is not excessive in scope, timing, or cost.     (d)   The arbitration shall be subject to the Federal Arbitration Act and conducted in accordance with the Arbitration Rules to the extent that they do not conflict with this Section 13. The Parties and the panel may, however, agree to vary to provisions of this Section 13 or the matters otherwise governed by the Arbitration Rules.     (e)   The arbitration hearing shall be held within 30 days after the appointment of the panel. The panel’s final decision or award shall be made within 30 days after the hearing. That final decision or award shall be made by unanimous or majority vote or consent of the arbitrators constituting the panel, and shall be deemed issued at the place of arbitration. The panel’s final decision or award shall be based on this Agreement and applicable law; the panel may not act according to equity and conscience or apply the law merchant. -7- --------------------------------------------------------------------------------     (f)   The panel’s final decision or award may include injunctive relief in response to any actual or impending breach of this Agreement or any other actual or impending action or omission of a Party under or in connection with this Agreement.     (g)   The panel’s final decision or award shall be final and binding upon the Parties, and judgment upon that decision or award may be entered in any court having jurisdiction. The Parties waive any right to apply or appeal to any court for relief from the preceding sentence or from any decision of the panel made before the final decision or award.     (h)   Nothing in this Section 13 limits the right of either Party to apply to a court having jurisdiction to (i) enforce the agreement to arbitrate in accordance with this Section 13, (ii) seek provisional or temporary injunctive relief, in response to an actual or impending breach of the Agreement or otherwise so as to avoid a irrevocable damage or maintain the status quo, until a final arbitration decision or award is rendered or the Dispute is otherwise resolved, or (iii) challenge or vacate any final arbitration decision or award that does not comply with this Section 13. In addition, nothing in this Section 13 prohibits the Parties from resolving any Dispute (in whole or in part) by agreement. 14.   Company’s Successor. In addition to any obligations imposed by law upon any successor to the Company, the Company shall require any successor to all or substantially all of the Company’s business or assets (whether direct or indirect and whether by purchase, reorganization, merger, share exchange, consolidation, or otherwise) to expressly assume and agree to perform the Company’s obligations under this Agreement to the same extent, and in the same manner, as the Company would be required to perform if no such succession had occurred. This Agreement shall be binding upon, and inure to the benefit of, any successor to the Company. 15.   Executive’s Successor. This Agreement shall inure to the benefit of, and be enforceable by, the Executive’s personal or legal representatives, administrators, successors, executors, heirs, distributees, devisees, and legatees. If the Executive should die after a Severance Payment Event, but before any payment or benefit to which the Executive is entitled under this Agreement has been received by the Executive, all payments or benefits to which the Executive would have been entitled had he continued to live (other than any such Welfare Benefits that, by their terms, terminate upon the Executive’s death) shall be made or provided in accordance with this Agreement to the representatives, executors, or administrators of the Executive’s estate. 16.   Restricted Assignment. Except as expressly provided in Sections 14 and 15, neither Party may assign, transfer, or delegate this Agreement or any of its or his rights or obligations under this Agreement without the prior written consent of the other Party. Any attempted assignment, transfer, or delegation in violation of the preceding sentence shall be void and of no effect. 17.   Waiver and Amendment. No term or condition of this Agreement shall be deemed -8- --------------------------------------------------------------------------------       waived other than by a writing signed by the Party against whom or which enforcement of the waiver is sought. Without limiting the generality of the preceding sentence, a Party’s failure to insist upon the other Party’s strict compliance with any provision of this Agreement or to assert any right that a Party may have under this Agreement shall not be deemed a waiver of that provision or that right. Any written waiver shall operate only as to the specific term or condition waived under the specific circumstances and shall not constitute a waiver of that term or condition for the future or a waiver of any other term or condition. No amendment or modification of this Agreement shall be deemed effective unless stated in a writing signed by the Parties. 18.   Entire Agreement. This Agreement, including the Statement of Purpose, contains the Parties’ entire agreement regarding the subject matter of this Agreement and supersedes all prior agreements and understandings between them regarding that subject matter, including the Previous Severance Agreement. The Parties have made no agreements, representations, or warranties regarding the subject matter of this Agreement that are not set forth in this Agreement. 19.   Notice. Each notice or other communication required or permitted under this Agreement shall be in writing and transmitted, delivered, or sent by personal delivery, prepaid courier or messenger service (whether overnight or same-day), prepaid telecopy or facsimile, or prepaid certified United States mail (with return receipt requested), addressed (in any case) to the other Party at the address or number for that Party set forth below that Party’s signature on this Agreement, or at such other address or number as the recipient has designated by Notice to the other Party. Each notice or communication so transmitted, delivered, or sent:   (a)   in person, by courier or messenger service, or by certified United States mail shall be deemed given, received, and effective on the date delivered to or refused by the intended recipient (with the return receipt, or the equivalent record of the courier or messenger, being deemed conclusive evidence of delivery or refusal), or     (b)   by telecopy or facsimile shall be deemed given, received, and effective on the date of actual receipt (with the confirmation of transmission being deemed conclusive evidence of receipt, except where the intended recipient has promptly Notified the other Party that the transmission is illegible). Nevertheless, if the date of delivery or transmission is not a Business Day, or if the delivery or transmission is after 5:00 p.m. on a Business Day, the notice or other communication shall be deemed given, received, and effective on the next Business Day. -9- --------------------------------------------------------------------------------   20.   Severability. If any provision of this Agreement is or becomes invalid or unenforceable, that provision (to the extent invalid or unenforceable) shall be deemed amended or reformed to the extent required to render it valid and enforceable, and the remainder of this Agreement shall be unaffected and shall continue in effect. 21.   Counterparts. This Agreement may be signed in counterparts, with the same effect as if both Parties had signed the same document. All counterparts shall be construed together to constitute one, and the same, document. The Parties have signed this Agreement to be effective as of the date set forth in the first paragraph.                   Company:       Executive:                       ACE CASH EXPRESS, INC.                               By:   /s/ WALTER E. EVANS       /s/ JAY B. SHIPOWITZ                                   JAY B. SHIPOWITZ                       Address for Notice:       Address for Notice:     1231 Greenway Drive             Suite 600        , Texas       Irving, Texas 75038       Telecopy no. ( ) -       Telecopy no. (972) 550-5150             Attention: Chairman of the Board             -10- --------------------------------------------------------------------------------   Exhibit A to Change-in-Control Executive Severance Agreement Defined Terms. In the Agreement, the following terms have the corresponding meanings: “Accounting Firm” means an independent certified public accounting firm selected by the Company and reasonably acceptable to the Executive. “Acquiring Person” means any Person (other than an Excluded Person) who or which, alone or together with all Affiliates and Associates of that Person, is the Beneficial Owner of 25% or more of the Voting Securities of the Company then outstanding. “Affiliate” and “Associate” have the respective meanings ascribed to them in Rule 12b-2 under the Exchange Act. “Agreement” means the Change-in-Control Executive Severance Agreement between the Parties, as may hereafter be amended or supplemented, of which this Exhibit A is a part. “Arbitration Rules” means the Rules for Commercial Arbitration of the American Arbitration Association in effect at the time of an arbitration of a Dispute. “Base Salary” means the Executive’s annual Base Salary under, and as defined in, the Employment Agreement. “Beneficial Owner” means beneficial owner as defined in Rule 13d-3 under the Exchange Act. (“Beneficially Owns” has the correlative meaning.) Any calculation of the number of Voting Securities outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding Voting Securities of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) under the Exchange Act. “Benefit Continuation Period” means 30 consecutive months after a Severance Payment Event. “Board” means the Board of Directors of the Company. “Business Day” means any Monday through Friday, excluding any such day on which banks are authorized to be closed in Texas. A-11 --------------------------------------------------------------------------------   “Cause” means: (i)   the Executive’s willful failure to substantially perform his employment duties to the Company, as such duties may exist from time to time, or comply with the written policies of the Company (other than any such failure resulting from Disability or the Executive’s termination for Good Reason) which continues for a reasonable time after a Notice to the Executive from the Board that (A) identifies the manner in which the Board believes that the Executive has not substantially performed the Executive’s duties or complied with written policies and (B) demands substantial performance or compliance within a specified reasonable time; or (ii)   the Executive’s willful engaging in conduct (including any illegal conduct) that is demonstrably and materially injurious to the Company or any Subsidiary, monetarily or otherwise. For purposes of this definition, no act, or failure to act, by the Executive shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s act, or failure to act, was in the best interest of the Company and its Subsidiaries. For the purpose of clause (i) of this definition, a “reasonable time” shall be a time period determined by the Board, acting in good faith, to be sufficient under normal circumstances to correct the deficient performance or compliance described in the Notice to the Executive. “Change in Control” means the occurrence of any one or more of the following: (i)   Any Person becomes an Acquiring Person, except as the result of (A) any acquisition of Voting Securities of the Company by the Company or (B) any acquisition of Voting Securities of the Company directly from the Company (as authorized by the Board). (ii)   Individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Board; and for this purpose, any individual who becomes a member of the Board after the date of this Agreement whose election, or nomination for election by holders of the Company’s Voting Securities, was approved by the vote of at least a majority of the individuals then constituting the Incumbent Board shall be considered a member of the Incumbent Board (except that any such individual whose initial election as director occurs as the result of an actual or threatened election contest, within the meaning of Rule 14a-11 under the Exchange Act, or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered). (iii)   The consummation of a reorganization, merger, share exchange, consolidation, or sale or disposition of all or substantially all of the assets of the Company unless, in any case, the Persons who or which Beneficially Own the Voting Securities of the Company immediately before that transaction Beneficially Own, directly or indirectly, immediately after the transaction, at least 75% of the Voting Securities of the Company or any other corporation or other entity resulting from or surviving the transaction (including a corporation or other entity which, as the result of the transaction, owns all or substantially A-12 --------------------------------------------------------------------------------       all of Voting Securities of the Company or all or substantially all of the Company’s assets, either directly or indirectly through one or more subsidiaries) in substantially the same proportion as their respective ownership of the Voting Securities of the Company immediately before that transaction.   (iv)   The Company’s shareholders approve a complete liquidation or dissolution of the Company. “Code” means the Internal Revenue Code of 1986, as amended from time to time. “Common Stock” means the common stock, $0.01 par value per share, of the Company. “Company” means Ace Cash Express, Inc., a Texas corporation. “Disability” means the Executive’s Disability under, and as defined in, the Employment Agreement. “Dispute” means any dispute, disagreement, claim, or controversy arising in connection with or relating to the Agreement or the validity, interpretation, performance, breach, or termination of the Agreement. “Employment Agreement” means the Amended and Restated Executive Employment Agreement between the Parties dated as of January 23, 2006, as may hereafter be amended or supplemented. “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time. “Excise Tax” means the excise tax imposed by Section 4999 of the Code, with all interest and penalties, if any, incurred with respect to such excise tax. “Excluded Person” means: (i)   the Executive or any group (within the meaning of Section 13(d)(3) of the Exchange Act) of which the Executive is a member; (ii)   any Person that controls (as defined in Rule 12b-2 under the Exchange Act) the Company as of the date of the Agreement or any group of which any such Person is a member; (iii)   any employee-benefit plan, or related trust, sponsored or maintained by the Company or any of its Subsidiaries, or any trustee or other fiduciary thereof; or (iv)   any corporation or other entity owned directly or indirectly by the shareholders of the Company in substantially the same proportions as their ownership of the Voting Securities of the Company. “Executive” means Jay B. Shipowitz. “Good Reason” means: A-13 --------------------------------------------------------------------------------   (i)   the assignment to the Executive of any duties inconsistent in any material respect with the Executive’s position (which, in this definition, includes status, office, title, and reporting requirements), duties, or responsibilities as an officer of the Company or any Subsidiary, or any other material diminution in the Executive’s position, authority, duties, or responsibilities from those in effect as of three months before a Change in Control, other than (in any case) an isolated and inadvertent action not taken in bad faith that is remedied by the Company promptly after Notice thereof to the Company by the Executive; (ii)   the Company’s requiring the Executive to be based at any office or location farther than 50 miles from the Executive’s office or principal job location immediately before a Change in Control, except for required business travel to an extent substantially consistent with the Executive’s travel obligations immediately before the Change in Control; (iii)   any failure to comply with and satisfy Section 14, if the Company’s successor has received at least ten days’ prior written notice from the Company or the Executive of the requirements of Section 14; (iv)   a material reduction in the Executive’s Base Salary from the highest amount in effect at any time within three months before a Change in Control; (v)   the failure by the Company or any Subsidiary to continue to provide the Executive with compensation that is equal or comparable to the Executive’s total compensation under the Employment Agreement as in effect immediately before the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative Plan or arrangement) has been made with respect to that compensation or any component thereof, or the failure by the Company or any Subsidiary to continue the Executive’s participation in any compensation Plan in which the Executive participates immediately before the Change in Control (or in any substitute or alternative Plan or arrangement) on a basis not materially less favorable to the Executive, both in terms of the amount of benefits provided and the level of the Executive’s participation relative to other participants, than existed at any time within three months before the Change in Control; or (vi)   the failure by the Company or any Subsidiary to continue to provide the Executive with benefits similar in all material respects to those enjoyed by the Executive under the Employment Agreement and under any Plan in which the Executive was participating at any time within three months before the Change in Control, the taking of action by the Company or any Subsidiary which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at any time three months before the Change in Control, or the failure by the Company or any Subsidiary to provide the Executive with the number of paid vacation days to which the Executive is entitled on the basis of years of service with the Company and its Subsidiary in accordance with the Company’s or a Subsidiary’s normal vacation policy in effect at any time within three months before the Change in Control. A-14 --------------------------------------------------------------------------------   “Incumbent Board” means the members of the Board on the effective date of the Agreement (subject, however, to clause (ii) of the definition of “Change in Control”). “Notice” means a written communication complying with Section 19. (“Notify” has the correlative meaning.) “Parties” means, collectively, the Company and the Executive. (“Party” means either the Company or the Executive.) “Per Share Change-in-Control Price” means: (i)   the closing price of a share of Common Stock on The Nasdaq Stock Market (or on a national securities exchange if the Common Stock is then so listed) upon the occurrence of an event described in clause (i), clause (ii), or clause (iv) of the definition of “Change in Control” or upon the occurrence of a sale or disposition of assets described in clause (iii) of the definition of “Change in Control,” or (ii)   the price per share at which the Common Stock is sold, exchanged, or transferred in a transaction, other than a sale or disposition of assets, described in clause (iii) of the definition of “Change in Control.” “Person” means any individual, firm, corporation, partnership, limited liability company, trust, or other entity, including any successor (by merger or otherwise) of such entity. “Plan” means any bonus, incentive compensation, savings, retirement, stock option, stock appreciation, stock ownership or purchase, pension, deferred compensation, or Welfare Benefits plan, policy, practice, program, or arrangement of (including any separate contract or agreement with) the Company or any Subsidiary for its employees, but does not include the Employment Agreement. “Restricted Territory” means, collectively, Dallas County, Texas; each county (or equivalent subdivision) of any state, district, or territory of the United States of America as to which the Executive had supervisory responsibility for the Company during his employment with the Company; and each county (or equivalent territory) adjacent to any of the preceding counties (or equivalent territories). “Severance Payment” means an amount equal to two and one-half times the sum of: (i)   the Executive’s highest Base Salary in effect at any time within three months before the Change in Control; (ii)   the highest amount of the annual automobile allowance payable to the Executive within three months before the Change in Control; and (iii)   an amount equal to the average of the annual bonuses or incentive cash compensation paid or payable to the Executive by the Company and any Subsidiary for the three fiscal years of the Company preceding the fiscal year in which the Change in Control occurs, but in A-15 --------------------------------------------------------------------------------       any event no less than the Executive’s targeted bonus or amount of incentive cash compensation for the fiscal year in which the Change in Control occurs (or if not yet determined for that fiscal year before the Change in Control occurs, the Executive’s targeted bonus or amount of incentive compensation for the preceding fiscal year). For clause (iii) of this definition: (a) the calculation of the average of the annual bonuses or incentive cash compensation of the Executive shall include a fiscal year during which the Executive was employed by the Company and a participant in a bonus or incentive cash compensation Plan even if the Executive did not earn any bonus or incentive cash compensation for that fiscal year; (b) the bonus or incentive cash compensation paid or payable to the Executive for only part of a fiscal year of the Company shall be annualized (on the same basis as the one on which the bonus or compensation was prorated) for that fiscal year to calculate the average; and (c) the “targeted” bonus or incentive cash compensation for the fiscal year of the Company in which the Change in Control occurs shall be the amount identified as a “target” by the Board (or its compensation committee that administers the bonus or incentive cash compensation Plan) for the Executive in accordance with the Employment Agreement. “Severance Payment Event” means the occurrence of a Change in Control coincident with or followed, at any time before the end of the 24th month immediately following the month in which the Change in Control occurred, by the termination of the Executive’s employment with the Company for any reason other than (a) by the Executive without Good Reason, (b) by the Company because of Disability or for Cause, or (c) by the death of the Executive. Any transfer of the Executive’s employment from the Company to a Subsidiary, from a Subsidiary to the Company, or from one Subsidiary to another Subsidiary is not a termination of the Executive’s employment by the Company for purposes of the Agreement (though any such transfer might, depending on the circumstances, constitute or result in a termination of employment by the Executive for Good Reason). “Stock Award” means a stock option, stock appreciation right, restricted stock grant, performance share plan, or any other agreement in which the Executive has, or will (by the passage of time only, not based on the Executive’s performance) have, (a) an interest in capital stock of the Company or a right to obtain capital stock or an interest in capital stock of the Company, or (b) an interest or right the economic value of which depends solely on the performance of the capital stock of the Company. “Subsidiary” means a corporation or other entity, whether incorporated or unincorporated, of which at least a majority of the Voting Securities is owned, directly or indirectly, by the Company. “Total Severance Benefits” means the Severance Payment; all other payments and benefits received or to be received by the Executive under the Agreement; and all payments, awards, distributions, and benefits (and accelerations of any payment, award, distribution, or benefit), if any, to which the Executive may be entitled, under any Plan or any other contract or agreement, upon or as the result of a Change in Control or the termination of his employment with the Company, or both. A-16 --------------------------------------------------------------------------------   “Trade Secrets” means any and all information and materials (in any medium) that are proprietary to the Company or are treated as confidential by the Company as part of or relating to all or any portion of the Company’s business, including information and materials about the products and services offered, or the needs of customers served, by the Company; compilations of information, records and specifications, processes, programs, and systems of the Company; research of or for the Company; and methods of doing business of the Company. “Voting Securities” means securities or other interests having by their terms ordinary voting power to elect members of the board of directors of a corporation or individuals serving similar functions for a noncorporate entity. “Welfare Benefits” means medical, prescription, dental, disability, employee life, group life, accidental death, and travel accident insurance (whether funded by insurance policy or self-insured by the Company or any Subsidiary) provided or arranged by the Company or any Subsidiary to be provided to its employees. “Welfare Benefit Plan” means any Plan that provides any Welfare Benefits. Interpretive Matters. In the interpretation of the Agreement, except where the context otherwise requires: (a)   “including” or “include” does not denote or imply any limitation;   (b)   “or” has the inclusive meaning “and/or”;   (c)   the singular includes the plural, and visa a versa, and each gender includes each of the others;   (d)   captions or headings are only for reference and are not to be considered in interpreting the Agreement;   (e)   “Section” refers to a Section of the Agreement, unless otherwise stated in the Agreement;   (f)   “month” refers to a calendar month; and   (g)   a reference to any statute, rule, or regulation includes any amendment thereto or any statute, rule, or regulation enacted or promulgated in replacement thereof. A-17

  Exhibit 10.1 Execution Version RECEIVABLES PURCHASE AGREEMENT between HYUNDAI MOTOR FINANCE COMPANY, as Seller, and HYUNDAI ABS FUNDING CORPORATION, as Depositor Dated as of November 3, 2006 (2006-B Receivables Purchase Agreement)   --------------------------------------------------------------------------------   TABLE OF CONTENTS               PAGE   ARTICLE I. CERTAIN DEFINITIONS     1     ARTICLE II. CONVEYANCE OF RECEIVABLES     3   Section 2.01 Conveyance of Receivables     3   Section 2.02 The Closing     4     ARTICLE III. REPRESENTATIONS AND WARRANTIES     4   Section 3.01 Representations and Warranties of Depositor     4   Section 3.02 Representations and Warranties of Seller     4     ARTICLE IV. CONDITIONS     12   Section 4.01 Conditions to Obligation of the Depositor     12   Section 4.02 Conditions to Obligation of the Seller     13     ARTICLE V. COVENANTS OF THE SELLER     13   Section 5.01 Protection of Right, Title and Interest     13   Section 5.02 Other Liens or Interests     14   Section 5.03 Costs and Expenses     14   Section 5.04 Hold Harmless     14     ARTICLE VI. INDEMNIFICATION     14   Section 6.01 Indemnification     14     ARTICLE VII. MISCELLANEOUS PROVISIONS     15   Section 7.01 Obligations of Seller     15   Section 7.02 Repurchase Events     15   Section 7.03 Depositor Assignment of Repurchased Receivables     15   Section 7.04 Transfer to the Issuer     16   Section 7.05 Amendment     16   Section 7.06 Waivers     16   Section 7.07 Notices     16   Section 7.08 Costs and Expenses     16   Section 7.09 Representations of the Seller and the Depositor     17   Section 7.10 Confidential Information     17   Section 7.11 Headings and Cross-References     17   Section 7.12 GOVERNING LAW     17   (2006-B Receivables Purchase Agreement) -i- --------------------------------------------------------------------------------   TABLE OF CONTENTS (continued)               Page   Section 7.13 Counterparts     17   Section 7.14 Third Party Beneficiary     17   Section 7.15 No Proceedings     17   Section 7.16 Nonpetition Covenant     17             SCHEDULE I   Schedule of Receivables   I-1 SCHEDULE II   Receivable File Schedule   II-1 SCHEDULE III   Reconveyance Agreements   III-1 SCHEDULE IV   Conduit Documents   IV-1 (2006-B Receivables Purchase Agreement) -ii- --------------------------------------------------------------------------------        RECEIVABLES PURCHASE AGREEMENT dated as of November 3, 2006 between HYUNDAI MOTOR FINANCE COMPANY, a California corporation, as seller (the “Seller”), and HYUNDAI ABS FUNDING CORPORATION, a Delaware corporation, as depositor (the “Depositor”). RECITALS      WHEREAS, in the regular course of its business, the Seller has purchased certain motor vehicle retail installment sale contracts secured by new and used automobiles and light-duty trucks from motor vehicle dealers;      WHEREAS, the Seller and the Depositor wish to set forth the terms pursuant to which such contracts are to be sold by the Seller to the Depositor; and      WHEREAS, the Depositor intends, concurrently with its purchases from time to time hereunder, to convey all of its right, title and interest in and to $1,000,174,222.94 of such contracts to Hyundai Auto Receivables Trust 2006-B (the “Issuer”) pursuant to a Sale and Servicing Agreement dated as of November 3, 2006 (the “Sale and Servicing Agreement”), by and among the Issuer, the Depositor, the Seller, Hyundai Motor Finance Company, as Servicer and Citibank, N.A., as Indenture Trustee, and the Issuer intends to pledge all of its right, title and interest in such contracts to the Indenture Trustee pursuant to the Indenture.      NOW, THEREFORE, in consideration of the foregoing, other good and valuable consideration and the mutual terms and covenants contained herein, the parties hereto agree as follows: ARTICLE I. Certain Definitions      Terms not defined in this Agreement shall have the meanings assigned thereto in the Sale and Servicing Agreement or the Indenture. As used in this Agreement, the following terms shall, unless the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms of the terms defined):      “Agreement” shall mean this Receivables Purchase Agreement, as the same may be amended and supplemented from time to time.      “Closing Date” shall mean November 3, 2006.      “Conduit Documents” shall mean the documents listed on Schedule IV hereto.      “Depositor” shall mean Hyundai ABS Funding Corporation, a Delaware corporation, its successors and assigns.      “Indemnified Losses” shall have the meaning specified in Section 6.01.      “Indemnified Party” shall have the meaning specified in Section 6.01. (2006-B Receivables Purchase Agreement) 1 --------------------------------------------------------------------------------        “Indenture” means the Indenture, dated as of November 3, 2006, between the Issuer and the Indenture Trustee, as amended, supplemented, amended and restated or otherwise modified from time to time.      “Lien Certificate” means with respect to a Financed Vehicle, an original certificate of title, certificate of lien or other notification issued by the Registrar of Titles of the applicable state to a secured party which indicates that the lien of the secured party on the Financed Vehicle is recorded on the original certificate of title. In any jurisdiction in which the original certificate of title is required to be given to the Obligor, the term “Lien Certificate” shall mean only a certificate or notification issued to a secured party.      “Purchase Price” means, with respect to any Receivable, an amount equal to the Principal Balance of such Receivable as of the Cutoff Date.      “Receivable” shall mean any Contract listed on Schedule I hereto (which Schedule may be in the form of microfiche).      “Reconveyance Documents” shall mean the documents listed on Schedule III hereto.      “Registrar of Titles” means with respect to any state, the governmental agency or body responsible for the registration of, and the issuance of certificates of title relating to, motor vehicles and liens thereon.      “Repurchase Event” shall have the meaning specified in Section 7.02.      “Sale and Servicing Agreement” shall have the meaning set forth in the recitals.      “Schedule of Receivables” shall mean the list of Receivables annexed hereto as Schedule I.      “Seller” shall mean Hyundai Motor Finance Company, a California corporation, its successors and assigns.      “Transfer Date” shall mean the Cutoff Date.      “Transfer Tax” shall have the meaning specified in Section 3.02(b)(xlvi).      “Underwriting Agreement” means the Underwriting Agreement dated October 27, 2006, relating to Hyundai Auto Receivables Trust 2006-B among the Depositor, HMFC and Barclays Capital Inc., on behalf of itself and as Representative of the Several Underwriters, as amended, supplemented, amended and restated or otherwise modified from time to time. (2006-B Receivables Purchase Agreement) 2 --------------------------------------------------------------------------------   ARTICLE II. Conveyance of Receivables      Section 2.01 Conveyance of Receivables.      (a) In consideration of the Depositor’s delivery to the Seller on the Closing Date of $956,207,233.34 and a capital contribution by the Seller to the Depositor of $43,966,989.60 aggregate principal amount of the Receivables, the Seller does hereby sell, transfer, assign, set over and otherwise convey to the Depositor without recourse (subject to the obligations of the Seller herein) all right, title, and interest of the Seller in and to:      (i) the Receivables and all moneys received thereon on or after the Cutoff Date;      (ii) the security interests in the Financed Vehicles and any accessions thereto granted by Obligors pursuant to the Receivables and any other interest of the Seller in such Financed Vehicles;      (iii) any Liquidation Proceeds and any other proceeds with respect to the Receivables from claims on any physical damage, credit life or disability insurance policies covering Financed Vehicles or Obligors, including any vendor’s single interest or other collateral protection insurance policy;      (iv) any property that shall have secured any Receivable and that shall have been acquired by or on behalf of the Seller;      (v) all documents and other items contained in the Receivable Files;      (vi) all proceeds from any Receivable repurchased by a Dealer pursuant to a Dealer Agreement; and      (vii) the proceeds of any and all of the foregoing. HMFC and the Depositor agree that the purchase price for the Receivables sold by HMFC to the Depositor represents reasonably equivalent value for the Receivables. The Depositor shall make payment in respect of the Purchase Price upon demand by the Seller.      (b) [Reserved].      (c) [Reserved].      (d) The Seller and the Depositor intend that the transfer of assets by the Seller to the Depositor pursuant to this Agreement be a sale of the ownership interest in such assets to the Depositor, rather than the mere granting of a security interest to secure a borrowing. In the event, however, that such transfer is deemed not to be a sale but to be of a mere security interest to secure a borrowing or such transfer is otherwise not effective to sell the Receivables and other property described in Section 2.01(a) hereof, the Seller shall be deemed to have hereby granted to the Depositor a perfected first priority security interest in all such assets, and this Agreement (2006-B Receivables Purchase Agreement) 3 --------------------------------------------------------------------------------   shall constitute a security agreement under applicable law. Pursuant to the Sale and Servicing Agreement and Section 7.04 hereof, the Depositor may sell, transfer and assign to the Issuer (i) all or any portion of the assets assigned to the Depositor hereunder, (ii) all or any portion of the Depositor’s rights against the Seller under this Agreement and (iii) all proceeds thereof. Such assignment may be made by the Depositor with or without an assignment by the Depositor of its rights under this Agreement, and without further notice to or acknowledgement from the Seller. The Seller waives, to the extent permitted under applicable law, all claims, causes of action and remedies, whether legal or equitable (including any right of setoff), against the Depositor or any assignee of the Depositor relating to such action by the Depositor in connection with the transactions contemplated by the Sale and Servicing Agreement.      Section 2.02 The Closing. The sale and purchase of the Receivables shall take place at a closing at the offices of Mayer, Brown, Rowe & Maw LLP, 350 South Grand Avenue, 25th Floor, Los Angeles, California 90071, on the Closing Date, simultaneously with the closing under (a) the Sale and Servicing Agreement, (b) the Indenture and (c) the Trust Agreement. ARTICLE III. Representations and Warranties      Section 3.01 Representations and Warranties of Depositor. The Depositor hereby represents and warrants as follows to the Seller and the Indenture Trustee as of the date hereof and the Transfer Date:      (a) Organization and Good Standing. The Depositor has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with the corporate power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted, including the corporate power, authority and legal right to acquire and sell the Receivables.      (b) Power and Authority. The Depositor has the power and authority to execute and deliver this Agreement and to carry out its terms; and the execution, delivery and performance of this Agreement have been duly authorized by the Depositor by all necessary corporate action.      (c) No Violation. The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, the charter or bylaws of the Depositor, or any indenture, agreement or other instrument to which the Depositor is a party or by which it is bound. There shall be no breach of the representations and warranties in this paragraph resulting from any of the foregoing breaches, violations, Liens or other matters which, individually or in the aggregate, would not materially and adversely affect the Depositor’s ability to perform its obligations under the Basic Documents or the consummation of the transactions as contemplated by the Basic Documents.      Section 3.02 Representations and Warranties of Seller.      (a) The Seller hereby represents and warrants as follows to the Depositor and the Indenture Trustee as of the date hereof and as of the Transfer Date: (2006-B Receivables Purchase Agreement) 4 --------------------------------------------------------------------------------        (i) Organization and Good Standing. The Seller has been duly organized and is validly existing as a corporation in good standing under the laws of the State of California, with the corporate power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted.      (ii) Due Qualification. The Seller is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions where the failure to do so would materially and adversely affect the Seller’s ability to acquire, own and service the Receivables.      (iii) Power and Authority. The Seller has the power and authority to execute and deliver this Agreement and the other Basic Documents to which it is a party and to carry out their respective terms; the Seller had at all relevant times, and has, full power, authority and legal right to sell, transfer and assign the property sold, transferred and assigned to the Depositor hereby and has duly authorized such sale, transfer and assignment to the Depositor by all necessary corporate action; and the execution, delivery and performance of this Agreement and the other Basic Documents to which the Seller is a party have been duly authorized by the Seller by all necessary corporate action.      (iv) No Violation. The consummation of the transactions contemplated by this Agreement and the other Basic Documents to which the Seller is a party and the fulfillment of their respective terms do not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, the articles of incorporation or bylaws of the Seller, or any indenture, agreement or other instrument to which the Seller is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than this Agreement), or violate any law or, to the best of the Seller’s knowledge, any order, rule or regulation applicable to the Seller of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Seller or its properties. There shall be no breach of the representations and warranties in this paragraph resulting from any of the foregoing breaches, violations, Liens or other matters which, individually or in the aggregate, would not materially and adversely affect the Seller’s ability to perform its obligations under the Basic Documents or the consummation of the transactions as contemplated by the Basic Documents.      (v) No Proceedings. There are no proceedings or investigations pending or, to the Seller’s knowledge, threatened against the Seller before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Seller or its properties (A) asserting the invalidity of this Agreement or any other Basic Document to which the Seller is a party, (B) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any other Basic Document to which the Seller is a party or (C) seeking any determination or ruling that would materially and adversely affect the performance by the Seller of its obligations under, or the validity or enforceability of, this Agreement or any other Basic Document to which the Seller is a party. (2006-B Receivables Purchase Agreement) 5 --------------------------------------------------------------------------------        (vi) Valid Sale, Binding Obligation. This Agreement and the other Basic Documents to which the Seller is a party, when duly executed and delivered by the other parties hereto and thereto, shall constitute legal, valid and binding obligations of the Seller, enforceable against the Seller in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization and similar laws now or hereafter in effect relating to or affecting creditors’ rights generally and to general principles of equity (whether applied in a proceeding at law or in equity).      (vii) Chief Executive Office. The chief executive office of the Seller is located at 10550 Talbert Avenue, Fountain Valley, California 92708.      (viii) No Consents. The Seller is not required to obtain the consent of any other party or any consent, license, approval, registration, authorization, or declaration of or with any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity, or enforceability of this Agreement or any other Basic Document to which it is a party that has not already been obtained, other than (A) UCC filings and (B) consents, licenses, approvals, registrations, authorizations or declarations which, if not obtained or made, would not have a material adverse affect on the enforceability or collectibility of the Receivables or would not materially and adversely affect the ability of the Depositor to perform its obligations under the Basic Documents.      (ix) Ordinary Course. The transactions contemplated by this Agreement and the other Basic Documents to which the Seller is a party are in the ordinary course of the Seller’s business.      (x) Solvency. The Seller is not insolvent, nor will the Seller be made insolvent by the transfer of the Receivables, nor does the Seller contemplate any pending insolvency.      (xi) [Reserved].      (xii) Creditors. The Seller represents and warrants that it did not sell the Receivables to the Depositor with any intent to hinder, delay or defraud any of its creditors.      (xiii) No Notice. The Seller represents and warrants that it acquired title to the Receivables in good faith, without notice of any adverse claim.      (xiv) Bulk Transfer. The Seller represents and warrants that the transfer, assignment and conveyance of the Receivables by the Seller pursuant to this Agreement are not subject to the bulk transfer laws or any similar statutory provisions in effect in any applicable jurisdiction.      (b) The Seller makes the following representations and warranties with respect to the Receivables, on which the Depositor relies in accepting the Receivables and in transferring the Receivables to the Issuer under the Sale and Servicing Agreement, and on which the Issuer relies in pledging the same to the Indenture Trustee. Such representations and warranties speak as of the execution and delivery of this Agreement or as of the Cutoff Date as applicable, but shall (2006-B Receivables Purchase Agreement) 6 --------------------------------------------------------------------------------   survive the sale, transfer and assignment of the Receivables to the Depositor, the subsequent sale, transfer and assignment of the Receivables by the Depositor to the Issuer pursuant to the Sale and Servicing Agreement and the pledge of the Receivables by the Issuer to the Indenture Trustee pursuant to the Indenture.      (i) Characteristics of Receivables. Each Receivable (A) was originated in the United States of America by a Dealer located in the United States of America for the retail sale of a Financed Vehicle in the ordinary course of such Dealer’s business and satisfied the Seller’s Credit and Collection Policy as of the date of origination of the related Receivable, is payable in United States dollars, has been fully and properly executed by the parties thereto, has been purchased by the Seller from such Dealer under an existing Dealer Agreement and has been validly assigned by such Dealer to the Seller, (B) has created or shall create a valid, subsisting and enforceable first priority security interest in favor of the Seller in the Financed Vehicle, which security interest is assignable by the Seller to the Depositor, by the Depositor to the Issuer, and by the Issuer to the Indenture Trustee, (C) contains customary and enforceable provisions such that the rights and remedies of the holder thereof are adequate for realization against the collateral of the benefits of the security, (D) provides for fixed level monthly payments (provided that the payment in the last month of the term of the Receivable may be insignificantly different from the level payments) that fully amortize the Amount Financed by maturity and yield interest at the APR, (E) amortizes using the simple interest method and (F) has an Obligor which is not an affiliate of HMFC, is not a government or governmental subdivision or agency and is not shown on the Servicer’s records as a debtor in pending bankruptcy proceeding.      (ii) Compliance with Law. Each Receivable and the sale of the related Financed Vehicle complied at the time it was originated or made, and at the time of execution of this Agreement complies, in all material respects with all requirements of applicable federal, state and local laws, rulings and regulations thereunder, including usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board’s Regulations “B” and “Z”, the Servicemembers Civil Relief Act, the Gramm-Leach-Bliley Act, state adaptations of the National Consumer Act and of the Uniform Consumer Credit Code, and other consumer credit laws and equal credit opportunity and disclosure laws.      (iii) Binding Obligation. Each Receivable represents the genuine, legal, valid and binding payment obligation of the Obligor thereon, enforceable by the holder thereof in accordance with its terms, except (A) as enforceability thereof may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditors’ rights generally and by equitable limitations on the availability of specific remedies, regardless of whether such enforceability is considered in a proceeding in equity or at law and (B) as such Receivable may be modified by the application after the Transfer Date of the Servicemembers Civil Relief Act. (2006-B Receivables Purchase Agreement) 7 --------------------------------------------------------------------------------        (iv) No Government Obligor. No Receivable is due from the United States of America or any State or any agency, department, subdivision or instrumentality thereof.      (v) Obligor Bankruptcy. According to the records of the Seller, as of the Cutoff Date, no Obligor is the subject of a bankruptcy proceeding.      (vi) Schedule of Receivables. The information set forth in Schedule I to this Agreement is true and correct in all material respects as of the close of business on the Cutoff Date.      (vii) Marking Records. By the Transfer Date, the Seller will have caused its computer and accounting records relating to each Receivable to be clearly and unambiguously marked to show that the Receivables have been sold to the Depositor by the Seller and transferred and assigned by the Depositor to the Issuer in accordance with the terms of the Sale and Servicing Agreement and pledged by the Issuer to the Indenture Trustee in accordance with the terms of the Indenture.      (viii) Computer Tape. The computer tape regarding the Receivables made available by the Seller to the Depositor is complete and accurate in all respects as of the Transfer Date.      (ix) No Adverse Selection. No selection procedures believed by the Seller to be adverse to the Noteholders were utilized in selecting the Receivables.      (x) Chattel Paper. Each Receivable constitutes chattel paper within the meaning of the UCC as in effect in the state of origination.      (xi) One Original. There is only one executed original of each Receivable.      (xii) Receivables in Force. No Receivable has been satisfied, subordinated or rescinded, nor has any Financed Vehicle been released from the Lien of the related Receivable in whole or in part. None of the terms of any Receivable has been waived, altered or modified in any respect since its origination, except by instruments or documents identified in the related Receivable File.      (xiii) Lawful Assignment. No Receivable has been originated in, or is subject to the laws of, any jurisdiction the laws of which would make unlawful, void or voidable the sale, transfer and assignment of such Receivable under this Agreement, the Sale and Servicing Agreement or the pledge of such Receivable under the Indenture.      (xiv) Title. It is the intention of the Seller that the transfers and assignments herein contemplated constitute sales of the Receivables from the Seller to the Depositor and that the beneficial interest in and title to the Receivables not be part of the debtor’s estate in the event of the filing of a bankruptcy petition by or against the Seller under any bankruptcy law. No Receivable, other than the Receivables identified in the Reconveyance Documents, has been sold, transferred, assigned or pledged by the Seller to any Person other than to the Depositor or pursuant to this Agreement (or by the Depositor to any other Person other than to the Issuer pursuant to the Sale and Servicing (2006-B Receivables Purchase Agreement) 8 --------------------------------------------------------------------------------   Agreement). Except with respect to the Liens under the Conduit Documents (which such Liens shall be released in accordance with provisions of the Reconveyance Documents), immediately prior to the transfers and assignments herein contemplated, the Seller has good and marketable title to each Receivable free and clear of all Liens, and, immediately upon the transfer thereof, the Depositor shall have good and marketable title to each Receivable, free and clear of all Liens and, immediately upon the transfer thereof from the Depositor to the Issuer pursuant to the Sale and Servicing Agreement, the Issuer shall have good and marketable title to each Receivable, free and clear of all Liens and, immediately upon the pledge thereof from the Issuer to the Indenture Trustee pursuant to the Indenture, the Indenture Trustee shall have a first priority perfected security interest in each Receivable.      (xv) Security Interest in Financed Vehicle. Immediately prior to its sale, assignment and transfer to the Depositor pursuant to this Agreement, each Receivable shall be secured by a validly perfected first priority security interest in the related Financed Vehicle in favor of the Seller as secured party, or all necessary and appropriate actions have been commenced that will result in the valid perfection of a first priority security interest in such Financed Vehicle in favor of the Seller as secured party.      (xvi) All Filings Made. All filings (including UCC filings, except for UCC releases required to be filed in accordance with the Reconveyance Documents) required to be made in any jurisdiction to give the Issuer a first perfected ownership interest in the Receivables and the Indenture Trustee a first priority perfected security interest in the Receivables have been made.      (xvii) No Defenses. No Receivable is subject to any right of rescission, setoff, counterclaim, dispute or defense, including the defense of usury, whether arising out of transactions concerning the Receivable or otherwise, and the operation of any terms of the Receivable or the exercise by the Seller or the Obligor of any right under the Receivable will not render the Receivable unenforceable in whole or in part, and no such right of rescission, setoff, counterclaim, dispute or defense, including the defense of usury, has been asserted with respect thereto.      (xviii) No Default. As of the Cutoff Date, the Servicer’s accounting records did not disclose that there was any default, breach, violation or event permitting acceleration under the terms of any Receivable (other than payment delinquencies of not more than 30 days), or that any condition exists or event has occurred and is continuing that with notice, the lapse of time or both would constitute a default, breach, violation or event permitting acceleration under the terms of any Receivable, and there has been no waiver of any of the foregoing.      (xix) Insurance. The Seller, in accordance with its customary procedures, has determined at the origination of the Receivable that the Obligor had obtained physical damage insurance covering the related Finance Vehicle at that time and under the terms of each Receivable, the Obligor is required to maintain physical damage insurance covering the related Financed Vehicle and to name the Seller as a loss payee. (2006-B Receivables Purchase Agreement) 9 --------------------------------------------------------------------------------        (xx) Final Scheduled Maturity Date. No Receivable has a final scheduled payment date after October 15, 2012.      (xxi) Certain Characteristics of the Receivables. As of the applicable Cutoff Date, (A) each Receivable had an original maturity of not less than 12 or more than 72 months and (B) no Receivable was more than 30 days past due as of the Cutoff Date.      (xxii) No Foreign Obligor. All of the Receivables were originated in the United States of America.      (xxiii) No Extensions. The number or timing of scheduled payments has not been changed on any Receivable on or before the Cutoff Date, except as reflected on the computer tape delivered in connection with the sale of the Receivables.      (xxiv) [Reserved].      (xxv) [Reserved].      (xxvi) No Fleet Sales. No Receivable has been included in a “fleet” sale (i.e., a sale to any single Obligor of more than five Financed Vehicles).      (xxvii) Receivable Files. The Servicer has in its possession all original copies of documents or instruments that constitute or evidence the Receivables. The Receivable Files that constitute or evidence the Receivables do not have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed by the Seller to any Person other than the Depositor, except for such Liens as have been released on or before the Closing Date. All financing statements filed or to be filed against the Seller in favor of the Depositor in connection herewith describing the Receivables contain a statement to the following effect: “A purchase of or security interest in any collateral described in this financing statement, except as provided in the Receivables Purchase Agreement, will violate the rights of the Depositor.”      (xxviii) No Fraud or Misrepresentation. Each Receivable was originated by a Dealer and was sold by the Dealer to the Seller, to the best of the Seller’s knowledge, without fraud or misrepresentation on the part of such Dealer in either case.      (xxix) Receivables Not Assumable. No Receivable is assumable by another person in a manner which would release the Obligor thereof from such Obligor’s obligations to the Seller with respect to such Receivable.      (xxx) No Impairment. The Seller has not done anything to convey any right to any person that would result in such person having a right to payments due under a Receivable or otherwise to impair the rights of the Depositor in any Receivable or the proceeds thereof.      (xxxi) [Reserved]. (2006-B Receivables Purchase Agreement) 10 --------------------------------------------------------------------------------        (xxxii) No Corporate Obligor. All of the Receivables are due from Obligors who are natural persons.      (xxxiii) No Liens. According to the Servicer’s records as of the Cutoff Date, no liens or claims have been filed for work, labor or materials relating to a Financed Vehicle that are prior to, or equal or coordinate with the security interest in the Financed Vehicles granted by the Receivables.      (xxxiv) [Reserved].      (xxxv) APR. No Receivable has an APR of less than 0.00% and the weighted average coupon on the pool of Receivables is at least 8.659%.      (xxxvi) Remaining Term. Each Receivable has a remaining term of at least 5 months and no more than 72 months.      (xxxvii) Original Term. The weighted average original term for the Receivables is at least 65.66 months.      (xxxviii) Remaining Balance. Each Receivable has a remaining balance of at least $2,000.00 and not greater than $42,053.57.      (xxxix) New Vehicles. At least 97.82% of the aggregate principal balance of the Receivables is secured by Financed Vehicles which were new at the date of origination.      (xl) [Reserved].      (xli) No Repossessions. No Financed Vehicle has been repossessed on or prior to the applicable Cutoff Date.      (xlii) [Reserved].      (xliii) [Reserved].      (xliv) Dealer Agreements. Each Dealer from whom the Seller purchases Receivables has entered into a Dealer Agreement with the Seller providing for the sale of Receivables from time to time by such Dealer to the Seller.      (xlv) Receivable Obligations. To the best of the Seller’s knowledge, no notice to or consent from any Obligor is necessary to effect the acquisition of the Receivables by the Issuer.      (xlvi) [Reserved].      (xlvii) Computer Tape. The computer tape from which the selection of the Receivables being acquired on the Closing Date was made available to the accountants that are providing a comfort letter to the Noteholders in connection with the numerical information regarding the Receivables and the Notes. (2006-B Receivables Purchase Agreement) 11 --------------------------------------------------------------------------------        (xlviii) No Future Disbursement. At the time each Receivable was acquired from the Dealer, the Amount Financed was fully disbursed. There is no requirement for future advances of principal thereunder, and, other than in connection with Dealer participations, all fees and expenses in connection with the origination of such Receivable have been paid.      (xlix) [Reserved].      (l) [Reserved].      (li) [Reserved].      (lii) [Reserved].      (liii) [Reserved].      (liv) No Consumer Leases. No Receivable constitutes a “consumer lease” under either (a) the UCC as in effect in the jurisdiction whose law governs the Receivable or (b) the Consumer Leasing Act, 15 USC 1667.      (lv) Balance as of Cutoff Date. The aggregate principal balance of the Receivables as of the Cutoff Date is equal to $1,000,174,222.94. ARTICLE IV. Conditions      Section 4.01 Conditions to Obligation of the Depositor. The obligation of the Depositor to purchase the Receivables is subject to the satisfaction of the following conditions:      (a) Representations and Warranties True. The representations and warranties of the Seller hereunder shall be true and correct on the Transfer Date with the same effect as if then made, and the Seller shall have performed all obligations to be performed by it hereunder on or prior to the Transfer Date.      (b) Computer Files Marked. The Seller shall, at its own expense, on or prior to the Transfer Date, indicate in its computer files that the Receivables have been sold to the Depositor pursuant to this Agreement and deliver to the Depositor the Schedule of Receivables, certified by the Seller’s President, a Vice President or the Treasurer to be true, correct and complete.      (c) Documents To Be Delivered by the Seller on the Transfer Date.      (i) Evidence of UCC Filing. On or prior to the Transfer Date, the Seller shall record and file, at its own expense, a UCC-1 financing statement, in each jurisdiction in which required by applicable law, naming the Seller as debtor and naming the Depositor as secured party, describing the Receivables and the other assets assigned to the Depositor pursuant to Section 2.01 hereof, meeting the requirements of the laws of each such jurisdiction and in such manner as is necessary to perfect the sale, transfer, assignment and conveyance of the Receivables and such other assets to the Depositor. (2006-B Receivables Purchase Agreement) 12 --------------------------------------------------------------------------------   The Seller shall deliver to the Depositor a file-stamped copy or other evidence satisfactory to the Depositor of such filing on or prior to the Transfer Date.      (ii) Other Documents. Such other documents as the Depositor may reasonably request.      (d) Other Transactions. The transactions contemplated by the Sale and Servicing Agreement, the Indenture and the Trust Agreement to be consummated on the Transfer Date shall be consummated on such date.      Section 4.02 Conditions to Obligation of the Seller. The obligation of the Seller to sell the Receivables to the Depositor is subject to the satisfaction of the following conditions:      (a) Representations and Warranties True. The representations and warranties of the Depositor hereunder shall be true and correct on the Transfer Date with the same effect as if then made, and the Depositor shall have performed all obligations to be performed by it hereunder on or prior to the Transfer Date.      (b) Receivables Purchase Price. On the Transfer Date, the Depositor shall have delivered to the Seller the Purchase Price specified in Section 2.01. ARTICLE V. Covenants of the Seller      The Seller agrees with the Depositor and the Indenture Trustee as follows:      Section 5.01 Protection of Right, Title and Interest.      (a) Filings. The Seller shall cause, at its own expense, all financing statements and continuation statements and any other necessary documents (other than the costs to re-title the Financed Vehicles in order to name a party other than the Seller as lienholder) covering the right, title and interest of the Seller, the Depositor, the Trust and the Indenture Trustee, respectively, in and to the Receivables and the other property included in the Trust Estate to be promptly filed and at all times to be kept recorded, registered and filed, all in such manner and in such places as may be required by law fully to preserve and protect the right, title and interest of the Depositor hereunder, the Trust under the Sale and Servicing Agreement and the Indenture Trustee under the Indenture in and to the Receivables and the other property included in the Trust Estate. The Seller shall deliver to the Depositor and the Indenture Trustee file-stamped copies of, or filing receipts for, any document recorded, registered or filed as provided above, as soon as available following such recordation, registration or filing. The Depositor shall cooperate fully with the Seller in connection with the obligations set forth above and will execute any and all documents reasonably required to fulfill the intent of this paragraph.      (b) Name Change. If the Seller makes any change in its name, identity or corporate structure that would make any financing statement or continuation statement filed in accordance with paragraph (a) above seriously misleading within the applicable provisions of the UCC or any title statute, the Seller shall give the Depositor, the Indenture Trustee and the Owner Trustee written notice thereof at least 45 days prior to such change and shall promptly file such financing (2006-B Receivables Purchase Agreement) 13 --------------------------------------------------------------------------------   statements or amendments as may be necessary to continue the perfection of the Depositor’s and the Indenture Trustee’s interest in the property conveyed pursuant to Section 2.01.      Section 5.02 Other Liens or Interests. Except for the conveyances hereunder and pursuant to the Basic Documents, the Seller shall not sell, pledge, assign or transfer to any Person, or grant, create, incur, assume, or suffer to exist any Lien on, or any interest in, to or under the Receivables, and the Seller shall defend the right, title and interest of the Depositor, the Trust and the Indenture Trustee in, to and under the Receivables against all claims of third parties claiming through or under the Seller.      Section 5.03 Costs and Expenses. The Seller agrees to pay all reasonable costs and disbursements in connection with the perfection, as against all third parties, of the Depositor’s, the Issuer’s and the Indenture Trustee’s right, title and interest in and to the Receivables and the other property included in the Trust Estate.      Section 5.04 Hold Harmless. Seller shall protect, defend, indemnify and hold the Depositor and the Issuer and their respective assigns and their attorneys, accountants, employees, officers and directors harmless from and against all losses, liabilities, claims, damages and expenses of every kind and character, as incurred, resulting from or relating to or arising out of (i) the inaccuracy, nonfulfillment or breach of any representation, warranty, covenant or agreement made by Seller in this Agreement, (ii) any legal action, including, without limitation, any counterclaim, that has either been settled by the litigants (which settlement, if Seller is not a party thereto shall be with the consent of Seller) or has proceeded to judgment by a court of competent jurisdiction, in either case to the extent it is based upon alleged facts that, if true, would constitute a breach of any representation, warranty, covenant or agreement made by Seller in this Agreement, (iii) any actions or omissions of Seller or any employee or agent of Seller or any Dealer occurring prior to the Transfer Date with respect to any of the Receivables or Financed Vehicles or (iv) any failure of a Receivable to be originated in compliance with all requirements of law. These indemnity obligations shall be in addition to any obligation that the Seller may otherwise have. ARTICLE VI. Indemnification      Section 6.01 Indemnification.      Without limiting any other rights any such Person may have hereunder or under applicable law, the Seller hereby indemnifies and holds harmless the Depositor and its officers, directors, agents and employees (each an “Indemnified Party”) from and against any and all damages, losses, claims, liabilities, penalties, costs and expenses (including reasonable attorneys’ fees and court costs) (all of the foregoing collectively, the “Indemnified Losses”) at any time imposed on or incurred by any Indemnified Party arising out of or otherwise relating to this Agreement, the transactions contemplated hereby or the acquisition of any of the Receivables, or any action taken or omitted by any of the Indemnified Parties, whether arising by reason of the acts to be performed by the Seller hereunder or otherwise, excluding only Indemnified Losses to the extent (a) such Indemnified Losses resulted from gross negligence or willful misconduct of the Indemnified Party seeking indemnification, (b) due to the financial inability of the Obligor to (2006-B Receivables Purchase Agreement) 14 --------------------------------------------------------------------------------   pay a Receivable and for which reimbursement would constitute recourse to the Seller for uncollectible Receivables or (c) such Indemnified Losses include taxes on, or measured by, the overall net income of the Depositor or any other Indemnified Party. ARTICLE VII. Miscellaneous Provisions      Section 7.01 Obligations of Seller. The obligations of the Seller under this Agreement shall not be affected by reason of any invalidity, illegality or irregularity of any Receivable.      Section 7.02 Repurchase Events. The Seller hereby covenants and agrees that the occurrence of a breach of any of the Seller’s representations and warranties contained in Section 3.02(b), with respect to any Receivable shall constitute an event obligating the Seller to repurchase such Receivable if the interest of the Noteholders or the Issuer are materially and adversely affected by such breach (each, a “Repurchase Event”). If the Seller does not correct or cure such breach prior to the end of the Collection Period (or, if the Seller elects, an earlier date) after the date that the Seller became aware or was notified of such breach, then the Seller shall purchase any Receivable materially and adversely affected by such breach from the Issuer on the Payment Date following the end of such Collection Period. Any such purchase by the Seller shall be at a price equal to the Purchased Amount. In consideration for such repurchase, the Seller shall make (or shall cause to be made) a payment to the Issuer equal to the Purchased Amount by depositing such amount into the Collection Account on the applicable Payment Date. Upon payment of such Purchased Amount by the Seller, the Issuer and the Indenture Trustee shall release and shall execute and deliver such instruments of release, transfer or assignment, in each case without recourse or representation, as shall be reasonably necessary to vest in the Seller or its designee any Receivable repurchased pursuant hereto. It is understood and agreed that the right to cause the Seller to purchase any Receivable as described above shall constitute the sole remedy respecting such breach available to the Issuer, the Noteholders, the Owner Trustee, the Certificateholders and the Indenture Trustee. Neither the Owner Trustee nor the Indenture Trustee will have any duty to conduct an affirmative investigation as to the occurrence of any condition requiring the repurchase of any Receivable pursuant to this Section 7.02.      Section 7.03 Depositor Assignment of Repurchased Receivables. With respect to all Receivables repurchased by the Seller pursuant to this Agreement, the Depositor shall assign, without recourse, representation or warranty, to the Seller all of the Depositor’s right, title and interest in and to such Receivables and all security and documents relating thereto.      Section 7.04 Transfer to the Issuer. The Seller acknowledges and agrees that (1) the Depositor will, pursuant to the Sale and Servicing Agreement, transfer and assign the Receivables and assign its rights under this Agreement with respect thereto to the Issuer and, pursuant to the Indenture, the Issuer will pledge the Receivables to the Indenture Trustee, and (2) the representations and warranties contained in this Agreement and the rights of the Depositor under this Agreement, including under Section 7.02, are intended to benefit the Issuer, the Noteholders and the Certificateholder. The Seller hereby consents to such transfers and assignments and agrees that enforcement of a right or remedy hereunder by the Indenture Trustee, the Owner Trustee or the Issuer shall have the same force and effect as if the right or remedy had been enforced or executed by the Depositor. (2006-B Receivables Purchase Agreement) 15 --------------------------------------------------------------------------------        Section 7.05 Amendment. This Agreement may be amended from time to time, with prior written notice to the Rating Agencies but without the consent of the Noteholders or the Certificateholder, by a written amendment duly executed and delivered by the Seller and the Depositor, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of Noteholders or the Certificateholder; provided that such amendment shall not materially and adversely affect the interest of any Noteholder or Certificateholder. This Agreement may also be amended by the Seller and the Depositor, with prior written notice to the Rating Agencies and the prior written consent of Holders of Notes evidencing at least a majority of the Outstanding Amount of the Notes and Holders of Certificates evidencing at least a majority of the Certificate Balance (excluding, for purposes of this Section 7.05, Certificates held by the Seller or any of its affiliates), for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholder; provided, however, that no such amendment may (i) reduce the interest rate or principal amount of any Note or Certificate or delay the Stated Maturity Date of any Note without the consent of the Holder of such Note or (ii) reduce the aforesaid percentage of the Notes or the Certificates that is required to consent to any such amendment, without the consent of the Holders of all the outstanding Notes and Certificates.      Section 7.06 Waivers. No failure or delay on the part of the Depositor, the Issuer or the Indenture Trustee in exercising any power, right or remedy under this Agreement or the Bill of Sale shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other or further exercise thereof or the exercise of any other power, right or remedy.      Section 7.07 Notices. All demands, notices and communications under this Agreement shall be in writing, electronically delivered, personally delivered or mailed by certified mail, return receipt requested, to: (1) in the case of the Seller, Hyundai Motor Finance Company, 10550 Talbert Avenue, Fountain Valley, California 92708, Attention: Vice President, Finance, with a copy to General Counsel; (2) in the case of the Depositor, Hyundai ABS Funding Corporation, 10550 Talbert Avenue, Fountain Valley, California 92708, Attention: Vice President and Secretary, with a copy to General Counsel; (3) in the case of Moody’s, Moody’s Investors Service, Inc., ABS Monitoring Department, 99 Church Street, New York, New York 10007; (4) in the case of Standard & Poor’s, via electronic delivery to [email protected] or at the following address: Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., 55 Water Street (40th Floor), New York, New York 10041, Attention: ABS Surveillance Department; and (5) in the case of Fitch, Fitch, Inc., One State Street Plaza, New York, New York 10004; or as to each of the foregoing, at such other address as shall be designated by written notice to the other parties.      Section 7.08 Costs and Expenses. The Seller shall pay all expenses incident to the performance of its obligations under this Agreement and the Seller agrees to pay all reasonable out-of-pocket costs and expenses of the Depositor, in connection with the perfection as against third parties of the Depositor’s, the Issuer’s and the Indenture Trustee’s right, title and interest in and to the Receivables and the enforcement of any obligation of the Seller hereunder. (2006-B Receivables Purchase Agreement) 16 --------------------------------------------------------------------------------        Section 7.09 Representations of the Seller and the Depositor. The respective agreements, representations, warranties and other statements by the Seller and the Depositor set forth in or made pursuant to this Agreement shall remain in full force and effect and will survive the closing under Section 2.02 and the transfers and assignments referred to in Section 7.04.      Section 7.10 Confidential Information. The Depositor agrees that it will neither use nor disclose to any Person the names and addresses of the Obligors, except to enforce the Depositor’s rights hereunder, under the Receivables, under the Sale and Servicing Agreement or any other Basic Document, or as required by any of the foregoing or by law.      Section 7.11 Headings and Cross-References. The various headings in this Agreement are included for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. References in this Agreement to section names or numbers are to such Sections of this Agreement.      Section 7.12 GOVERNING LAW. THIS AGREEMENT AND THE ASSIGNMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER OR THEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.      Section 7.13 Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument.      Section 7.14 Third Party Beneficiary. The Indenture Trustee is an express third party beneficiary of this Agreement and shall be entitled to enforce the provisions of this Agreement as if it were a party hereto.      Section 7.15 No Proceedings. So long as this Agreement is in effect, and for one year plus one day following its termination, the Seller agrees that it will not file any involuntary petition or otherwise institute any bankruptcy, reorganization arrangement, insolvency or liquidation proceeding or other proceedings under any federal or state bankruptcy law or similar law against the Trust.      Section 7.16 Nonpetition Covenant. Notwithstanding any prior termination of this Agreement, the Seller shall not, prior to the date that is one year and one day after the termination of this Agreement with respect to the Depositor, acquiesce, petition or otherwise invoke or cause the Depositor to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Depositor under any federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Depositor or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Depositor. (2006-B Receivables Purchase Agreement) 17 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective duly authorized officers as of the date and year first above written.                   HYUNDAI MOTOR FINANCE COMPANY                       By:   /s/ Jae Min Song               Name: Jae Min Song             Title: Treasurer     (2006-B Receivables Purchase Agreement) A-1 --------------------------------------------------------------------------------                     HYUNDAI ABS FUNDING CORPORATION                       By:   /s/ Min Sok Randy Park               Name: Min Sok Randy Park             Title: Vice President and Secretary     (2006-B Receivables Purchase Agreement) A-2 --------------------------------------------------------------------------------   SCHEDULE I Schedule of Receivables [To be delivered to the Trust at Closing] (2006-B Receivables Purchase Agreement) I-1 --------------------------------------------------------------------------------   SCHEDULE II Receivable File Schedule 1.   All documents obtained or created in connection with the credit investigation.   2.   All Obligor records including without limitation (i) file copy of Receivable; (ii) copy of Dealer assignment (if applicable) and any intervening assignments; (iii) warranty copy (if applicable); (iv) credit life insurance policy (if applicable); (v) proof of auto insurance or obligor agreement to provide such insurance; (vi) title application; (vii) contract verification sheet; and (viii) original application.   3.   Original document file together with all documents maintained therein.   4.   Any and all other documents that the Servicer shall keep on file in accordance with its customary procedures relating to a Receivable, an Obligor or a Financed Vehicle. (2006-B Receivables Purchase Agreement) II-1 --------------------------------------------------------------------------------   SCHEDULE III Reconveyance Agreements Reconveyance and Release Agreement dated as of November 3, 2006 among Hyundai BC Funding Corporation, Société Générale, Amsterdam Funding Corporation, Asset One Securitization, L.L.C., Sheffield Receivables Corporation and Park Avenue Receivables Company, LLC Receivables Transfer Agreement and Assignment, dated as of November 3, 2006 between Hyundai Motor Finance Company and Hyundai BC Funding Corporation (2006-B Receivables Purchase Agreement) III-1 --------------------------------------------------------------------------------   SCHEDULE IV Conduit Documents Purchase and Sale Agreement dated as of January 17, 2000, as amended, between Hyundai Motor Finance Company and Hyundai BC Funding Corporation. Second Amended and Restated Receivables Purchase Agreement dated as of July 23, 2002, as amended, among Hyundai BC Funding Corporation, Hyundai Motor Finance Company, Amsterdam Funding Corporation, Asset One Securities, L.L.C., Sheffield Receivables Corporation, ABN AMRO Bank N.V., Barclays Bank PLC, Park Avenue Receivables Company, LLC, JPMorgan Chase Bank, N.A. and Société Générale. (2006-B Receivables Purchase Agreement) IV-1

Exhibit 10.23   TUT SYSTEMS, INC. Summary of Non-Management Director Compensation Plan Effective for Calendar Year 2006   Cash Compensation     •   Annual retainer of $25,000.     •   Additional meeting bonus retainer of $12,500 for attendance at all (100%) regularly scheduled quarterly Tut Systems’ Board meetings.     •   Directors may voluntarily elect to receive up to 100% of all cash retainers in the form of Tut Systems’ common stock with a 10% value premium (e.g., if total cash retainer is $37,500, a director may voluntarily elect to receive up to $41,250 in common stock). Common stock grants will be subject to the holding requirements of the Company’s stock ownership guidelines, when adopted by the Board of Directors.     •   All Cash Compensation (or common stock if so elected), except the additional meeting bonus retainer, is paid at the beginning of the calendar year (January). The meeting bonus retainer is paid at the end of the calendar year (December), based on calendar year attendance.   Equity Compensation     •   Initial stock option grant of 30,000 shares upon first election to the board.     •   Annual restricted stock unit grant value of $37,500 (approximately 12,100 shares at current price of $3.10/share) awarded on the date of the Company’s Annual Stockholders’ Meeting.     •   Equity awards will vest at a rate of one-third per year over three years.     •   All Equity Compensation is awarded on the date of the Company’s Annual Stockholders’ Meeting.

  -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   Exhibit 10.1 CREE, INC. FISCAL 2007 MANAGEMENT INCENTIVE COMPENSATION PLAN The following Management Incentive Compensation Plan (the “Plan”) is adopted by Cree, Inc. and its consolidated subsidiaries (collectively, the “Company”) for its fiscal year ending June 24, 2007 (the “Plan Year”): 1.  Purpose. The purpose of the Plan is to motivate and reward excellent performance, to attract and retain outstanding senior management, to create a strong link between strategic and corporate operating plans and individual performance, to achieve greater corporate performance by focusing on results, and to encourage teamwork at the highest levels within the organization. The Plan rewards participants with incentives based on their contributions and the attainment of specific corporate and individual performance goals. Incentives may be calculated in part based on a performance measurement multiplied by the participant’s annual target award level. Annual target award levels vary according to the position. 2.  Eligibility. The Company’s Chairman, its Chief Executive Officer (CEO), senior level managers of the Company who report directly to the Company’s CEO, and other key managers of the Company who have been identified by the CEO are eligible to participate in this Plan upon approval by the Compensation Committee in the case of executive officers, or by the CEO in all other cases, of such individual’s target award level for the Plan Year. No participant or other employees have a right to be selected for participation in the Plan despite having participated in any predecessor Plan. If an eligible participant’s duties and responsibilities materially change during the Plan Year, the Compensation Committee in the case of executive officers or the CEO in all other cases shall have the option to terminate the participant’s eligibility to participate in the Plan due to such change. 3.  Plan Awards: 3.1 Target Award Levels. Annual target award levels are expressed as a percentage of base salary and vary by position. The target award level specified for each participant represents the award level for 100% achievement of all objectives by that participant. The actual award amount is determined by multiplying the participant’s base salary during the award period by various percentages, as provided in Paragraph 3.2 below. 3.2 Determination of Awards. Except as expressly provided otherwise in this Plan, each eligible participant’s base salary for all award periods in the Plan Year will be determined by reference to the participant’s base salary in effect on the last day of the first fiscal quarter of the Plan Year (as provided in the Company’s human resources management system). If the participant’s base salary changes after the first fiscal quarter of the Plan Year, the base salary for the award period in which the change occurs will be the weighted average base salary for the award period determined by multiplying each base salary in effect during that award period by a fraction, the numerator of which is the number of calendar days in the award period in which such base salary was in effect and the denominator of which is the number of calendar days in the award period, and the base salary for all subsequent award periods will be the new base salary (subject to any further changes). For the positions of Chairman and Chief Executive Officer, unless otherwise approved by the Compensation Committee, awards are based 100% on achieving predetermined corporate goals. Awards for all other eligible positions are determined based       --------------------------------------------------------------------------------   on performance against goals in two categories: corporate and individual. Unless otherwise approved by the Compensation Committee in the case of executive officers or by the CEO in all other cases, 60% of a participant’s target award level will be allocated to achievement of corporate goals and 40% of a participant’s target award level will be allocated to achievement of individual goals. Performance against individual goals will be measured quarterly on a scale of 0% to 100% and performance against corporate goals will be measured annually on a scale of 0% to 150%. Actual awards will be determined for each participant (other than the Chairman and the Chief Executive Officer) in accordance with the following formulas: Quarterly Awards:         A x (B x C) x E Annual Award:  A x (B x D) x F Where: A equals the base salary for the award period B equals the target award level for the participant (expressed as a percentage) C equals the percentage of the target award level allocated to individual performance goals for that quarter (e.g., ¼ of 40%) D equals the percentage of the target award level allocated to corporate performance goals E equals the participant’s aggregate performance measurement against individual goals for the fiscal quarter (expressed as a percentage) F equals the performance measurement against corporate goals for the fiscal year (expressed as a percentage) Actual awards for the Chairman and the Chief Executive Officer will be determined in accordance with the following formula: Annual Award:  A x B x F 3.3 Individual Goals. At the beginning of each fiscal quarter, each participant who is subject to individual performance measurements under the Plan will develop a minimum of three (3) performance goals specific to his or her unit’s performance for that fiscal quarter and assign a weight to each goal (expressed as a percentage) such that the aggregate weight of all goals is equal to 100%. The participant’s proposed goals and assigned weights will be submitted to the CEO for approval. Performance goals are standards for evaluating success associated with a specific performance objective and should be expressed both as a minimum goal and a target goal. Minimum goals are the lowest level of competent performance that is eligible for an award. Performance of an individual goal at the minimum level will yield a performance measurement of 25% for that individual goal. Target goals are the expected level of performance. Performance of an individual goal at the target level will yield a performance measurement of 100% for that individual goal. Performance of an individual goal below the minimum level will result in a performance measurement of 0% for that individual goal. Performance measurements for individual goals will be approved by the CEO after the end of each fiscal quarter and multiplied by the weight assigned to that goal to arrive at the participant’s aggregate performance measurement against individual goals for the fiscal quarter. Any corresponding awards will be paid to eligible participants following approval of the CEO. 3.4 Corporate Goals. Performance against corporate goals is measured based on the Company meeting or exceeding the revenue, net income, and earnings per share (EPS) targets for the Plan     - 2 - --------------------------------------------------------------------------------   Year recommended by the CEO and approved by the Compensation Committee. If the minimum established revenue, net income, and EPS targets are not met, the performance measurement against corporate goals will be 0%. After the end of the Plan Year, the Compensation Committee will assess the Company’s financial performance for the Plan Year using competent and reliable information, including but not limited to audited financial statements, if available, and will determine in good faith and in its sole discretion the Company’s financial performance measurement for the Plan Year. Any corresponding awards will be paid to eligible participants following approval of the amount by the Compensation Committee in the case of executive officers and by the CEO in all other cases. 4. Other Provisions: 4.1 Termination of Employment. Unless otherwise approved by the Compensation Committee in the case of an executive officer or by the CEO in any other case, and except in the case of termination of employment due to the participant’s death or disability or termination of employment after a Change In Control as provided in this paragraph, the participant must be continuously employed by the Company for that part of the award period that the individual is eligible to participate in the Plan up through and including the date of the payment in order to have a right to payment, and any participant whose employment with the Company terminates prior to the date of payment, with or without cause, shall forfeit his or her rights to any unpaid award. If a participant’s employment terminates prior to the payment date for an award period on account of the employee’s death or disability (as determined under the Company’s long-term disability plan), the participant will be entitled to receive an award for any award period in which he or she was employed by the Company as otherwise determined in accordance with this Plan. However, the base salary used for purposes of calculating such participant’s award(s) will be reduced proportionately to equate to the base salary applicable to the number of calendar days the participant was employed during the award period. If there is a Change In Control, as that term is defined in the Cree, Inc. Equity Compensation Plan (“Change In Control”), and a participant’s employment terminates for any reason (including death or disability) subsequent to the Change in Control but prior to the payment date for an award period, the participant will be entitled to receive an award for all award periods for the Plan Year in accordance with this Plan as if the participant remained employed through the payment date for the award period. The base salary used for purposes of calculating such participant’s awards will be determined as provided in Paragraph 3.2 above, except that the base salary for such purposes may not be decreased after the Change in Control without the Participant’s approval. 4.2 New Hires; Newly Eligible Employees; Leave Periods. Unless otherwise provided in the individual’s employment offer letter, if a new hire is eligible to participate in the Plan, he or she will commence participation in the Plan as of the date of hire and his or her base salary for the Plan Year will be as provided in his or her offer letter (subject to change as provide in Paragraph 3.2 above); provided that the base salary used for purposes of calculating the participant’s awards for the first quarter of participation and the annual award will reduced proportionately to equate to the base salary applicable to the number of calendar days the participant was employed during such award periods. If an existing employee of the Company first becomes eligible to participate in the Plan after the start of the Plan Year, he or she will commence participation in the Plan as of the start date approved by the Compensation Committee in the case of an executive officer or by the CEO in all other cases. The base salary used for purposes of calculating such participant’s awards will be determined as provided in Paragraph 3.2 above, provided that the base salary used for purposes of calculating the participant’s awards for the first quarter of participation and the annual award will reduced proportionately to equate to the base salary applicable to the number of calendar days the participant was eligible to participate in the Plan during such award periods. If a participant is on unpaid personal leave for all or part of an award period, to the extent permitted by applicable law (e.g., the Family and Medical Leave Act (FMLA) or the Uniformed Services Employment and Reemployment Rights Act (USERRA)), the base salary for such award period will be reduced proportionately to equate to a base salary applicable to the number of calendar days the     - 3 - --------------------------------------------------------------------------------   participant was not on unpaid personal leave during such award period. No reduction will be made to base salary for participants on paid leave during an award period. If a participant in the Plan remains employed by the Company, but after the start of the Plan Year becomes ineligible to participate in the Plan, unless otherwise approved by the Compensation Committee in the case of an executive officer or by the CEO in all other cases, the participant will not be eligible for an award for any award period that is partially completed as of the date he or she becomes ineligible to participate in the Plan. 4.3 Exceptions. In order to ensure that the Company’s best interests are met, the amount of a payment on an award otherwise calculated in accordance with this Plan can be increased, decreased, or eliminated, at any time prior to payment, in the sole discretion of the CEO, except that no change with respect to any award to the Chairman, the Chief Executive Officer or any executive officer of the Company shall be made without Compensation Committee approval, and payments due as a result of a Change In Control, as otherwise provided in the Plan, cannot be decreased or eliminated. 4.4 Amendment; Termination. The Company has no obligation to implement this Plan for any fiscal year and has the right to amend, modify or terminate the Plan at any time without prior notice to participants; provided that the Company may not amend, modify or terminate the Plan in a manner that affects a payment that has already become payable hereunder to an eligible employee. 4.5 Earned Upon Payment. Except as provided in Paragraph 4.1 above, no award amount shall be considered earned by any participant under the Plan until it is received by the participant from the Company. 4.6 Change In Control. In the event a Change In Control occurs during the Plan Year, notwithstanding any language in this Plan to the contrary, each participant’s performance measurement against individual goals for any award period ending after the effective date of the Change In Control will be 100% and the performance measurement against corporate goals for the Plan Year will be the greater of 100% or such performance measurement as is determined in accordance with this Plan, regardless of whether such participant is employed during or at the end of the applicable award period. 4.7 Priority of Written Agreement. Notwithstanding any language in this Plan to the contrary, the terms and conditions of any written agreement between the Company and a participant regarding payment of one or more awards under this Plan upon termination of employment for any reason or in the event of a Change In Control shall supersede and control with respect to payment of such awards to the participant under this Plan, provided that the written agreement was approved by the Compensation Committee if the participant was an executive officer at the time of execution of the agreement or by the CEO in any other case. 4.8 Non-Transferability. No right or interest of any participant in this Plan is assignable or transferable, or subject to any lien, directly, by operation of law, or otherwise, including execution, levy, garnishment, attachment, pledge, and bankruptcy. 4.9 No Rights to Company Assets. No Plan participant nor any other person will have a right in, nor title to, any assets, funds or property of the Company or any of its subsidiaries through this Plan. Any earned incentives will be payable from the Company’s general assets. Nothing contained in this Plan constitutes a guarantee by the Company or any of its subsidiaries that the assets of the Company and its subsidiaries will be sufficient to pay any earned incentives.     - 4 - --------------------------------------------------------------------------------   5. Administration: 5.1 The Compensation Committee is the Plan Administrator with respect to all decisions under the Plan concerning, affecting or related to the compensation of executive officers, and the CEO is the Plan Administrator with respect to all other aspects of the Plan. The Plan Administrators, in their respective capacities, have the authority to interpret the Plan, and the Plan Administrators’ interpretations, in their respective capacities, shall be final and binding on all Plan participants. 5.2 This Plan shall be operated at all times in accordance with the requirements of section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). Any provision in this Plan that is determined to violate and/or any action taken by the Company in violation of the requirements of Code section 409A shall be void and without effect. If any failure to act is determined to violate Code section 409A, then to the extent it is possible thereby to avoid a violation of Code section 409A, the rights and effects under this Plan, as applicable, shall be altered to avoid such violation. In addition, any provision that is required to appear in this Plan to satisfy the requirements of Code section 409A, but that is not expressly set forth, shall be deemed to be set forth herein, and this Plan shall be administered in all respects as if such provision were expressly set forth. In all cases, the provisions of this paragraph shall apply notwithstanding any contrary provisions in this Plan. 5.3 When awarded, payments under the Plan will be made as soon as practicable after the end of the applicable award period, and in any event, payments will be made no later than the end of the second fiscal quarter following the award period to which the payments relate. Notwithstanding the foregoing, if a participant is eligible for payment of: (a) all or part of an annual award as a result of his or her death or disability as provided in Paragraph 4.1 above, the payment will be made no later than the 15th day of the third month after the later of the end of the Company’s tax year in which such death or disability occurs or the end of the participant’s tax year in which such death or disability occurs; (b) 100% of a quarterly award as provided in Paragraph 4.6 above due to a Change In Control, payment will be made without exception on or before the 15th day of third month following the end of the award period; and/or (c) 100% or more of an annual award as provided in Paragraph 4.6 above due to a Change In Control, payment will be made without exception no later than the 15th day of the third month after the later of the end of the Company’s tax year in which the Change In Control occurs or the end of the participant’s tax year in which the Change In Control occurs. 5.4 This Plan shall not be construed to give participants a right of continued employment with the Company.     - 5 - --------------------------------------------------------------------------------  

EXHIBIT 10.4 RESTRICTED STOCK UNITS AWARD AGREEMENT This Award Agreement (the “Agreement”) is entered into as of _________, 2006 by and between Electro Scientific Industries, Inc., an Oregon corporation (the “Company”), and __________________ (“Recipient”), for the grant of restricted stock units with respect to the Company’s Common Stock (“Common Stock”). On July 20, 2006, the Company’s Board of Directors made a restricted stock units award to Recipient pursuant to Section 9 of the Company’s 2004 Stock Incentive Plan (the “Plan”) and Recipient desires to accept the award subject to the terms and conditions of this Agreement. IN CONSIDERATION of the mutual covenants and agreements set forth in this Agreement, the parties agree to the following. 1. Grant and Terms of Restricted Stock Units. The Company grants to Recipient under the Company’s Plan _____________ restricted stock units, subject to the restrictions, terms and conditions set forth in this Agreement. (a) Rights under Restricted Stock Units. A restricted stock unit (a “RSU”) represents the unsecured right to require the Company to deliver to Recipient one share of Common Stock for each RSU. The number of shares of Common Stock deliverable with respect to each RSU is subject to adjustment as determined by the Board of Directors of the Company as to the number and kind of shares of stock deliverable upon any merger, reorganization, consolidation, recapitalization, stock dividend, spin-off or other change in the corporate structure affecting the Common Stock generally. (b) Vesting and Delivery Dates. The RSUs issued under this Agreement shall initially be 100% unvested and subject to forfeiture. Subject to this Section 1(b), the RSUs shall vest on with respect to one-third of the RSUs on each of the first three anniversaries of the date of grant. The RSUs shall become vested on the vesting date only if Recipient continues to be a director of the Company immediately after such vesting date. The delivery date for a RSU shall be the date on which such RSU vests. (c) Acceleration before Vesting Date. (1) Acceleration on Death or Total Disability. If Recipient ceases to be a director of the Company by reason of Recipient’s death or physical disability, outstanding but unvested RSUs shall become immediately vested in an amount determined by multiplying the total number of RSUs subject to this Agreement by a percentage calculated by dividing the number of whole months elapsed from the date of this Agreement to the date of termination of service by 60 (the “Pro Rata Percentage”); provided, however, that the number of RSUs so vested shall be reduced by the number of any RSUs that previously vested pursuant to Section 1(b). The delivery date shall also accelerate. The term “total disability” -------------------------------------------------------------------------------- means a medically determinable mental or physical impairment that is expected to result in death or has lasted or is expected to last for a continuous period of 12 months or more and that, in the opinion of the Company and two independent physicians, causes Recipient to be unable to perform his or her duties as a director of the Company and unable to be engaged in any substantial gainful activity. Total disability shall be deemed to have occurred on the first day after the two independent physicians have furnished their written opinion of total disability to the Company and the Company has reached an opinion of total disability. (2) Acceleration on Normal Retirement. If Recipient terminates his service with the Company following normal retirement under the retirement policy of the Board of Directors in place at such time, outstanding but unvested RSUs shall become immediately vested in an amount determined by multiplying the total number of RSUs subject to this Agreement by the Pro Rata Percentage; provided, however, that the number of RSUs so vested shall be reduced by the number of any RSUs that previously vested pursuant to Section 1(b). The delivery date shall also be accelerated. (3) Treatment on Change in Control. (i) If as a result of a Change in Control, the Company’s Common Stock ceases to be listed for trading on a national securities exchange (an “Exchange”), any RSUs subject to this award that are unvested on the date of the Change in Control shall continue to vest according to the terms and conditions of this award; provided that such award is replaced with an award for voting securities of the resulting corporation or the acquiring corporation, as the case may be (including without limitation, the voting securities of any corporation which as a result of the Change in Control owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) (the “Surviving Company”) which are traded on an Exchange (a “Replacement Award”), which Replacement Award shall consist of RSUs with a value (determined using the Surviving Company’s stock price as of the date of the Change in Control) equal to the value of the replaced award of RSUs (determined using the Company’s stock price as of the date of the Change in Control), with any restrictions on such Replacement Award lapsing at the same time and manner as the replaced award; provided, however, that in the event Recipient ceases to serve as a director of the Company during the vesting period of any Replacement Award, the Replacement Award shall immediately vest; and provided further that upon the vesting date of all or a portion of a Replacement Award, Recipient shall be entitled to receive a lump sum cash payment equal to the decrease, if any, in the value of a share of the Surviving Company’s stock from the date of the Change in Control (as increased on a calendar quarterly basis using an annual interest rate, as of the last business day of the calendar quarter, for zero-coupon U.S. government securities with a constant maturity closest in length to the time period   2 -------------------------------------------------------------------------------- between the date of the Change in Control and the date of vesting of the Replacement Award) to the time of vesting multiplied by the total number of RSUs vesting on such date. If any RSUs that are unvested at the time of the Change in Control are not replaced with Replacement Awards, such RSUs shall immediately vest. (ii) If as a result of a Change in Control, the Company’s Common Stock continues to be listed for trading on an Exchange, any RSUs that are unvested on the date of the Change of Control shall continue to vest according to the terms and conditions of this award; provided however, that, in the event Recipient ceases to serve as a director of the Company during the vesting period of this award such award shall immediately vest; and provided further that upon the vesting date of all or portion of this award, Recipient shall be entitled to receive a lump sum cash payment equal to the decrease, if any, in the value of a share of the Company’s stock from the date of the Change in Control (as increased on a calendar quarterly basis using an annual interest rate, as of the last business day of the calendar quarter, for zero-coupon U.S. government securities with a constant maturity closest in length to the time period between the date of the Change in Control and the date of the vesting) to the time of vesting, multiplied by the total number of RSUs vesting on such date. (iii) For purposes of this Agreement, a “Change in Control” of the Company shall mean the occurrence of any of the following events: (A) Any consolidation, merger or plan of share exchange involving the Company (a “Merger”) as a result of which the holders of outstanding securities of the Company ordinarily having the right to vote for the election of directors (“Voting Securities”) immediately prior to the Merger do not continue to hold at least 50% of the combined voting power of the outstanding Voting Securities of the surviving or continuing corporation immediately after the Merger, disregarding any Voting Securities issued or retained by such holders in respect of securities of any other party to the Merger; (B) Any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company; (C) The adoption of any plan or proposal for the liquidation or dissolution of the Company; (D) At any time during a period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (“Incumbent Directors”) shall cease for any   3 -------------------------------------------------------------------------------- reason to constitute at least a majority thereof, unless each new director elected during such two-year period was nominated or elected by two-thirds of the Incumbent Directors then in office and voting (with new directors nominated or elected by two-thirds of the Incumbent Directors also being deemed to be Incumbent Directors); or (E) Any Person (as hereinafter defined) shall, as a result of a tender or exchange offer, open market purchases, or privately negotiated purchases from anyone other than the Company, have become the beneficial owner (within the meaning of Rule 13d 3 under the Securities Exchange Act of 1934), directly or indirectly, of Voting Securities representing fifty percent (50%) or more of the combined voting power of the then outstanding Voting Securities. Notwithstanding anything in the foregoing to the contrary, unless otherwise determined by the Board of Directors, no Change in Control shall be deemed to have occurred for purposes of this Agreement if (1) Recipient acquires (other than on the same basis as all other holders of the Company Common Stock) an equity interest in an entity that acquires the Company in a Change in Control otherwise described under subparagraph (A) or (B) above, or (2) Recipient is part of group that constitutes a Person which becomes a beneficial owner of Voting Securities in a transaction that otherwise would have resulted in a Change in Control under subparagraph (E) above. (ix) For purposes of this Agreement, the term “Person” shall mean and include any individual, corporation, partnership, group, association or other “person”, as such term is used in Section 14 (d) of the Securities Exchange Act of 1934 (the “Exchange Act”), other than the Company, a wholly owned subsidiary of the Company or any employee benefit plan(s) sponsored by the Company. (d) Forfeiture of RSUs on Other Terminations of Service. If Recipient ceases to be a director of the Company for any reason that does not result in acceleration of vesting pursuant to Section 1(c), Recipient shall immediately forfeit all outstanding but unvested RSUs granted pursuant to this Agreement and Recipient shall have no right to receive the related Common Stock. (e) Restrictions on Transfer and Delivery on Death. Recipient may not sell, transfer, assign, pledge or otherwise encumber or dispose of the RSUs. Recipient may designate beneficiaries to receive stock if Recipient dies before the delivery date by so indicating on Exhibit A, which is incorporated into and made a part of this agreement. If Recipient fails to designate beneficiaries on Exhibit A, the shares will be delivered to Recipient’s estate.   4 -------------------------------------------------------------------------------- (f) Reinvestment of Dividend Equivalents. On each date on which the Company pays a dividend on shares of Common Stock underlying a RSU, Recipient shall receive additional whole or fractional RSUs in an amount equal to the value of the dividends that would have been paid on the stock deliverable pursuant to the RSUs (if such shares were outstanding), divided by the closing stock price on the dividend payment date. (g) Delivery on Delivery Date. As soon as practicable following the delivery date for a RSU, the Company shall deliver a certificate for the number of shares represented by all vested RSUs having a delivery date on the same date, rounded down to the whole share. No fractional shares of Common Stock shall be issued. The Company shall pay to Recipient in cash an amount equal to the value of any fractional shares that would otherwise have been issued, valued as of the delivery date. (h) Recipient’s Rights as Shareholder. Recipient shall have no rights as a shareholder with respect to the RSUs or the shares underlying them until the Company delivers the shares to Recipient on the delivery date. (i) Section 409A. The award made pursuant to this Agreement is intended not to constitute a “nonqualified deferred compensation plan” within the meaning of Section 409A the Internal Revenue Code of 1986, as amended, and instead is intended to be exempt from the application of Section 409A. To the extent that the award is nevertheless deemed to be subject to Section 409A, the award shall be interpreted in accordance with Section 409A and Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance issued after the grant of the award. Notwithstanding any provision of the award to the contrary, in the event that the Company determines that the award is or may be subject to Section 409A, the Company may adopt such amendments to the award or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Company determines are necessary or appropriate to (i) exempt the award from the application of Section 409A or preserve the intended tax treatment of the benefits provided with respect to the award, or (ii) comply with the requirements of Section 409A. 2. Miscellaneous. (a) Entire Agreement; Amendment. This Agreement constitutes the entire agreement of the parties with regard to the subjects hereof and may be amended only by written agreement between the Company and Recipient. (b) Notices. Any notice required or permitted under this Agreement shall be in writing and shall be deemed sufficient when delivered personally to the party to whom it is addressed or when deposited into the United States mail as registered or certified mail, return receipt requested, postage prepaid, addressed to Electro Scientific Industries, Inc., Attention: Corporate Secretary, at its principal executive offices or to Recipient at the address of Recipient in the Company’s records, or at such other address as such party may designate by ten (10) days’ advance written notice to the other party.   5 -------------------------------------------------------------------------------- (c) Rights and Benefits. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company’s successors and assigns and, subject to the restrictions on transfer of this Agreement, be binding upon Recipient’s heirs, executors, administrators, successors and assigns. (d) Further Action. 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. (e) Applicable Law; Attorneys’ Fees. The terms and conditions of this Agreement shall be governed by the laws of the State of Oregon. In the event either party institutes litigation hereunder, the prevailing party shall be entitled to reasonable attorneys’ fees to be set by the trial court and, upon any appeal, the appellate court. (f) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original.   ELECTRO SCIENTIFIC INDUSTRIES, INC. By:        Authorized Officer    Recipient   6 -------------------------------------------------------------------------------- EXHIBIT A DESIGNATION OF BENEFICIARY   Name _____________________________    Social Security Number ____-___-_____ I designate the following person(s) to receive any restricted stock units outstanding upon my death under the Restricted Stock Units Award Agreement with Electro Scientific Industries, Inc.:   E. Primary Beneficiary(ies)   Name________________________    Social Security Number ____-___-_____ Birth Date ____________________    Relationship ________________________ Address__________________________    City__________ State____ Zip ________ Name________________________    Social Security Number ____-___-_____ Birth Date ____________________    Relationship ________________________ Address__________________________    City__________ State____ Zip ________ Name________________________    Social Security Number ____-___-_____ Birth Date ____________________    Relationship ________________________ Address__________________________    City__________ State____ Zip ________ If more than one primary beneficiary is named, the units will be divided equally among those primary beneficiaries who survive the undersigned.   F. Secondary Beneficiary(ies) In the event no Primary Beneficiary is living at the time of my death, I designate the following the person(s) as my beneficiary(ies):   Name________________________    Social Security Number ____-___-_____ Birth Date ____________________    Relationship ________________________ Address__________________________    City__________ State____ Zip ________ Name________________________    Social Security Number ____-___-_____ Birth Date ____________________    Relationship ________________________ Address__________________________    City__________ State____ Zip ________ Name________________________    Social Security Number ____-___-_____ Birth Date ____________________    Relationship ________________________ Address__________________________    City__________ State____ Zip ________ If more than one Secondary Beneficiary is named, the units will be divided equally among those Secondary beneficiaries who survive the undersigned. This designation revokes and replaces all prior designations of beneficiaries under the Restricted Stock Units Award Agreement.          Date signed:        , 20      Signature             7

Exhibit 10.6 ISDA® International Swaps and Derivatives Association, Inc. NOVATION AGREEMENT dated as of April 28, 2006 among: DEUTSCHE BANK AG, NEW YORK BRANCH (the “Remaining Party”), NOVASTAR FINANCIAL, INC. (the “Transferor”) AND NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-1 (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 21, 2004 (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 April 28, 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 Transaction to the Transferee.     (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 the 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.   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   2 --------------------------------------------------------------------------------   “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 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   3 --------------------------------------------------------------------------------   Transferor from any liability it may have for any of its representations, warranties or obligations as the servicer or otherwise under the Sale and Servicing Agreement among NovaStar Certificates Financing Corporation, NovaStar Mortgage Inc., NovaStar Mortgage Funding Trust 2006-1, JPMorgan Chase Bank, National Association and U.S. Bank Corporate Trust Services dated as of April 1, 2006 (the “Sale 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. It is expressly understood and agreed by the parties hereto that (i) this Novation Agreement is executed and delivered by Wilmington Trust Company, not individually or personally but solely as Owner Trustee of Party B, in the exercise of the powers and authority conferred and vested in it under the Trust Agreement, (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 Wilmington Trust Company 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 Wilmington Trust Company, 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 and (iv) under no circumstances shall Wilmington Trust Company 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 under this Novation Agreement or any other related documents.   4 --------------------------------------------------------------------------------   (d) Sale and Servicing Agreement. Capitalized terms used in this Novation Agreement that are not defined herein and are defined in the Sale and Servicing Agreement shall have the respective meanings assigned to them in the Sale and Servicing Agreement.     (e) Calculation. Not later than each Reset Date, the Calculation Agent shall deliver in writing to the Indenture 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    Account with:    Deutsche Bank AG, New York SWIFT Code:    DEUTUS33 Favor of:    Deutsche Bank AG, New York Account Number:    100440170004 Transferee JPMorgan Chase Bank, N.A. ABA # 021000021 Acct # 507947541 Acct Name SFS-NY Incoming Wire Account Attn Ariella Kaminer Ref Novastar 2006-1, Cap/Swap 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.   DEUTSCHE BANK AG, NEW YORK BRANCH     NOVASTAR FINANCIAL, INC. By:          By:        Name:         Name:   David L. Farris   Title:         Title:   Vice President By:              Name:             Title:             NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-1 By:  Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee under the Trust Agreement By:        Name:     Title:     6 -------------------------------------------------------------------------------- Exhibit I [Old Swap Confirmations attached behind this page]   7 -------------------------------------------------------------------------------- Exhibit II [Form of New Agreement attached behind this page]   8

  Exhibit 10.1 INDEMNIFICATION AGREEMENT This Indemnification Agreement (“Agreement”) made this 4th day of May, 2006 by and between Warwick Valley Telephone Company (the “Company”), a New York corporation, and                                                              (“Indemnitee”). WITNESSETH: WHEREAS, Section 722(a) of the Business Corporation Law of New York (the “BCL”) empowers corporations to indemnify any person made, or threatened to be made, a party to an action or proceeding ( other than one by or in the right of the Company to procure a judgment in its favor), whether civil or criminal, including an action by or in the right of any other corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, which any director or officer of the Company served in any capacity at the request of the Company, by reason of the fact that he, his testator or intestate, was a director or officer of the Company, or served such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys` fees actually and necessarily incurred as a result of such action or proceeding, or any appeal therein, if such director or officer acted, in good faith, for a purpose which he reasonably believed to be in, or, in the case of service for any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise, not opposed to, the best interests of the Company and, in criminal actions or proceedings, in addition, had no reasonable cause to believe that his conduct was unlawful; and WHEREAS, Section 722(c) of the BCL empowers corporations to indemnify any person made, or threatened to be made, a party to an action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he, his testator or intestate, is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of any other corporation of any type or kind, domestic or foreign, of any partnership, joint venture, trust, employee benefit plan or other enterprise, against amounts paid in settlement and reasonable expenses, including attorneys’ fees, actually and necessarily incurred by him in connection with the defense or settlement of such action, or in connection with an appeal therein, if such director or officer acted, in good faith, for a purpose which he reasonably believed to be in, or, in the case of service for any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise, not opposed to, the best interests of the corporation, except that no indemnification under Section 722(c) may be made in respect of (1) a threatened action, or a pending action which is settled or otherwise disposed of, or (2) any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation, unless and only to the extent that the court in which the action was brought, or, if no action was brought, any court of competent jurisdiction, determines upon application that, in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such portion of the settlement amount and expenses as the court deems proper; and WHEREAS, the Company and the Indemnitee further recognize the substantial amount of corporate litigation in general, which subjects directors, officers, employees, controlling persons, agents and fiduciaries to expensive litigation risks; and WHEREAS, the Company and Indemnitee recognize the increasing expense of or difficulty in obtaining liability insurance for the Company’s directors, officers, employees, controlling persons, agents and fiduciaries, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance; and WHEREAS, highly competent persons have become more reluctant to serve as officers or directors of publicly-held corporations unless they are provided with adequate protection through insurance and indemnification against risks of claims and actions against them arising out of their service to, and activities on behalf, of the corporation; and 34 --------------------------------------------------------------------------------   WHEREAS, the Indemnitee is concerned that the current protection available may not be adequate under the present circumstances, and Indemnitee and other directors and officers of the Company may not be willing to serve in such capacities without additional protection; and WHEREAS, the Company’s directors and officers have certain existing indemnification arrangements pursuant to the Company’s Certificate of Incorporation and By-Laws and may be entitled to indemnification pursuant to Section 722 et seq., but the protection provided by such indemnification is limited and its availability is uncertain as to any particular situation; and WHEREAS, in recognition of Indemnitee’s need for (i) substantial protection against personal liability for services rendered to the Company, (ii) specific contractual assurance that the protection promised by the Company’s Certificate of Incorporation and By-Laws will be available to Indemnitee (regardless of, among other things, any amendment to or revocation of the Certificate of Incorporation or By-Laws or any change in the composition of the Board of Directors of the Company or acquisition transaction relating to the Company), and (iii) an inducement to provide effective services to the Company as a director or officer, as the case may be, the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the fullest extent (whether partial or complete) permitted under law (including, without limitation, Section 721 of the BCL) and as set forth in this Agreement, and, to the extent insurance is maintained, to provide for the continued coverage of Indemnitee under the Company’s directors and officers liability insurance policies; and WHEREAS, the Company wishes to obligate itself to advance such expenses to Indemnitee under the circumstances contemplated by this Agreement and the Indemnitee wishes to have the Company so obligate itself as a condition for continuing to serve as                                          of the Company; and WHEREAS, Section 721 of the BCL specifically provides that the indemnification and advancement of expenses granted pursuant to, or provided by, Sections 722 through 725 of the BCL shall not be deemed exclusive of any other rights to which a director or officer seeking indemnification or advancement of expenses may be entitled, provided that (1) any agreement providing for such other rights is authorized by the By-Laws of the Company, and (2) no indemnification may be made to or on behalf of any director or officer if a judgment or other final adjudication adverse to the director or officer establishes that his acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled. WHEREAS, Article X, Section 3 of the Company’s By-Laws permits the Company to provide indemnification to its officers and directors beyond that permitted by Section 722 et seq., as required by Section 721; and WHEREAS, the Board of Directors of the Company has authorized and directed the proper officers of the Company to enter into this Agreement in the name of or on behalf of the Company; NOW, THEREFORE, in consideration of the premises, the agreements herein set forth, and other good and valuable consideration, the Company and Indemnitee hereby agree as follows: ARTICLE I      Section 1.01. DEFINITIONS. As used in this Agreement, the following terms have the following meanings, unless a Section of this Agreement specifically provides otherwise:   1.   “Agreement” means this Indemnification Agreement and any amendments pursuant to Section 7.01 of this Agreement.     2.   “Board” means the Board of Directors of the Company.     3.   “Change in Control” shall have occurred in any of the following circumstances occurring after the date of this Agreement: (i) an occurrence of an event required to be reported with respect to the Company in response to item 6(e) of Schedule 14A or Regulation 14A (or in response to any similar item on any similar schedule or form) under the Exchange Act, regardless of whether the Company is then subject to such reporting requirement; (ii) a Business 35 --------------------------------------------------------------------------------         Combination (as defined in Article Fifth of the Company’s Certificate of Incorporation) shall take place which has not been approved pursuant to Sub-paragraph 2(a) of such Article Fifth; (iii) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) shall have become, without prior approval of the Company’s Board, the “beneficial owner”         (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then     4.   outstanding voting securities (provided that as used in clause (iii), the term “person” excludes a trustee or other fiduciary holding securities under an employee benefit plan of the Company), (iv) there occurs a merger or consolidation of the Company with another 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 or resulting entity) more than 51% of the combined voting power of the voting securities of the surviving or resulting 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 or resulting entity; (v) all or substantially all the assets of the Company are sold or otherwise disposed of in a transaction or series of related transactions; (vi) the approval by the stockholders of the Company of a complete liquidation of the Company or the sale or other disposition of all or substantially all of the assets of the Company, or (vii) the individuals who on the date of this Agreement constitute the Board (including, for this purpose, any new director whose election or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors then still in office who were directors on the date hereof or whose election or nomination was so approved) cease for any reason to constitute at least a majority of the members of the Board.     5.   “Company” means Warwick Valley Telephone Company and any parent, affiliate, subsidiary and any successors (whether direct or indirect by purchase, merger, consolidation, or otherwise) and any assigns.     6.   “Controlling Person” means any person who controls Indemnitee or Indemnitee’s Spouse or any person or entity who may be liable within the meaning of Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as amended.     7.   “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification or advancement of Expenses is sought by Indemnitee, Indemnitee’s Spouse, or a Controlling Person.     8.   “Expenses” means any and all costs and fees reasonably incurred in connection with any Proceeding including, without limitation, costs and fees reasonably incurred by counsel, consultants and experts, including all costs and fees reasonably incurred in connection with the enforcement of this Agreement.     9.   “Independent Counsel” means the law firm or a member(s) of a law firm, that is experienced in matters of corporate law and neither currently is, nor in the past five years has, been retained by the Company or Indemnitee, Indemnitee’s Spouse or any Controlling Person with respect to any matter materially related to the Proceeding for which indemnification is being sought and otherwise complies with any requirements of independence that may be applicable. Prior service as Independent Counsel under this Agreement or in any similar capacity with respect to any dispute involving the Company shall be grounds for disqualification from serving as Independent Counsel. This Agreement is not intended to and does not supersede any obligation incumbent upon Independent Counsel pursuant to applicable standards of professional conduct. Independent Counsel shall be an independent decision-maker and shall not owe any fiduciary responsibility to, or have any attorney-client relationship with, any of the Company, Indemnitee, Indemnitee’s Spouse or any Controlling Person.     10.   “Liabilities” means all judgments, fines (including any excise taxes assessed with respect to any employee benefit plan), penalties and amounts paid in settlement and other liabilities (including all interest, assessments and other charges paid or payable in connection with or in respect of any such amounts) arising out of or in connection with any Proceeding; provided that Liabilities shall not include any Expenses. 36 --------------------------------------------------------------------------------     11.   “Proceeding” means any reasonably foreseeable, threatened, pending or completed action, suit, hearing, investigation or inquiry (whether internal or external), arbitration or other alternative dispute mechanism, or other proceeding, whether civil, criminal, administrative, regulatory, congressional or investigative investigations, including, without limitation any action, suit or hearing seeking injunctive or declarative relief regarding the existence of any fiduciary     12.   duty, brought or conducted by any third party or by or in the right of the Company or an affiliate of the Company.     13.   “Spouse” means the person with whom Indemnitee has entered into a lawful marriage, civil union or domestic partnership arrangement that has not been annulled, dissolved, or otherwise invalidated or terminated under the law of the jurisdiction in which it was entered.     14.   “State” means any of the fifty states, the District of Columbia and any territory of the United States.     15.   “To The Fullest Extent Authorized By Law” means (i) to the fullest extent permitted by the BCL as in effect on the date of this Agreement, and (ii) to the fullest extent authorized or permitted by any amendments to or replacements of the BCL adopted after the date of this Agreement that increases the extent to which a corporation may provide indemnification, and shall be understood to include indemnification for Liabilities and Expenses and the advancement of funds for Expenses to the extent permitted by the BCL for indemnification or advancement under an agreement permitted pursuant to Section 721, clause (iii) of the BCL, subject only to any prohibitions or limitations set forth expressly in the BCL as being applicable even with respect to such an agreement, such as the proviso set forth in Section 721 of the BCL immediately after such clause (iii). ARTICLE II Section 2.01. SERVICES BY INDEMNITEE. Indemnitee hereby agrees to serve or continue to serve the Company, for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders his resignation or is removed, subject to the terms of any retention agreement between Indemnitee and the Company. ARTICLE III Section 3.01. INDEMNIFICATION GENERALLY. The Company will indemnify, pay on behalf of, or will reimburse Indemnitee, Indemnitee’s Spouse and each Controlling Person who is or was made a party or a witness or other participant in or is or was threatened to be made a party or a witness or other participant in any Proceeding, by reason of the fact that such person was or may be deemed the legal representative, or a director, officer, employee or agent of the Company or is or was or may be deemed serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise against any and all Expenses and Liabilities actually and reasonably incurred To The Fullest Extent Authorized By Law; provided however, that no indemnification shall be made to or on behalf of Indemnitee if a judgment or other final adjudication adverse to Indemnitee establishes that (i) Indemnitee’s acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or (ii) Indemnitee personally gained in fact a financial profit or other advantage to which Indemnitee was not legally entitled. Any acts of Indemnitee which are so finally adjudged or adjudicated to constitute intentional illegal conduct shall be presumed to have been committed in bad faith. Section 3.02. SUCCESSFUL DEFENSE; PARTIAL SUCCESS. Except to the extent set forth in the proviso in Section 3.01, the obligation of the Company set forth in such Section is not limited to only those circumstances in which Indemnitee, Indemnitee’s Spouse or any Controlling person is wholly or partially successful on the merits or otherwise in the defense of any Proceeding. Section 3.03. WITNESS EXPENSES. This Agreement shall not in any way limit or affect the Company’s power to pay (in advance or otherwise) or reimburse expenses reasonably incurred by Indemnitee, Indemnitee’s Spouse or any Controlling Person in connection with the appearance by any of them as a witness in any Proceeding at a time when the person appearing as a witness has not been formally named a defendant or respondent in or to such Proceeding. 37 --------------------------------------------------------------------------------   ARTICLE IV Section 4.01. ADVANCES; WRITTEN REQUEST. The Company shall advance to Indemnitee, Indemnitee’s Spouse and each Controlling Person any and all Expenses actually and reasonably incurred by such person in connection with any Proceeding within 14 calendar days of receipt of a written request for advancement, which may be delivered to the Company at such time and from time to time as Indemnitee, Indemnitee’s Spouse or each Controlling Person deems appropriate in such person’s discretion, whether prior to or after final disposition of any Proceeding. Section 4.02. SUFFICIENCY OF WRITTEN REQUEST FOR ADVANCES. A written request for advancement that conveys, without the need to do so verbatim, that Indemnitee, Indemnitee’s Spouse or the respective Controlling Person believes in good faith that such person is entitled to advancement of expenses under the terms of this Agreement shall be sufficient to invoke the right to advancement under Section 4.01. Section 4.03. PROMISE TO REPAY. Indemnitee, Indemnitee’s Spouse and each Controlling Person hereby each agree and promise that such person shall promptly repay any and all advanced Expenses to the Company if and to the extent it is ultimately determined, under the procedure set forth in Section 723(b) of the BCL, that such person is not entitled to indemnification under Section 3.01 above or has received reimbursement or advances for Expenses in excess of the amount to which such person is entitled. ARTICLE V Section 5.01. NOTICE TO COMPANY. Indemnitee, Indemnitee’s Spouse and each Controlling Person shall notify the Company in writing as soon as reasonably practicable after being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding with respect to which Indemnitee, Indemnitee’s Spouse or any Controlling Person intends to seek indemnification or advancement of Expenses and Liabilities under this Agreement. Section 5.02. NOTICE BY COMPANY. The Company shall notify Indemnitee, Indemnitee’s Spouse and each Controlling Person in writing as soon as reasonably practicable after being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding with respect to which Indemnitee, Indemnitee’s Spouse or any Controlling Person may be entitled to indemnification or advancement under this Agreement. Section 5.03. DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION. (a) Upon the final disposition of the matter that is the subject of the request for indemnification delivered pursuant to this Article, a determination shall be made with respect to Indemnitee’s entitlement thereto in the specific case in the manner set forth in section 723(b) of the BCL. (b) If it is determined that Indemnitee, Indemnitee’s Spouse or a Controlling Person is entitled to indemnification, payment to such person shall be made within 10 calendar days after such determination. Section 5.03. COOPERATION WITH INDEPENDENT COUNSEL. In connection with any determination of entitlement to indemnification in the manner set forth in Section 723(b) of the BCL that involves the use of Independent Counsel, Indemnitee, Indemnitee’s Spouse and each Controlling Person and the Company agree to reasonably cooperate with the Independent Counsel including providing, upon reasonable request, any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the party of whom the request was made and reasonably necessary to such determination. Section 5.04. PAYMENT OF INDEPENDENT COUNSEL. The Company agrees to pay all Expenses incurred by Indemnitee, Indemnitee’s Spouse or each Controlling Person in so cooperating with Independent Counsel in making such determination (irrespective of the determination as to Indemnitee, Indemnitee’s Spouse or each Controlling Person’s entitlement to indemnification), and the Company indemnifies and agrees to hold such persons harmless from such Expenses. 38 --------------------------------------------------------------------------------   Section 5.05. OBJECTIONS TO SELECTION OF INDEPENDENT COUNSEL. Following receipt of notice of the selection of Independent Counsel, if any, the party receiving the notice may, within 10 calendar days, deliver to the other party a written objection to such selection; provided that such objection may be asserted only on the ground that Independent Counsel selected does not meet the requirements of “Independent Counsel” as defined in Article I of this Agreement, and the objection shall set forth with particularity the factual basis for such assertion. Absent a proper and timely objection, the person selected shall act as Independent Counsel. If a proper and timely objection is made, the person selected may not serve as Independent Counsel unless and until such objection is withdrawn or the competent New York state court (or, at Indemnitee’s option, pursuant to an arbitration) has determined that such objection is without merit. If, within 20 days after receipt by the Company of a request for indemnification pursuant to this Agreement, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee, Indemnitee’s Spouse or a Controlling Person may petition the competent New York state court (or, at such person’s option an arbitration) for resolution of any objection which shall have been made to the selection of Independent Counsel and/or for the appointment of another person as Independent Counsel, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel. Section 5.06. APPEAL RIGHT. Indemnitee, Indemnitee’s Spouse and each Controlling Person and the Company shall have the right to appeal any decision of the Disinterested Directors, the Board or Independent Counsel to the competent New York state court, or, at Indemnitee’s, Indemnitee’s Spouse’s or the Controlling Person or Company’s sole option, to an arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Any such adjudication or arbitration shall be conducted in all respects as a de novo trial or arbitration on the merits. In any such adjudication or arbitration the presumptions and burdens articulated in Article VI shall apply. Section 5.07. VALIDITY OF AGREEMENT. The Company shall not oppose the right of Indemnitee, Indemnitee’s Spouse or any Controlling Person to seek any adjudication or arbitration sought under the terms of this Agreement and shall be precluded from asserting that the procedures or presumptions contained herein are not valid, binding or enforceable and shall stipulate in any such adjudication or arbitration that the Company is bound by all of the provisions of this Agreement. ARTICLE VI Section 6.01. PRESUMPTIONS AND BURDENS OF PROOF. Indemnitee, Indemnitee’s Spouse and each Controlling Person shall be entitled to a presumption that such person is entitled to indemnification, advancement of fees or both under this Agreement if the notice requirement of Section 5.01 has been met. The Company shall bear the burden of proving, by a preponderance of the evidence that Indemnitee, Indemnitee’s Spouse or the Controlling Person is not entitled to indemnification or advancement. Neither a determination by the Disinterested Directors, the Board or by Independent Counsel against Indemnitee, Indemnitee’s Spouse or a Controlling Person, nor the termination of any Proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contrendere, or its equivalent, shall create a presumption that Indemnitee, Indemnitee’s Spouse or a Controlling Person is not entitled to indemnification or advancement or otherwise affect the burden of proof or persuasion in any subsequent Proceeding. ARTICLE VII Section 7.01. AMENDMENT. This Agreement may not be modified or amended except by a written instrument executed by or on behalf of each of the parties hereto. Section 7.02. BINDING EFFECT. (a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it in order to induce Indemnitee to serve the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving the Company. 39 --------------------------------------------------------------------------------   (b) This Agreement shall be binding upon, and inure to the benefit of, and be enforceable by the parties hereto and their respective successors and permitted assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, heirs, executors, administrators or other successors. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all or a substantial part of the business or assets of the Company, by written agreement in the form and substance reasonably satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the manner and to the same extent that the Company would be required to perform if no such succession had taken place. (c) The indemnification and advancement of expenses provided by this Agreement shall continue as to a person who has ceased to be a director, officer, employee or agent or is deceased and shall inure to the benefit of the heirs, executors, administrators or other successors of the estate of such person. (d) Except to the extent, if any, as may be required by the BCL with respect to agreements to indemnify or advance expenses, all rights and obligations of the Company and Indemnitee, Indemitee’s Spouse and any Controlling Person hereunder shall continue in full force and effect despite the subsequent amendment or modification of the Company’s Certificate of Incorporation or By-Laws, as such are in effect on the date hereof, and such rights and obligations shall not be affected by any such amendment or modification, any resolution of directors or shareholders of the Company, or by any other corporate action which conflicts with or purports to amend, modify, limit or eliminate any of the rights or obligations of the Company and/or of Indemnitee, Indemnitee’s Spouse or any Controlling Person hereunder, except as set forth in Section 7.01 hereof. Section 7.03. CONSENT TO JURISDICTION. Except with respect to any arbitration commenced by Indemnitee, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action, suit or other proceeding arising out of or in connection with this Agreement shall be brought only in a competent New York state court and any New York court to which an appeal may be taken in such action, suit or other proceeding (the “New York Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the New York Court for purposes of any action, suit or other proceeding arising out of or in connection with this Agreement, (iii) waive any objection to the laying of venue of any such action, suit or other proceeding in the New York Court, and (iv) waive, and agree not to plead or to make, any claim that any such action, suit or other proceeding brought in the New York Court has been brought in an improper or inconvenient forum. Section 7.04. CONTRIBUTION. To The Fullest Extent Authorized By Law, if the indemnification provided for in this Agreement is unavailable to Indemnitee, Indemnitee’s Spouse or any Controlling Person for any reason, the Company, in lieu of indemnifying Indemnitee, Indemnitee’s Spouse and each Controlling Person, shall contribute to the amount reasonably incurred whether for Liabilities and/or Expenses in connection with a Proceeding or other expenses related to an indemnifiable event or transaction under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such other proceeding in order to reflect the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving rise to such other proceeding; and/or the relative fault of the Company and Indemnitee in connection with such event(s) and/or transaction(s). Section 7.05. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall constitute an original. Section 7.06. DEFENSE OF CLAIMS. The Company shall be entitled to participate in any proceeding at its own expense. The Company shall not settle any Proceeding (in whole or in part) in a manner that imposes any expense, liability or limitation on Indemnitee, Indemnitee’s Spouse or any Controlling Person without his, her or its prior written consent unless the Company first indemnifies such person. Such consent shall not be unreasonably withheld. Indemnitee, Indemnitee’s Spouse or any Controlling Person shall not settle any Proceeding (in whole or in part) in a manner that imposes any expense, liability or limitation on the Company without the Company’s prior written consent. Such consent shall not be unreasonably withheld. Section 7.07. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties with respect to the matters covered herein and supersedes all prior oral or written understandings or agreements with respect to the matters covered herein, except that, this Agreement shall not supersede any 40 --------------------------------------------------------------------------------   indemnification provisions contained in any other agreement, between the Company and the Indemnitee the primary purpose of which is to provide rights other than indemnification, including but not limited to, employment and severance agreements. This Section shall not be construed to limit any other rights Indemnitee, Indemnitiee’s Spouse, or each Controlling Person may have under the Company’s Certificate of Incorporation and Bylaws, applicable law or otherwise. Section 7.08. GOVERNING LAW. This Agreement and the legal relations among the parties hereto shall be governed by, and construed and enforced in accordance with, the local law of the State of New York. Section 7.09. HEADINGS. The Article and Section headings in this Agreement are for convenience of reference only, and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof. Section 7.10. IMPUTATION. The knowledge or actions or failure to act on the part of any fiduciary of the Company shall not be imputed to Indemnitee, Indemnitee’s Spouse or any Controlling Person for purposes of determining entitlement to indemnification under this Agreement. Section 7.11. LIABILITY INSURANCE. The Company shall obtain and maintain with reputable insurance companies an insurance policy or policies providing general and/or directors and officers liability insurance on terms with respect to coverage and amount (including with respect to the payment of expenses) no less favorable than those of such policy or policies in effect on the date hereof except for any changes approved by the Board prior to a Change in Control. Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any member of the Board. Upon request by Indemnitee, Indemnitee’s Spouse or any Controlling Person, the Company shall provide to such person copies of any such policy or policies in effect. The Company shall promptly notify Indemnitee, Indemnitee’s Spouse and each Controlling Person of any material change in the insurance coverage. Section 7.12. SEVERABILITY. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable To The Fullest Extent Authorized By Law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby. Section 7.13. NOTICES. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) if delivered by hand or by courier and receipted for by the party to whom said notice or other communication shall have been directed, (b) if mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed or (c) if sent by facsimile transmission and fax confirmation is received, on the next business day following the date on which such facsimile transmission was sent. Addresses for notice to either party are as shown on the signature page of this Agreement, or such other address as any party shall have given by written notice to the other party as provided above. Section 7.14. STATUTE OF LIMITATIONS. The Company agrees not to assert that a claim for indemnification is barred by the statute of limitations as an affirmative defense or otherwise. 41 --------------------------------------------------------------------------------   Section 7.15. SUBROGATION. In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, Indemnitee’s Spouse and each Controlling Person, who shall execute all papers required and take all actions necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder (or for which advancement is provided hereunder) if and to the extent that Indemnitee, Indemnitee’s Spouse or any Controlling Person has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. The Company’s obligation to indemnify or advance expenses hereunder to Indemnitee who is or was serving as a director, officer, employee, agent or fiduciary of another partnership, joint venture, trust or other enterprise at the request of the Company shall be reduced by any amount Indemnitee, Indemnitee’s Spouse or any Controlling Person has actually received as indemnification or advancement of expenses from such partnership, joint venture, trust or other enterprise. Section 7.16. TRUST. The Company shall, within 30 days of receipt of written request by Indemnitee, Indemnitee’s Spouse or any Controlling Person, establish a trust for the benefit of Indemnitee, Indemnitee’s Spouse or the Controlling Person and from time to time within 10 days of receipt of written request by Indemnitee, Indemnitee’s Spouse or any Controlling Person, fund the trust in an amount sufficient to satisfy any and all Expenses anticipated in good faith to be reasonably incurred in connection with any Proceeding as stated in Indemnitee’s, Indemnitee’s Spouse’s or the Controlling Person’s written request that the trust be funded. Any dispute arising under this Section shall be decided by Independent Counsel who shall be selected in accordance with the terms of Article V. Any determination by Independent Counsel may be appealed by Indemnitee, Indemnitee’s Spouse or any Controlling Person in accordance with the terms of Article V. The presumptions and burdens of proof articulated in Article VI shall apply to any dispute arising under this Section. Section 7.17. USE OF CERTAIN TERMS. As used in this Agreement, the words “herein,” “hereof,” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular paragraph, subparagraph, Section, or other subdivision. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. Section 7.18. WAIVERS. The observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a writing signed by the party against which such waiver is to be asserted. Unless otherwise expressly provided herein, no delay on the part of the party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party hereto of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof of the exercise of any other right, power or privilege hereunder. IN WITNESS WHEREOF, this Agreement has been duly executed and delivered to be effective as of the date first above written.               WARWICK VALLEY TELEPHONE COMPANY               By:                   Name:     Title:     Address:               INDEMNITEE                     Name:     Address: 42

  EXHIBIT 10.1 September 7, 2006 James Merritt, M.D. 5285 Toscana Way, Apt. 8311 San Diego, California 92122 Dear James: ADVENTRX Pharmaceuticals, Inc. is pleased to offer you full-time employment on the terms and conditions stated in this letter agreement. We would employ you as President and Chief Medical Officer reporting to Evan Levine, Chief Executive Officer. Your responsibilities would include the following: 1. Position Responsibilities: •   Develops goals, operating plans, policies, and short and long-range objectives for the company. •   Directs, monitors, and leads the staff in the development and implementation of strategies, business plan, budget, and work plans to achieve company’s vision and mission. •   Responsible for overseeing all aspects of staff administration, including hiring, terminations, salary administration, job descriptions, regular staff meetings, performance evaluations, office policy and procedures and a timely form of communication with support staff. •   Coordinates with the company’s Scientific Advisory Board. •   Represents the company on scientific and technical matters at internal and external functions, to the financial community, partners, stakeholders, major customers, government agencies, and the general public. •   Manages the company’s portfolio of products and facilitates go/no decisions at each stage of product development. •   Develops the company’s research and development team through training and headcount growth, as appropriate. •   Supports the business development team on the technical due diligence associated with investor relations, in-licensing, acquisitions, and co-development agreements. •   Works closely with legal advisors on enriching and optimizing the company’s intellectual property portfolio. •   Works closely with the clinical and regulatory team to ensure appropriate preparation and submission of regulatory documents. •   Responsible for the overall functions of Clinical, Research & Development, Regulatory, Business Development, Sales & Marketing, Facility & Operations, Administration and Human Resources. •   Perform other duties consistent with your positions as requested by the Chief Executive Officer. 2. General Responsibilities: •   Operate to the highest ethical and moral standards. •   Comply with our policies and procedures. •   Adhere to quality standards set by regulations, and our policies, procedures and mission.   --------------------------------------------------------------------------------   James Merritt, M.D. September 7, 2006 Page 2 of 7 •   Communicate effectively with supervisors, colleagues and subordinates. Be committed to team effort and be willing to assist in unrelated job areas when called upon. •   Provide administrative leadership for us and provide knowledge-based expertise in related areas that can be applied to meeting the strategic goals. •   Travel as needed. 3. We would initially compensate you at the rate of $325,000 per year, less payroll deductions and withholding, payable in accordance with our payroll policies. We will review your base salary from time to time (but no less frequently than annually) in accordance with our procedures for increasing salaries of similarly situated executives. 4. We would recommend that our Board of Directors grant you an incentive stock option to purchase up to 300,000 shares of our common stock under our 2005 Equity Incentive Plan pursuant to a Stock Option Agreement in substantially the form attached hereto as Exhibit A (the “Stock Option Agreement”). Please note that the grant date, vesting commencement date and exercise price of this option will be determined by our Board of Directors, or a committee thereof. There would also be the possibility of receiving additional stock options in the future based upon your performance and our overall success. 5. In addition and subject to the remainder of this section 5 and section 6, in the event of your Involuntary Termination (as defined in the Stock Option Agreement) (a) you will receive an amount equal to your base salary for the 6-month period immediately prior to the effective date of such Involuntary Termination, payable in 6 substantially equal installments over the 6-month period following such effective date and (b) we will pay all costs that we would otherwise have incurred to maintain your health, welfare and retirement benefits if you had continued to render services to us for 6 continuous months after such effective date. Prior to your receipt of any payment or benefit provided by this section 5, you must execute a “mutual release” in substantially the form attached hereto as Exhibit B, as such may be revised by the Company, acting reasonably, to reflect changes in legal requirements, or such other form as may be mutually agreed to by you and the Company. Such release will specifically relate to all of your rights and claims and the Company’s rights and claims in existence at the time of such execution and will confirm your obligations under the Company Confidentiality Agreement (as defined in Section 9 below). It is understood that you will have a certain period to consider whether to execute such release, and you may revoke such release within 7 business days after execution. In the event you do not execute such release within the applicable period, or if you revoke such release within the subsequent 7-business-day period, you will not be entitled to the payments and benefits described in this section 5. 6. You acknowledge and agree that any payment to be made or benefit to be provided to you pursuant to section 5 will be delayed to the extent necessary for this letter agreement and such payment or benefit to comply with Section 409A of the Internal Revenue Code (“Section 409A”); provided that, if any payment to be made or benefit to be provided to you is delayed as a result of this section 6, such payment or benefit will be paid to you in a lump-sum as soon as permitted under Section 409A. In addition, if we reasonably determine that a change in applicable law following the date set forth above causes the payments to be made or benefits to be provided to be payable to you without delay but in another manner that complies with Section 409A, you and we agree to amend this letter agreement to reform the payment provisions set forth in section 5 to provide to you economic benefits that are as close as reasonably possible to   --------------------------------------------------------------------------------   James Merritt, M.D. September 7, 2006 Page 3 of 7 those contemplated by section 5 but that still comply with Section 409A. Subject to the foregoing, this letter agreement will be interpreted, construed and administered in a manner that satisfies the requirements of Section 409A. Any provision of this letter agreement to the contrary notwithstanding, we may adopt such amendments to this letter agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that we determine are necessary to comply with the requirements of Section 409A; provided, that, prior to taking any such action, we will confer with you and take your input into account in good faith. 7. As an our employee, you would be entitled to participate in our medical, dental, life insurance and 401(k) programs on the same terms as our other full-time employees. These programs as well as other employee benefits and policies are described in further detail in our Policies and Procedures Manual. We reserve the right to modify or amend at our sole discretion the terms of any and all employee benefit programs from time to time without advance notice to our employees. Notwithstanding our employee vacation policy set forth in the Policies and Procedures Manual, you would be entitled to 30 vacation days per year which would accrue in accordance with our general vacation accrual policy. 8. Your employment with us would be “at will” and not for a specified term. We make no express or implied commitment that your employment will have a minimum or fixed term, that we may take adverse employment action only for cause or that your employment is terminable only for cause. We may terminate your employment with or without cause and with or without advance notice at any time and for any reason. Any contrary representations or agreements that may have been made to you are superseded by this letter agreement. The at-will nature of your employment described by this letter agreement shall constitute the entire agreement between you and ADVENTRX concerning the nature and duration of your employment. Although your job duties, title and compensation and benefits may change over time, the at-will nature of your employment with us can only be changed in a written agreement signed by you and our CEO. 9. Our proprietary rights and confidential information are among our most important assets. In addition to signing this letter agreement as a condition to your employment, you must also sign the Company’s current Confidential Information, Non-Solicitation and Invention Assignment Agreement (the “Company Confidentiality Agreement”). 10. We require that in the course of your employment with us that you not use or disclose to us any confidential information, including trade secrets, of any former employer or other person to whom you have had 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 us. During our discussions about your proposed job duties, you assured us that you would be able to perform those duties within the guidelines just described. Accordingly, you further agree that you will not bring on to our premises any unpublished documents or property belonging to any former employer or other person to whom you have an obligation of confidentiality. 11. As an employee, we require that you comply with all of our policies and procedures, including, without limitation, our Code of Business Conduct and Ethics, a copy of which will, at   --------------------------------------------------------------------------------   James Merritt, M.D. September 7, 2006 Page 4 of 7 your request, be provided to you prior to your beginning work with us. You may be required to sign certain documents acknowledging your receipt and understanding of our policies and procedures. Violation of any or our policies or procedures would be cause for disciplinary action including termination. 12. Your employment with us is also conditioned upon your ability to provide adequate documentation of your legal right to work in the United States, as well as educational credentials, and successful completion of our reference checking process. If you make any misrepresentations to us or omit to state a material fact necessary in order to make another statement made not misleading, we may void this letter agreement or, if you are already employed, terminate your employment. 13. Any controversy, claim or dispute between you and the company concerning this letter agreement or documents attached hereto, your employment or the severance of your employment shall be finally settled by arbitration held in San Diego, California by one (1) arbitrator in accordance with the rules of employment arbitration then followed by the American Arbitration Association or any successor to the functions thereof. The arbitrator shall apply California law (as applied to agreements between California residents entered into and to be performed entirely within California) in the resolution of all controversies, claims and disputes and shall have the right and authority to determine how his or her decision or determination as to each issue or matter in dispute may be implemented or enforced. Any decision or award of the arbitrator shall be final and conclusive on the parties. The parties shall bear equally all costs of the arbitrator in any action brought under this section 13 unless otherwise required by law (in which case such costs will be borne as required by law). 14. In the event of any dispute related to or based upon this letter agreement or documents attached hereto, the arbitrator has the right to allocate between the parties, as the arbitrator may determine, the costs of the arbitrator (unless the allocation of the costs of the arbitration are otherwise mandated by law) and the reasonable costs and expenses (including reasonable attorneys’ fees and costs) of each party incurred in connection with such arbitration. 15. This letter agreement and documents attached hereto shall be governed pursuant to the laws of the State of California as applied to agreements between California residents entered into and to be performed entirely within California. 16. If any portion of this letter agreement shall, for any reason, be held invalid or unenforceable, or contrary to public policy or any law, the remainder of this letter agreement shall not be affected by such invalidity or unenforceability, but shall remain in full force and effect, as if the invalid or unenforceable term or portion thereof had not existed within this letter agreement.   --------------------------------------------------------------------------------   James Merritt, M.D. September 7, 2006 Page 5 of 7 17. If you accept the terms and conditions set forth in this letter agreement, we would like you to begin full time work with us on September 7, 2006, and this letter agreement will be effective as of such date. I look forward to you joining us and being an integral and important part of our team. Please sign below to accept this offer and return the fully executed letter to me within five business days. You should keep one copy of this letter for your own records. Sincerely,       ADVENTRX Pharmaceuticals, Inc.   ACCEPTED AND AGREED:       /s/ Evan Levine       Evan Levine   /s/ James Merritt       Chief Executive Officer   James Merritt, M.D.           Date: September 7, 2006   --------------------------------------------------------------------------------   James Merritt, M.D. September 7, 2006 Page 6 of 7 Exhibit A STOCK OPTION AGREEMENT   --------------------------------------------------------------------------------   James Merritt, M.D. September 7, 2006 Page 7 of 7 Exhibit B RELEASE   --------------------------------------------------------------------------------   EXHIBIT A Stock Option Agreement      ADVENTRX Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and the undersigned person (“Optionee”) have entered into this Stock Option Agreement (this “Agreement”) effective as of the Grant Date set forth below. The Company has granted to Optionee the option (the “Option”) to purchase the number of shares (the “Shares”) of common stock, par value $0.001 per share, of the Company (“Common Stock”) set forth below at the per Share purchase price (the “Exercise Price”) set forth below, pursuant to the terms of this Agreement. The Option was granted under the Company’s 2005 Equity Incentive Plan (the “Plan”).       Optionee Name:   James Merritt Grant Date:   MM/DD/YYYY Vesting Commencement Date:   MM/DD/YYYY Shares:   300,000 Exercise Price:   $X.XX 1. Terms of Plan. All capitalized terms used in this Agreement and not otherwise defined shall have the meanings ascribed thereto in the Plan. Optionee confirms and acknowledges that Optionee has received and reviewed copies of the Plan and the Information Statement, dated July 13, 2005, with respect to the Plan. Optionee and the Company agree that the terms and conditions of the Plan are incorporated in this Agreement by this reference. 2. Nature of the Option. The Option has been granted as an incentive to Optionee’s Continuous Service, and is in all respects subject to such Continuous Service and all other terms and conditions of this Agreement. The Option is intended to be an Incentive Option within the meaning of the Plan. 3. Vesting and Exercise of Option. The Option shall vest and become exercisable during its term in accordance with the following provisions:      (a) Vesting and Right of Exercise. (i) The Option shall vest and become exercisable with respect to one forty-eighth of the Shares on each successive monthly anniversary of the Vesting Commencement Date until all of the Shares have vested, subject to Optionee’s Continuous Service; provided, however, that, in the event of an Involuntary Termination (as defined in Section 10 below) but subject to Optionee’s timely execution of the release (the “Release”) referred to in that certain letter agreement, dated September 7, 2006, by and between the Company and Optionee offering employment to Optionee (the “Offer Letter”) and Optionee’s not revoking the Release as described in the Offer Letter, the Option shall vest and become exercisable, effective immediately prior to the effective date of such Involuntary Termination,   --------------------------------------------------------------------------------   with respect to that number of the Shares that would have vested and become exercisable had Optionee remained in Continuous Service for 6 months following the effective date of such Involuntary Termination. (ii) In the event of Optionee’s death, disability or other termination of Optionee’s Continuous Service, the Option shall be exercisable in the manner and to the extent provided in Section 6.3 of the Plan; provided, however, that, anything in Section 6.3(a)(i) to the contrary notwithstanding but subject to Optionee’s timely execution of the Release and Optionee’s not revoking the Release as described in the Offer Letter, in the event of an Involuntary Termination, the Option shall remain exercisable for 180 days following the effective date of such Involuntary Termination. (iii) No fraction of a Share shall be purchasable or deliverable upon exercise of the Option, but in the event any adjustment hereunder of the number of Shares shall cause such number to include a fraction of a Share, such number of Shares shall be rounded down to the nearest smaller whole number of Shares.      (b) Method of Exercise. In order to exercise any portion of the Option which has vested, Optionee shall notify the Company in writing of the election to exercise such vested portion of the Option and the number of Shares in respect of which the Option is being exercised, by executing and delivering the Notice of Exercise of Stock Option in the form attached hereto as Exhibit A (the "Exercise Notice”). The certificate or certificates representing Shares as to which the Option has been exercised shall be registered in the name of Optionee.      (c) Restrictions on Exercise. (i) Optionee may exercise the Option only with respect to Shares that have vested in accordance with Section 3(a) of this Agreement. (ii) Optionee may not exercise the Option if the issuance of the Shares upon such exercise or the method of payment of consideration for such Shares would constitute a violation of any applicable federal or state securities law or other law or regulation. (iii) The method and manner of payment of the Exercise Price will be subject to the rules under Part 221 of Title 12 of the Code of Federal Regulations as promulgated by the Federal Reserve Board if such rules apply to the Company at the date of exercise. (iv) As a condition to the exercise of the Option, the Company may require Optionee to make any representation or warranty to the Company at the time of exercise of the Option as in the opinion of legal counsel for   --------------------------------------------------------------------------------   the Company may be required by any applicable law or regulation, including the execution and delivery of an appropriate representation statement. Accordingly, the stock certificate(s) for the Shares issued upon exercise of the Option may bear appropriate legends restricting transfer. (v) Optionee may only exercise the Option upon, and the obligations of the Company under this Agreement to issue Shares to Optionee upon any exercise of the Option is conditioned on, satisfaction of all federal, state, local or other withholding tax obligations associated with such exercise (whether so required to secure for the Company an otherwise available tax deduction or otherwise) (“Withholding Obligations”). The Company reserves the right to require Optionee to remit to the Company an amount sufficient to satisfy all Withholding Obligations prior to the issuance of any Shares upon any exercise of the Option. Optionee authorizes the Company to withhold in accordance with applicable law from any compensation payable to Optionee any amounts necessary to meet any Withholding Obligations. 4. Non-Transferability of Option. The Option may not be transferred in any manner other than by will or by the laws of descent and distribution. The terms of this Agreement shall bind the executors, administrators, heirs and successors of Optionee. 5. Method of Payment.      (a) Upon exercise, Optionee shall pay the aggregate Exercise Price of the Shares purchased by any of the following methods, or a combination thereof, at the election of Optionee: (i) by cash; (ii) by certified or bank cashier’s check; (iii) if shares of Common Stock are traded on an established stock market or exchange on the date of exercise, by surrender of whole shares of Common Stock having a Market Value equal to the portion of the Exercise Price to be paid by such surrender, provided that if such shares of Common Stock to be surrendered were acquired upon exercise of an Incentive Option, Optionee must have first satisfied the holding period requirements under Section 422(a)(1) of the Code; or (iv) if shares of Common Stock are traded on an established stock market or exchange on the date of exercise, pursuant to and under the terms and conditions of any formal cashless exercise program authorized by the Company entailing the sale of the Stock subject to an Option in a brokered transaction (other than to the Company).   --------------------------------------------------------------------------------        (b) If Optionee shall pay all or a portion of the aggregate Exercise Price due upon an exercise of the Option by surrendering shares of Common Stock pursuant to Section 5(a)(iii), then Optionee: (i) shall accompany the Exercise Notice with a duly endorsed blank stock power with respect to the number of shares of Common Stock to be surrendered and shall deliver the certificate(s) representing such surrendered shares to the Company at its principal offices within two business days after the date of the Exercise Notice; (ii) authorizes and directs the Secretary of the Company to transfer so many of the shares of Common Stock represented by such certificate(s) as are necessary to pay the aggregate Exercise Price in accordance with this Agreement; (iii) agrees that Optionee may not surrender any fractional share as payment of any portion of the Exercise Price; and (iv) agrees that, notwithstanding any other provision in this Agreement, Optionee may only surrender shares of Common Stock owned by Optionee as of the date of the Exercise Notice in the manner and within the time periods allowed under Rule 16b-3 promulgated under the Exchange Act. 6. Adjustments to Option. Subject to any required action by the stockholders of the Company, the number of Shares covered by the Option, and the Exercise Price, shall be proportionately adjusted in accordance with and pursuant to Section 8.1 of the Plan. Such adjustments shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided in this Agreement, no issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares or the Exercise Price. 7. Term of Option. The Option may not be exercised more than 10 years after the Grant Date, and may be exercised during such term only in accordance with the terms of this Agreement. 8. Not Employment Contract. Nothing in this Agreement shall confer upon Optionee any right to continue in the employ of the Company or shall interfere with or restrict in any way the rights of the Company, which are hereby expressly reserved, to terminate Optionee’s Continuous Service at any time for any reason whatsoever, with or without cause, subject to the provisions of applicable law. 9. Tax Consequences Generally. Optionee acknowledges that Optionee may suffer adverse tax consequences as a result of Optionee’s exercise of the Option. Optionee acknowledges that the Company advises that Optionee consult with Optionee’s tax   --------------------------------------------------------------------------------   advisers in connection with any exercise of the Option or disposition of the Shares receivable upon exercise of the Option. Optionee agrees that Optionee is not relying on the Company for any tax advice with respect to the acceptance or exercise of the Option, the disposition of any Shares Optionee may acquire upon exercise of the Option or otherwise. Any adverse consequences incurred by an Optionee with respect to the use of shares of Common Stock to pay any part of the aggregate Exercise Price or of any tax in connection with the exercise of an Option, including, without limitation, any adverse tax consequences arising as a result of a disqualifying disposition within the meaning of Section 422 of the Code shall be the sole responsibility of Optionee. 10. Adjustments in Acquisitions. In accordance with the provisions of Section 8.2(a) of the Plan, the Option will Accelerate in full in the event of an Acquisition constituting a Change of Control if Optionee remains employed by the Company or one of its Affiliates as of the closing date of such Acquisition, and the Option is not assumed or replaced by the successor or acquiring entity or the entity in control of such successor or acquiring entity in accordance with Section 8.2 (referred to for purposes of this section as the “Acquirer”); provided, however, that, even if the Option is assumed or replaced by the Acquirer, 50% of any unvested portion of the Option shall be deemed to have vested as of the closing date of such Acquisition and the remaining unvested portion of the Option (after taking into account the foregoing) shall vest ratably by month over the 12-month period beginning on the closing of such Acquisition, subject to Optionee’s Continuous Service. Otherwise, the Option will not Accelerate in the event of an Acquisition. In this regard, if Optionee is offered employment or some other continuing role by or on behalf of the Acquirer, including but not limited to, continuing employment with the Company, and in connection therewith, the Acquirer offers to assume or replace the Option, the Option will not Accelerate if Optionee does not accept the offer. For clarification, the Option will Accelerate in full in the event of an Acquisition constituting a Change of Control even if Optionee does not remain employed by the Company or one of its Affiliates as of the closing date of such Acquisition if Optionee is the subject of an Involuntary Termination prior to such Acquisition and such Involuntary Termination is directly connected with or the result of such Acquisition. If, following a Change of Control in which the Option has been assumed by the successor or acquiring entity as of the closing date of such Change of Control, in the event of Optionee’s Involuntary Termination of employment within 24 months after the closing date of such Change of Control the vesting of the assumed Option shall be accelerated such that the Option will so vest as of the effective date of such Involuntary Termination with respect to all Shares that would have become vested during such 24-month period but for the Change of Control and Involuntary Termination (assuming Optionee’s Continuous Service). An “Involuntary Termination” is one that occurs by reason of dismissal for any reason other than Misconduct or of voluntary resignation following: (i) a change in position that materially reduces the level of Optionee’s responsibility, (ii) a material reduction in Optionee’s base salary, or (iii) relocation by more than 50 miles; provided that (ii) and (iii) will apply only if Optionee has not consented to the change or   --------------------------------------------------------------------------------   relocation. “Misconduct” shall mean the commission of any act of fraud, embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Company (or any Parent or Subsidiary), or any other intentional misconduct by such person adversely affecting the business affairs of the Company (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not be deemed to be inclusive of all the acts or omissions which the Company (or any Parent or Subsidiary) may consider as grounds for the dismissal or discharge of Optionee. 11. Consent of Spouse/Domestic Partner. Optionee agrees that Optionee’s spouse’s or domestic partner’s interest in the Option is subject to this Agreement and such spouse or domestic partner is irrevocably bound by the terms and conditions of this Agreement. Optionee agrees that all community property interests of Optionee and Optionee’s spouse or domestic partner in the Option, if any, shall similarly be bound by this Agreement. Optionee agrees that this Agreement is binding upon Optionee’s and Optionee’s spouse’s or domestic partner’s executors, administrators, heirs and assigns. Optionee represents and warrants to the Company that Optionee has the authority to bind Optionee’s spouse/domestic partner with respect to the Option. Optionee agrees to execute and deliver such documents as may be necessary to carry out the intent of this Section 11 and the consent of Optionee’s spouse/domestic partner.      IN WITNESS WHEREOF, Optionee and the Company have entered into this Agreement as of the Grant Date.                 ADVENTRX Pharmaceuticals, Inc.    James Merritt              By:             Name:           Title:                       --------------------------------------------------------------------------------             Exhibit A Notice of Exercise of Stock Option I                      (please print legibly) hereby elect to exercise the stock options(s) identified below (the “Option(s)”) granted to me by ADVENTRX Pharmaceuticals, Inc. (the “Company”) under its 2005 Equity Incentive Plan (the “Plan”) with respect to the number of shares of Common Stock of the Company set forth below (the “Shares”). I represent that each Share is fully vested and exercisable and subject to the Option(s). I acknowledge and agree that my exercise of the Option(s) is subject to the terms and conditions of the Plan and the Stock Option Agreement(s) governing the Option(s). 1.                      Shares at $                     per share (Grant date):                      2.                      Shares at $                     per share (Grant date):                      3.                      Shares at $                     per share (Grant date):                      4.                      Shares at $                     per share (Grant date):                      I choose to pay for the exercise of the above option(s) as follows (please circle applicable item numbers): 1. Cash: $                     2. Check: $                     (please make checks payable to ADVENTRX Pharmaceuticals, Inc.) 3. Surrender of                      Shares: Please deliver the stock certificate(s) representing the Shares to (please print legibly):               Name:         (please print legibly)       Signature:           Date:           Phone No:       --------------------------------------------------------------------------------   EXHIBIT B RELEASE Pursuant to that certain letter agreement, dated September 7, 2006, by and between ADVENTRX Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and the undersigned (“Executive” and, together with the Company, each, a “Party” and, collectively, the “Parties”) offering employment to Executive (the “Offer Letter”) and that certain Stock Option Agreement issued in connection with the Offer Letter (the “Option Agreement”), and in consideration of and as a condition precedent to the payments and benefits provided under Section 5 of the Offer Letter and other benefits provided under Sections 5(a)(i) and 5(a)(ii) of the Option Agreement, Executive and the Company each hereby furnish the other with this Release. Executive hereby confirms his/her obligations under the Company’s Confidential Information, Non-Solicitation and Invention Assignment Agreement. On Executive’s own behalf and on behalf of Executive’s heirs, estate and beneficiaries, Executive hereby waives, releases, acquits and forever discharges the Company, and each of its parents, subsidiaries and affiliates, and each of their respective past or present officers, directors, agents, servants, employees, shareholders, predecessors, successors and assigns, and all persons acting by, through, under, or in concert with them, or any of them, of and from any and all suits, debts, liens, contracts, agreements, promises, claims, liabilities, demands, causes of action, costs, expenses, attorneys’ fees, damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown, fixed or contingent, suspected and unsuspected, disclosed and undisclosed (“Claims”), from the beginning of time to the date hereof, including without limitation, Claims that arose as a consequence of Executive’s employment with the Company, or arising out of the termination of such employment relationship, or arising out of any act committed or omitted during or after the existence of such employment relationship, all up through and including the date on which this Release is executed, including, but not limited to, Claims which were, could have been, or could be the subject of an administrative or judicial proceeding filed by Executive or on Executive’s behalf under federal, state or local law, whether by statute, regulation, in contract or tort. This Release includes, but is not limited to: (1) Claims for intentional and negligent infliction of emotional distress; (2) tort Claims for personal injury; (3) Claims or demands related to salary, bonuses, commissions, stock, stock options, or any other ownership interest in the Company, vacation pay, fringe benefits, expense reimbursements, severance pay, front pay, back pay or any other form of compensation; (4) Claims for breach of contract; (5) Claims for any form of retaliation, harassment, or discrimination; (6) Claims pursuant to any federal, state or local law or cause of action including, but not limited to, the federal Civil Rights Act of 1964, as amended, the federal Age Discrimination in Employment Act of 1967, as amended (“ADEA”), the federal Employee Retirement Income Security Act of 1974, as amended, the federal Americans with Disabilities Act of 1990, the California Fair Employment and Housing Act, as amended, and the California Labor Code; and (7) all other Claims based on tort law, contract law, statutory law, common law, wrongful discharge, constructive discharge, fraud, defamation, emotional distress, pain and suffering, breach of the implied covenant of good faith and fair dealing, compensatory or punitive damages, interest, attorneys’ fees, and reinstatement or re-employment. If any court rules that Executive’s waiver of the right to file any administrative or judicial charges or complaints is ineffective, Executive agrees not to seek or accept any money damages or any other relief upon the filing of any such administrative or judicial charges or complaints. The Company, for itself and each of its parents subsidiaries and affiliates and each of their respective predecessors successors and assigns over which the Company has control and the right to release Executive as set forth herein, hereby waives, releases, acquits and forever discharges --------------------------------------------------------------------------------   Executive and Executive’s heirs, estate and beneficiaries, and all persons acting by, through, under, or in concert with them, or any of them, of and from any and all Claims, from the beginning of time to the date hereof, including without limitation, Claims that arose as a consequence of Executive’s employment with the Company, or arising out of the termination of such employment relationship, or arising out of any act committed or omitted during or after the existence of such employment relationship, all up through and including the date on which this Release is executed, including, but not limited to, Claims which were, could have been, or could be the subject of an administrative or judicial proceeding filed by the Company or on the Company’s behalf under federal, state or local law, whether by statute, regulation, in contract or tort. This Release includes, but is not limited to: (1) Claims for intentional and negligent infliction of emotional distress; (2) tort Claims for personal injury; (3) Claims or demands related to salary, bonuses, commissions, stock, stock options, or any other ownership interest in the Company, vacation pay, fringe benefits, expense reimbursements, severance pay, front pay, back pay or any other form of compensation; (4) Claims for breach of contract; (5) Claims for any form of retaliation, harassment, or discrimination; (6) Claims pursuant to any federal, state or local law or cause of action including, but not limited to, the federal Civil Rights Act of 1964, as amended, the ADEA, the federal Employee Retirement Income Security Act of 1974, as amended, the federal Americans with Disabilities Act of 1990, the California Fair Employment and Housing Act, as amended, and the California Labor Code; and (7) all other Claims based on tort law, contract law, statutory law, common law, wrongful discharge, constructive discharge, fraud, defamation, emotional distress, pain and suffering, breach of the implied covenant of good faith and fair dealing, compensatory or punitive damages, interest, attorneys’ fees, and reinstatement or re-employment. If any court rules that the Company’s waiver of the right to file any administrative or judicial charges or complaints is ineffective, the Company agrees not to seek or accept any money damages or any other relief upon the filing of any such administrative or judicial charges or complaints. The Parties acknowledge that each has read and understands Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his 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.” The Parties hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to the release by each Party of any unknown Claims either Party may have against the other Party. Notwithstanding the foregoing, nothing in this Release shall constitute a release by Executive of any claims or damages based on any right Executive may have to enforce the Company’s executory obligations under the Offer Letter and the Stock Option Agreement, any right Executive may have to vested or earned compensation and benefits, or Executive’s eligibility for indemnification under applicable law, Company governance documents, Executive’s indemnification agreement with the Company or under any applicable insurance policy with respect to Executive’s liability as an employee or officer of the Company. If Executive is 40 years of age or older at the time of the termination, Executive acknowledges that he/she is knowingly and voluntarily waiving and releasing any rights he/she may have under ADEA. Executive also acknowledges that the consideration given under the Offer Letter and Option Agreement for the release set forth herein is in addition to anything of value to which he/she was already entitled. Executive further acknowledges that he/she has been advised by this writing, as required by the ADEA, that: (A) his/her waiver and release do not apply to any rights or claims that may arise on or after the date he/she executes this Release; (B) Executive has the right to consult with an attorney prior to executing this Release; (C) Executive has [21]1 [45]2 --------------------------------------------------------------------------------   days to consider this Release (although he/she may choose to voluntarily execute this Release earlier); (D) Executive has 7 days following the execution of this Release to revoke the Release; [and]1 (E) this Release shall not be effective until the date upon which the revocation period has expired, which shall be the 8th day after this Release is executed by Executive, without Executive’s having given notice of revocation[; and (F) Executed has received with this Release a detailed list of job titles and ages of all employees who were terminated in the group termination of which Executive’s termination is a part and the ages of all employees of the Company in the same job classification or organizational unit who were not so terminated]2. Each Party further acknowledges that such Party has carefully read this Release, and knows and understands its contents and its binding legal effect. Each Party acknowledges that by signing this Release, such Party does so of such Party’s own free will, and that it is such Party’s intention that such Party be legally bound by its terms.                               James A. Merritt               Date:                   ADVENTRX PHARMACEUTICALS, INC.               By:                   Name:                   Title:                   Date:           1   Include only if an individual termination   2   Include only if a group termination.

EXHIBIT 10.18 SOFTWARE DEVELOPMENT, LICENSE AND DISTRIBUTION AGREEMENT This software development, license and distribution agreement (Agreement”) is entered into as of December 19, 2005 (the “Effective Date”) by and between EPMed Systems, Inc. (“EPMD”) and Biosense Webster Inc. (“Biosense”) (collectively the “Parties”) according to the terms below. WHEREAS EPMD develops and distributes the EP WorkMate, which provides electrophysiology monitoring that offers fully integrated computerized stimulator, real-time interval analysis, recording capabilities of up to 192 intracardiac signals, and a powerful query engine. WHEREAS Biosense develops and distributes the CARTO™ XP Mapping System, which displays intracardiac electrical activity and timing, and accurate catheter tip location in real time, allowing 3-D electroanatomical map reconstruction; WHEREAS the Parties desire to cooperate in the development of an accessory that allows the CARTO™ XP Mapping System to interface with the EP WorkMate System; WHEREAS as part of the cooperation between the Parties EPMD will design and develop the physical hardware necessary for the interface accessory, as well as interface software modules for the EP WorkMate System, and Biosense will develop certain interface software scripts for the WorkMate interface software modules, as well as interface software modules for the CARTO™ XP Mapping System; and   - 1 - -------------------------------------------------------------------------------- WHEREAS EPMD will distribute the interface accessory to end users and distributors (as described herein) and pay Biosense a royalty per system for the right to license the software scripts and to interface the EP WorkMate Systems to CARTO™ XP Mapping Systems. NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged by the Parties, the Parties agree as follows: TERMS     1. Definitions     a. “Affiliate” means any corporation, association or other entity which directly or indirectly controls, is controlled by or is under common control with the party in question. As used in this definition of “Affiliate”, the term “control” shall mean direct or indirect beneficial ownership of more than 50% of the voting or income interest in such corporation or other business entity.     b. “Amplifier” means the component of the WorkMate System where the cable connections to the patient are made.     c. “Biosense Module” means the software module(s) designed, developed and owned by Biosense, which will work with the software owned by Biosense and distributed by Biosense with its CARTO™ XP System, to help enable the interfacing of the WorkMate System with the CARTO™ XP System.     d. “WorkMate System” means the product sold by EPMD as the EP-WorkMate Computerized Recording System version 3.1.8 version and later versions of this product.     e. “CARTO™ XP System” means the product sold by Biosense as the CARTO™ XP System version 7.0, and all later versions of this platform.   - 2 - --------------------------------------------------------------------------------   f. “End Users” are persons who purchase the Interface Kit for their own use in their business and not for resale, redistribution, or other commercial purposes.     g. “EPMD Module” means the software module(s) designed, developed and owned by EPMD, which will work with the software owned by EPMD and distributed by EPMD with the WorkMate System, to help enable the interfacing of the WorkMate System with the CARTO™ XP System.     h. “Interface” means, collectively, the Biosense Module, the EPMD Module, the Software Script, the Interface Hardware, the Connecting Cables, and the related documentation distributed to End Users that enables the interfacing of the WorkMate System with the CARTO™ XP System according to the specifications in Appendix A.     i. “Interface Hardware” means the physical cabling system, not including the Connecting Cables, to be designed, developed and distributed by EPMD, that will be used by End Users to interface one WorkMate System to one CARTO™ XP System.     j. “Interface Kit” means, collectively, the Interface Hardware, Connecting Cables, any enabling mechanisms and related documentation distributed to End Users necessary to enable the interfacing of the WorkMate System with the CARTO™ XP System.     k. “Object Code” means code for the Software Script resulting from the translation of Source Code into machine-readable format.     l. “Patient Interface Unit” means the component of the CARTO™ XP System where the cable connections to the patient are made.     m. “Connecting Cables” mean the interface cables, to be designed and developed by EPMD, useful for connecting the Patient Interface Unit of the CARTO™ XP System to the Amplifier of the WorkMate System. The Connecting Cables may include, but are not limited to, the ECG connection, Intracardiac connection, and stimulator connection.   - 3 - --------------------------------------------------------------------------------   n. “Software Script” means the software scripts designed and developed by Biosense, and owned by Biosense, that will be licensed by Biosense to EPMD and used by the EPMD Module to help enable the interfacing of the WorkMate System with the CARTO™ XP System.     o. “Source Code” means the program listing for the Software Script in paper form and magnetic media written in the syntax of a well-known programming language.     p. “Programming Interface Manual” means all related documentation that Biosense will supply to EPMD in order for EPMD to correctly understand and identify the software interface that so that EPMD can correctly design and develop the EPMD Module.     q. “Competitor” means a third party that creates, develops, manufactures, markets, sells, distributes or otherwise is involved with 3D navigation and mapping systems, including but not limited to, Medtronic, St. Jude and Boston Scientific.     2. Development Terms     a. Biosense shall deliver the Software Script that complies according to the specifications and schedule set forth in Appendix A (“Development Work”) in Object Code. Biosense shall deliver to EPMD the Software Script in Object Code in electronic format, and all related documentation necessary to embed it in the EPMD Module, along with any necessary enabling mechanisms (such as key-stroke instructions to enable the Interface to operate in accordance with the specifications in Appendix A) which shall be subject to the license set forth in Section 3(a) below. Biosense shall use its commercially reasonable efforts to deliver the Software Script in Object Code, Programming Interface Manual and such enabling mechanisms in substantial accordance with the schedule set forth in Appendix A. The Development Work is NOT a work for hire and all right, title and interest in the Development Work shall belong to Biosense.   - 4 - --------------------------------------------------------------------------------   b. EPMD shall be responsible for the development of the WorkMate System and related software, EPMD Module, and the Interface Kit, including all costs of development, to enable the interfacing of the WorkMate System with the CARTO™ XP System in accordance with the Specifications set forth in Appendix A.     c. Biosense warrants that it will perform the Development Work in a professional and workmanlike manner and that the Software Script when delivered will reasonably conform to the specifications of Appendix A. Biosense shall be responsible for developing the Biosense Module, Software Script and the CARTO™ XP System and related software, including all costs of development, to enable the interfacing of the WorkMate System with the CARTO™ XP System. BIOSENSE DISCLAIMS ANY AND ALL OTHER WARRANTIES, IMPLIED OR EXPRESS, WITH RESPECT TO THIS DEVELOPMENT, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT WILL BIOSENSE’S LIABILITY INCLUDE ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS, EVEN IF BIOSENSE HAS KNOWLEDGE OF THE POTENTIAL LOSS OR DAMAGE.     d. EPMD shall maintain the specifications of their respective components of the Interface Kit in accordance with Appendix A, and continue to make such functioning Interface Kit components commercially available, for all future versions of the WorkMate System and the CARTO™ XP System while this Agreement is valid. EPMD shall maintain the specifications of the port in its WorkMate System to which the Interface Hardware connects. Biosense shall maintain the specifications of the port in its CARTO™ XP System to which the Interface Hardware connects     e. EPMD and Biosense shall not be obligated to implement the Interface for products prior to the Current System Version 3.1.8   - 5 - -------------------------------------------------------------------------------- and the CARTO™ XP version 7.0. During the term of this agreement, all versions of CARTO™ XP that are designed and developed by Biosense will be compatible and maintain the interface capabilities, and all versions of WorkMate Systems that are designed and developed by EPMD will be compatible and maintain the interface capabilities.     f. EPMD and Biosense shall provide to each other, free of charge, two WorkMate Systems and CARTO™ XP Systems, respectively, with appropriate cabling and simulators exclusively for development with respect to the Interface, demonstration, trade shows and training purposes. EPMD and Biosense each agree not to use the Systems of the other provided pursuant to this provision for any other purpose.     g. Each Party will be responsible for providing the latest software for their respective systems throughout the term of the definitive agreement.     3. Distribution Terms     a. EPMD shall have, and Biosense hereby grants to EPMD, the right to distribute (and to perform any required installation of) the Interface Kit throughout the world. EPMD shall have the sole and exclusive right to determine the price charged for the Interface Kit. EPMD shall have the right to distribute the Interface Kit through distributors and sub-distributors, provided, with respect to any country, such distributors or sub-distributors shall not include third parties that sell in such country mapping systems competitive with Biosense mapping systems such as Medtronic (LocaLisa) and St. Jude (EnSite and NavX). Distributors or sub-distributors that distribute the Boston Scientific (RPM) system are acceptable. The terms of any agreement concerning the distribution of the Interface Kit will be between the End User and EPMD or its distributor or sub-distributor and shall not create any contractual obligations between Biosense and the End User. EPMD shall have the sole right to set the terms of the agreement it reaches with End Users. EPMD may distribute the Interface Kit to End Users, subsidiaries, and distributors only and may not delegate, sublicense, assign or   - 6 - -------------------------------------------------------------------------------- otherwise sell its right to distribute the Interface Kit to any other person or entity without the written consent of Biosense. EPMD shall be responsible for the development, assembly, packaging and maintenance of the Interface Kit. EPMD shall sell a minimum of 15 Interface Kits per year.     b. The parties understand that this Agreement affects only the distribution of the Interface Kit and the components thereof and does not create or bestow any distribution or other rights with respect to the WorkMate System, Biosense Module or the CARTO™ XP System. EPMD will be the party responsible for the distribution of its WorkMate System, including any related software, and Biosense will be the party responsible for the distribution its Biosense Module and CARTO™ XP System, including any related software. This Agreement in no way affects each Party’s right to determine the price and other terms reached with their respective customers concerning the distribution of their respective systems and modules.     c. Biosense will provide to EPMD the Software Script in Object Code, including any revisions, upgrades or updates, under the license described in Section 3.a. below, for distribution with the EPMD Module. Biosense warrants to EPMD the reasonable, commercial performance of the Software Script in accordance with the specifications set forth in Appendix A for twelve months from the first commercial sale of the EMPD Module by EPMD or a distributor or sub-distributor to an End User with the exclusive remedy for any breach of the warranty being repair or replacement of the Software Script at Biosense’s discretion. BIOSENSE DISCLAIMS ANY AND ALL OTHER WARRANTIES, IMPLIED OR EXPRESS, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT WILL BIOSENSE’S LIABILITY INCLUDE ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS, EVEN IF BIOSENSE HAS KNOWLEDGE OF THE POTENTIAL LOSS OR DAMAGE.   - 7 - --------------------------------------------------------------------------------   d. If the CARTO™ XP System of an End User lacks necessary hardware (i.e. Ethernet card in the CARTO™ XP computer) beyond the Interface Kit, Biosense, at its own expense, shall provide and install the hardware in the End User’s CARTO™ XP System.     e. Biosense shall have the right to sell the Interface Hardware and the Connecting Cables to End Users during post sales service calls. EPMD shall use commercially reasonable efforts to sell such cables to Biosense at its cost + 30%, or to arrange for Biosense to purchase such cables directly from EPMD’ supplier of such cables at EPMD’ negotiated price.     4. License Terms     a. Biosense grants EPMD for the term of this Agreement, subject to the payment of the royalty fees as set forth in Section 4(b), a non-exclusive, non-transferable, worldwide license to copy, distribute to End Users and to sublicense End Users to use the Software Script provided by Biosense in Object Code solely as part of the EPMD Module. EPMD shall have the right to sublicense its distributors and sub-distributors its license to copy, distribute to End Users and to sublicense End Users to use the Software Script provided by Biosense to EPMD in Object Code solely as part of the EPMD Module; provided however, that such distributors or sub-distributors shall not include third parties that sell mapping systems of a Competitor. The terms of any such sub-license shall not create any contractual obligations between Biosense and any other party. Biosense also grants EPMD the nonexclusive, non-transferable right throughout the world to distribute the Interface Kit for use with the CARTO™ XP System and to sublicense its distributors and sub-distributors the rights to do the same; provided however, that such distributors or sub-distributors shall not include third parties that sell mapping systems to a Competitor. The terms of any such sub-license shall not create any contractual obligations between Biosense and any other party. EPMD and/or its distributors or sub-distributors, shall enter into with each End User an appropriate end user license agreement that protects Biosense’s ownership in the intellectual property of the Software Script.   - 8 - --------------------------------------------------------------------------------   b. For each Interface Kit sold or distributed by EPMD (whether directly to an End User or to a distributor or sub-distributor), EPMD shall pay to Biosense a license fee of $[            ]. A report will be generated indicating the average selling price (ASP) for kits sold and payments shall be due within forty five days (45) after the end of each calendar quarter for Interface Kits delivered by EPMD to End Users, distributors or sub-distributors during such quarter. Interface kits that are placed at up to 5 beta and reference sites will not be included in ASP calculation.     c. On a quarterly basis EPMD and Biosense will review ASP for all new system Interface kits sold by EPMD in the previous quarter. If the ASP for the interface kit is below $[            ] then the license fee will be increased by the difference between $[            ] and the ASP, up to a maximum of $[            ]. If the ASP for the interface kit is above $[            ] then the license fee will be decreased by the difference between the ASP and $[            ], down to a minimum of $[            ]     d. If EPMD fails to make any payment (other than payments reasonably disputed by EPMD) in the manner described in this Section 4, within forty five (45) days after the end of the calendar quarter, then an interest rate of 10% (ten percent) per year shall be paid by EPMD on such payment. If EPMD fails to make such payment within ninety (90) days of EPMD’s receipt of a notice from Biosense that a payment has not been made within forty five (45) days after the end of the calendar quarter, then such failure may, at Biosense’s discretion, be deemed a material breach of a material term of this Agreement by EPMD for which Biosense may terminate this Agreement in accordance with Section 8(b)     e. EPMD shall keep records of all Interface Kits sold or distributed by EPMD for the Term of this Agreement and for a period of two years thereafter. Biosense shall have the right, through its own representative or shall have the right to appoint an independent certified public accounting firm, to audit such EPMD’s records, as well as other documents as may be reasonably required solely for   - 9 - -------------------------------------------------------------------------------- the purpose of verifying EPMD’s compliance with its payment obligations hereunder. Such audit shall be conducted during EPMD’s normal working hours, at the EPMD location(s) where such records are maintained and shall be conducted in a manner that will not be unduly disruptive to EPMD’s operations. The auditor shall prepare a report either verifying such compliance or summarizing the total of any deviations therefrom, which report shall be furnished to each Party but shall be deemed the Confidential Information of EPMD. Such audit shall be conducted no more than once every twelve (12) months and shall be conducted at Biosense’s expense, except in those cases where the auditor detects deviations that are greater than ten (10) percent from EPMD’s payment obligations hereunder to the disadvantage of Biosense, in which latter case, the cost of the audit shall be born by EPMD.     f. Notwithstanding the foregoing, nothing in this Agreement shall be construed as restricting a party’s right to develop, license, market or distribute interfaces between that party’s products and other products of that party and/or third parties.     5. Tax     a. EPMD will make all payments to Biosense under this Agreement without deduction or withholding for taxes except to the extent that any such deduction or withholding is required by law in effect at the time of payment.     b. Any tax required to be withheld on amounts payable under this Agreement will promptly be paid by EPMD on behalf of Biosense to the appropriate governmental authority, and EPMD will furnish Biosense with proof of payment of such tax. Any such tax required to be withheld will be an expense of and borne by Biosense.   - 10 - --------------------------------------------------------------------------------   6. Marketing and Training     a. Co-branded brochures and other marketing, advertising and promotional materials may be created by either Party for the Interface Kit subject to the trademark licenses granted below and the approval of such materials by the other Party as outlined below.     b. EPMD shall be responsible to perform commercially reasonable marketing efforts with respect to the Interface Kit. Biosense shall use its commercially reasonable efforts to reference the Interface Kits to its customers and other third parties. Both parties must perform such efforts in an honest and professional manner and in conformance with applicable legal requirements and accepted industry standards.     c. Biosense hereby grants to EPMD, a limited, non-exclusive, non-transferable, non-sublicensable, license to use the Biosense trademarks identified in Appendix B, as may be amended by Biosense from time to time (the “Biosense Marks”) and the Biosense Webster, Inc. name (the “Biosense Name”) for the term of this Agreement, solely in connection with the marketing, advertising and promotion of the Interface Kit. The manner in which the Biosense Marks and the Biosense Name may appear, if at all, on any and all marketing, advertising and promotional materials of EPMD shall be subject to Biosense’s prior written approval, which approval may be granted or withheld in Biosense’s sole discretion. Prior to the distribution or use of any such marketing, advertising and promotional materials, EPMD shall provide Biosense copies of any such materials for Biosense’s approval or disapproval. Biosense shall notify EPMD of Biosense’s approval or disapproval of such proposed materials, which approval or disapproval may be granted or withheld in Biosense’s sole discretion. No materials shall be deemed approved by Biosense unless written approval is given. EPMD acknowledges Biosense’s exclusive ownership of the Biosense Marks and the Biosense Name and all proprietary rights therein. EPMD shall not (i) acquire or assert any trademark or other   - 11 - -------------------------------------------------------------------------------- proprietary rights in the Biosense Marks or Biosense Name or (ii) harm, misuse or bring into disrepute the Biosense Marks or Biosense Name     d. Except as otherwise provided herein, EPMD shall not have any right, title or interest in or to any Biosense trademarks (including, but not limited to the Biosense Marks), copyrighted material or other Biosense property, and may not use such property in the marketing, advertising or promoting of the Interface Kit, without an express license from Biosense. EPMD acknowledges that all use by EPMD of the Biosense Marks and Biosense Name (including any goodwill associated therewith) shall inure to the benefit of Biosense.     e. EPMD hereby grants to Biosense, a limited, non-exclusive, non-transferable license to use the EPMD trademarks identified in Appendix C (the “EPMD Marks”) and the EPMed Systems, Inc. name (the “EPMD Name”) for the term of this Agreement, solely in connection with the marketing, advertising and promotion of the Interface Kit. Biosense shall have the right to sublicense this license to its Affiliates. The manner in which the EPMD Marks and the EPMD Name may appear, if at all, on any and all marketing, advertising and promotional materials of Biosense shall be subject to EPMD’ prior written approval, which approval may be granted or withheld in EPMD’ sole discretion. Prior to the distribution or use of any such marketing, advertising and promotional materials, Biosense shall provide EPMD copies of any such materials for EPMD’ approval or disapproval. EPMD shall notify Biosense of EPMD approval or disapproval of such proposed materials, which approval or disapproval may be granted or withheld in EPMD sole discretion. No materials shall be deemed approved by EPMD unless such written approval is given. Biosense acknowledges EPMD exclusive ownership of the EPMD Marks and the EPMD Name and all proprietary rights therein. Biosense shall not (i) acquire or assert any trademark or other proprietary rights in the EPMD Marks or EPMD Name or (ii) harm, misuse or bring into disrepute the EPMD Marks or EPMD Name.   - 12 - --------------------------------------------------------------------------------   f. Except as otherwise provided herein, Biosense shall not have any right, title or interest in or to any EPMD Marks or the EPMD Name, copyrighted material or other EPMD property, and may not use such property in the marketing, advertising or promoting of the Interface Kit, without an express license from EPMD. Biosense acknowledges that all use by Biosense of the EPMD Marks and EPMD Name (including any goodwill associated therewith) shall inure to the benefit of EPMD.     g. EPMD and Biosense will be responsible for their own marketing, printing, distribution and other expenses respectively related to the marketing of the Interface Kit. Prior to the distribution of any press releases or other information concerning the existence, nature, or general subject matter of this Agreement, each Party must obtain the written consent of the other Party hereto, which approval may be granted or withheld in such Party’s sole discretion. Neither Party will use any of the other Party or its Affiliates’ trademarks or trade names or representations of the other Party or its Affiliates’ products or services, or refer directly or indirectly to the other Party or its Affiliates’, or the products or services of either in order to make known and/or publicize its relationship with the other Party or its Affiliate’ without, in any case, obtaining the prior written permission of the other Party.     h. Internal training. EPMD and Biosense will each conduct at least one training session, at its own cost, to train their respective sales force and professional educational teams on the Interface and how the EP-WorkMate System and the CARTO™ XP System work together. See Appendix D for the training timeline, key deliverables/owners of the program and outline of educational materials needed for the interface.     i. External and Customer training. EPMD will be responsible for training end users on the Interface and how the WorkMate System and the CARTO™ XP System work together. See Appendix D for the training timeline, key deliverables/owners of the program and outline of educational materials needed for the interface. EPMD and Biosense will continue to train end users on their respective systems overall clinical use and functionality as necessary.   - 13 - --------------------------------------------------------------------------------   j. Upon the expiration or termination of this Agreement, the respective other Party shall immediately cease to use in any manner whatsoever the Party’s name and the trademarks of the Party, as well as any other trademark in which the Party has any rights.     7. Service, Installation, and Warranty     a. EPMD or its distributors or sub-distributors shall provide on-site installation of the Interface Kit and shall assume all reasonable costs associated with the installation.     b. Both parties shall provide their standard field service and repair for their respective products, including all service relating to their respective Modules and other contributions to the Interface.     c. Both parties shall provide their standard product training to End Users for their respective products, including their Software Modules.     d. EPMD and Biosense shall provide to End Users warranties with respect to their respective Software Modules according to, and under terms no less favorable than, their standard existing product warranties for the applicable Software Modules.   - 14 - --------------------------------------------------------------------------------   8. Term and Termination     a. This Agreement becomes effective as of the Effective Date. The term of this Agreement will remain in effect for 2 years from the date of the first commercial distribution of an Interface Kit by EPMD, unless terminated by either party as hereafter provided. The Parties may, but are not required to, mutually agree to renew the Agreement beyond the initial term. This Agreement will terminate after the expiration of the Term unless renewed by both parties in writing. Upon termination of the agreement, EPMD will be allowed to ship all backlog of orders and honor all quotes up to 6 months from original quote date.     b. Notwithstanding the language of Section 8.a. above, either Party shall have the right to terminate this Agreement, including, without limitation, any licenses granted hereunder, upon the occurrence of any of the following events (an “Event of Default”):     i. In the event the other Party materially violates a material provision of the Agreement; or     ii. In the event the other Party (a) terminates or suspends its business, or (b) becomes subject to any bankruptcy or insolvency proceeding under U.S. Federal or state statute, or (c) becomes insolvent or subject to direct control by a trustee, receiver or similar authority, or (d) has wound up or liquidated, voluntary or otherwise.     c. Before a Party has the right to terminate the Agreement under Section 8.b.(i) upon the occurrence of an Event of Default, such Party must provide to the other a detailed written notification of its claim concerning an Event of Default and of its intention to terminate the Agreement based upon that claim. If the Event of Default remains uncured for sixty days after receipt of the written notification, the Party providing the notification may terminate this Agreement, including without limitation, any licenses granted hereunder, by delivering to the defaulting Party a written document stating that it terminates the Agreement. The termination shall be effective as of the date of receipt of said termination document.   - 15 - --------------------------------------------------------------------------------   d. Upon expiration or termination of this Agreement, the Parties will retain their respective ownership rights in their respective products.     e. Upon termination or expiration of this Agreement, EPMD shall promptly pay Biosense any amounts due to Biosense and cease any use of the Software Script, including copies thereof. Termination of this Agreement shall not in any way affect an End User’s rights and will remain in compliance with regulatory standards for end of life service and support of products with respect to any Interface Kit purchased by such End User.     9. Regulatory Compliance     a. Biosense shall be responsible for complying with any state, federal or foreign authority regulations, including, without limitation, any United States FDA requirements, for the CARTO™ XP System using the Biosense Module, including, without limitation, all costs and tasks associated with such compliance. EPMD will provide commercially reasonable support upon request (e.g., documentation rights of reference, complaint investigation reports) for Biosense to meet its compliance obligations.     b. EPMD shall be responsible for complying with any state, federal or foreign authority regulations, including, without limitation, United States FDA requirements, for the WorkMate System using the EPMD Module with the Software Script and for the Interface Hardware and related documentation, including, without limitation, all costs and tasks associated with such compliance. Biosense will provide commercially reasonable support upon request (e.g., documentation rights of reference, complaint investigation reports) for EPMD to meet its compliance obligations.   - 16 - --------------------------------------------------------------------------------   10. Ownership of Software     a. EPMD shall own all proprietary rights, including, without limitation, all patents, copyrights, trade secrets and trade marks, in and to the EPMD Module (excluding the Software Script) and any other software used by the WorkMate System, including, without limitation, any derivative works, corrections, bug fixes, enhancements, updates or other modifications. EPMD shall not copy, translate, modify, create derivative works, disassemble, reverse engineer, decompile, attempt, directly or indirectly, to otherwise obtain or create Source Code of the Software Script for any reason other than as required by law or otherwise use the Software Script except as specifically authorized hereunder or required by law.     b. Biosense shall own all proprietary rights, including, without limitation, all patents, copyrights, trade secrets and trade marks, in and to the Software Script, the Biosense Module and any other software used by the CARTO™ XP System, including, without limitation, any derivative works, corrections, bug fixes, enhancements, updates or other modifications.     11. Confidential Information The parties agree that the WorkMate System, the CARTO™ XP System, the EPMD Module, the Biosense Module, the Software Script, and related documentation, the terms of this Agreement and the Parties’ collaboration on the Interface between their respective systems contain and/or constitute proprietary information, including trade secrets, know-how and confidential information (“Confidential Information”). In addition, all other information disclosed by one party to the other hereunder and, if written, clearly marked on its face as “Confidential,” or, if disclosed orally, identified as confidential at the time of the disclosure and summarized in a writing provided to the other party and marked “Confidential” within thirty (30) days of the date of the disclosure, shall be deemed “Confidential Information.” Confidential Information does not include a Party’s information if: (a) the information was known by the other Party, outside of confidentiality requirements, prior to the Parties’ collaboration commenced on the Interface, or (b) was, is, or   - 17 - -------------------------------------------------------------------------------- becomes available publicly without disclosure by the other party, or (c) is provided to the other Party by a third party who was not in breach of an agreement to keep such information confidential, or (d) is independently developed by the other Party. Each Party agrees to keep the other Party’s Confidential Information confidential for a period of seven (7) years from date of disclosure, not to disseminate the other Party’s Confidential Information to personnel within its organization and personnel of its Affiliates other than on a “need-to-know” basis, including their directors, officers, employees, consultants and agents, who have an actual need to know and have a written obligation to protect the confidentiality of such information, and not to disclose such Confidential Information to third parties or to use such Confidential Information for any purpose other than in furtherance of this Agreement; provided, however, a Party may disclose the other Party’s Confidential Information if required by law or judicial process to do so, provided that it first provides the other Party with notice of the planned disclosure and a reasonable opportunity to contest or obtain a protective order with respect to the disclosure.     12. Indemnification     a. Biosense agrees to indemnify and save EPMD and its distributors and sub-distributors harmless from claims by third persons asserted against EPMD that the CARTO™ XP System, the Biosense Module or the Software Script supplied by Biosense have caused damage to tangible personal property or bodily injury (including death), if and to the extent such damage or injury is proximately caused by Biosense’s negligent act or omission and is determined by a court of competent jurisdiction to be Biosense’s legal liability, and provided that EPMD furnishes to Biosense prompt written notice and requisite authority, information and assistance to defend.     b. Biosense will defend, indemnify and hold harmless EPMD and its distributors, sub-distributors and End Users from any claim that the Software Script or Biosense Marks or Biosense Name constitutes an unauthorized use or infringement of any third party’s intellectual property or other proprietary rights. Biosense will pay all costs, damages and expenses (including reasonable attorneys’ fees) incurred by EPMD, its distributors, sub-distributors or End Users and will pay any award with respect to any such claim or agreed to in any   - 18 - -------------------------------------------------------------------------------- settlement of that claim, provided that Biosense is notified promptly (not later than within thirty (30) days) in writing of such claim and is given exclusive authority over and reasonable cooperation for (including access to potential witnesses and relevant documents) the defense of same. Biosense shall not be responsible for paying any costs, expense, or amount otherwise due as a result of compromises or settlements reached by EPMD in connection with any such claim unless EPMD first obtains Biosense’s prior written approval of the compromise or settlement. EPMD may at its own expense be represented by counsel of its own choice in any such suit or proceeding. If the Software Script, or the use thereof becomes, or in Biosense’s reasonable opinion is likely to become, the subject of such a claim, EPMD shall permit Biosense, at Biosense’s option and expense, either to (a) procure the right for EPMD to continue using the same or (b) replace or modify the same so that it becomes non-infringing while remaining functionally equivalent and remaining in compliance with the applicable Specifications. If neither of these alternatives is reasonably available to Biosense, then either party may terminate this Agreement. Biosense shall not be liable with respect to any Claim to the extent arising out of or relating to either (i) use or incorporation in the Software Script of any design or technique furnished or requested by EPMD, (ii) the combination with or incorporation of the Licensed Software into the EPMD Module if such infringement, other than where contributory infringement is involved, would not have occurred without such combination; (iii) the modification of the Software Script by EPMD or one of its distributors, sub-distributors or End Users or any person or entity other than Biosense or in accordance with Biosense’s instructions; (iv) the use of the Software Script other than as permitted under this Agreement; or (v) use or distribution of other than the most current version of the Software Script (if such Claim would have been prevented by the use of such current version) after such current version has been made available to EPMD at no additional charge.     c. EPMD agrees to indemnify and save Biosense harmless from claims by third persons asserted against Biosense that the WorkMate System, the EPMD Module, the Connecting Cables or the Interface Hardware supplied by EPMD have caused damage to tangible personal property or bodily injury (including death), if and to the extent such damage or   - 19 - -------------------------------------------------------------------------------- injury is proximately caused by EPMD’s negligent act or omission and is determined by a court of competent jurisdiction to be EPMD’s legal liability, and provided that Biosense furnishes to EPMD prompt written notice and requisite authority, information and assistance to defend.     d. EPMD will defend, indemnify and hold harmless Biosense and its Affiliates from any claim any of the EPMD Marks or EPMD Name constitutes an unauthorized use or infringement of any third party’s intellectual property rights or other proprietary rights. EPMD will pay all costs, damages and expenses (including reasonable attorneys’ fees) incurred by Biosense or any of its Affiliates and will pay any award with respect to any such claim or agreed to in any settlement of that claim, provided that EPMD is notified promptly (not later than within thirty (30) days) in writing of such claim and is given exclusive authority over and reasonable cooperation for (including access to potential witnesses and relevant documents) the defense of same. EPMD shall not be responsible for paying any costs, expense, or amount otherwise due as a result of compromises or settlements reached by Biosense in connection with any such claim unless Biosense first obtains EPMD’s prior written approval of the compromise or settlement. Biosense may at its own expense be represented by counsel of its own choice in any such suit or proceeding.     13. Amendment, Governing Law, Dispute Resolution and Jurisdiction     a. This Agreement set forth the entire Agreement between the Parties with respect to the subject matter of this Agreement and supercedes all prior agreements, understandings and negotiations with respect to the subject matter hereof. Any amendment to this Agreement must be in writing and signed by both Parties.     b. This Agreement is to be construed under the law of the State of New York, excluding the application of any choice of law principles.     c. Any controversy or claim arising out of or relating to this Agreement or the validity, inducement, or breach thereof, shall be settled by arbitration before a single arbitrator in accordance with the American   - 20 - -------------------------------------------------------------------------------- Arbitration Association’s (“AAA’s”) Commercial Arbitration Rules then in effect, except where those rules conflict with this provision, in which case this provision controls. The parties hereby consent to the jurisdiction of the Federal District Court for the Southern District of New York for the enforcement of these provisions and the entry of judgment on any award rendered hereunder. Should such court for any reason lack jurisdiction, any court with jurisdiction shall enforce this clause and enter judgment on any award. The arbitrator shall be an attorney specializing in business litigation who has at least 15 years of experience with a law firm of over 25 lawyers or was a judge of a court of general jurisdiction. The arbitration shall be held in New York, New York and the arbitrator shall apply the substantive law of the State of New York, except that the interpretation and enforcement of this arbitration provision shall be governed by the Federal Arbitration Act. Within 30 days of initiation of arbitration, the parties shall reach agreement upon and thereafter follow procedures assuring that the arbitration will be concluded and the award rendered within no more than six months from selection of the arbitrator. Failing such agreement, the AAA will design and the parties will follow such procedures. Each party has the right before or during the arbitration to seek and obtain from the appropriate court provisional remedies such as attachment, preliminary injunction, replevin, etc., to avoid irreparable harm, maintain the status quo or preserve the subject matter of the arbitration. THE ARBITRATOR SHALL NOT AWARD ANY PARTY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES, AND EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO SEEK SUCH DAMAGES.     14. Waiver and Severability     a. Failure by either Party to enforce at any time or for any time the provisions of this Agreement shall not be construed as a waiver of such provisions and shall not affect such Party’s rights to later enforce such provisions.     b. If any part of this Agreement is determined by any court or tribunal of competent jurisdiction to be wholly or partially unenforceable for any reason, such unenforceability shall not affect the balance of this Agreement.   - 21 - --------------------------------------------------------------------------------   15. Notices All notices under this Agreement shall be sent by registered mail to the address below or to any other address as a Party may designate in writing: For EPMD: David Jenkins, President and CEO EPMedSystems, Inc. Cooper Run Executive Park 575 Route 73 North Unit-D West Berlin, NJ 08091 For Biosense: Shlomi Nachman Vice President, Worldwide Business Development 3333 Diamond Canyon Road Diamond Bar, CA 91765 cc: Chief Patent Counsel Johnson & Johnson 1 Johnson & Johnson Plaza New Brunswick NJ 08933     16. Relationship of the Parties Neither EPMD nor Biosense are authorized to oblige the other Party or act in the name of the other Party. This Agreement does not create a joint venture, partnership, or association.     17. Assignment This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and assigns, provided, however, that neither Party shall have the right to assign its interest in this   - 22 - -------------------------------------------------------------------------------- Agreement without the prior written authorization of the other Party, other than to its Affiliates. A merger or transfer of control of one party shall be deemed an assignment for purposes of this Section 17.     18. Survivability Upon expiration or termination of this Agreement, all rights and obligations of the parties shall cease to have effect, except for those rights and obligations set forth in Sections 10, 11, 12, 13, 14, and 17 which shall survive termination or expiration. IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by their thereunto duly authorized representatives as of the date first written above.     EP Med Systems Inc.   BIOSENSE WEBSTER, INC.   By:   /s/ David Jenkins   By:   /s/ Shane Wachman   Name:   David Jenkins   Name:   Shane Wachman   Title:   CEO   Title:   V.P Business Development   - 23 -

  Exhibit 10.18 ABM INDUSTRIES INCORPORATED STATEMENT OF TERMS AND CONDITIONS APPLICABLE TO OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS AND PERFORMANCE SHARES GRANTED TO EMPLOYEES PURSUANT TO THE 2006 EQUITY INCENTIVE PLAN (As Adopted October __2, 2006) I. INTRODUCTION The following terms and conditions shall apply to each Award granted under the Plan to an Employee eligible to participate in the Plan. This Statement of Terms and Conditions is subject to the terms of the Plan and of any Award made pursuant to the Plan. In the event of any inconsistency between this Statement of Terms and Conditions and the Plan, the Plan shall govern. II. DEFINITIONS Capitalized terms not otherwise defined in this Statement of Terms and Conditions shall have the meaning set forth in the Plan. When capitalized in this Statement of Terms and Conditions, the following additional terms shall have the meaning set forth below: A. “Grant Date” means the date the Administrator grants the Award. B. “Option Period” means the period commencing on the Grant Date of an Option and, except at otherwise provided in Section III.E, ending on the Termination Date. C. “Termination Date” means the date that an Option expires as set forth in the Option Agreement. III. OPTIONS A. Option Notice and Agreement. An Option granted under the Plan shall be evidenced by an Option Agreement setting forth the terms and conditions of the Option, including whether the Option is an Incentive Stock Option or a Nonqualified Stock Option and the number of Shares subject to the Option. Each Option Agreement shall incorporate by reference and be subject to this Statement of Terms and Conditions and the terms and conditions of the Plan. B. Exercise Price. The Exercise Price of an Option, as specified in the Option Agreement, shall be equal to or greater than the Fair Market Value of the Shares underlying the Option on the Grant Date. C. Option Period. An Option shall be exercisable only during the applicable Option Period, and during such Option Period the exercisability of the Option shall be subject to the vesting provisions of Section III.D as modified by the rules set forth in Sections III.E, V and VI. The Option Period shall be not more than seven years from the Grant Date.   --------------------------------------------------------------------------------   D. Vesting of Right to Exercise Options. 1. Except as provided in Sections V and VI, an Option shall be exercisable during the Option Period in accordance with the following vesting schedule: (i) 25 percent of the Shares subject to the Option shall vest on the first anniversary of the Grant Date; (ii) an additional 25 percent of the Shares shall vest on the second anniversary of the Grant Date; (iii) an additional 25 percent of the Shares shall vest on the third anniversary of the Grant Date; and (iv) the remaining 25 percent of the Shares subject to the Option shall vest on the fourth anniversary of the Grant Date. Notwithstanding the foregoing, the Administrator may specify a different vesting schedule at the time the Option is granted and as specified in the Option Agreement. 2. Any vested portion of an Option not exercised hereunder shall accumulate and be exercisable at any time on or before the Termination Date, subject to the rules set forth in Sections III.E, V and VI. No Option may be exercised for less than 5 percent of the total number of Shares then available for exercise under such Option. In no event shall the Company be required to issue fractional shares. E. Termination of Employment. In addition to the terms set forth in the Plan with respect to termination of employment: 1. If a Participant ceases to be a bona fide employee of the Company or an Affiliate due to his or her Retirement, Disability or death during the Option Period, in addition to any Shares vested under the Option Agreement prior to the date of Disability or death, the Option shall vest in the number of Shares equal to 25 percent of the number of Shares originally subject to the Option, multiplied by the number of whole months between the most recent anniversary date of the Option grant and the date of Retirement, Disability or death, and divided by 12. 2. If a Participant who ceases to be a bona fide employee of the Company or an Affiliate is subsequently rehired prior to the expiration of his or her Option, then the Option shall continue to remain outstanding until such time as the Participant subsequently terminates employment or the Option otherwise terminates pursuant to this Statement of Terms and Conditions. Upon the Participant’s subsequent termination of employment, the post-termination exercise period calculated pursuant to the terms and conditions of this Section III.E shall be reduced by the number days between the date of the Participant’s initial termination of employment and his or her rehire date; provided, however, that if the rehired Participant continues to be employed by the Company or an Affiliate for at least one year from his or her rehire date, then the post-termination exercise period for the Option shall be determined in accordance with the Plan and shall not be adjusted as described above. 2 --------------------------------------------------------------------------------   F. Method of Exercise. A Participant may exercise an Option with respect to all or any part of the exercisable Shares as follows: 1. By giving the Company, or its authorized representative designated for this purpose, written notice of such exercise specifying the number of Shares as to which the Option is so exercised. Such notice shall be accompanied by an amount equal to the Exercise Price of such Shares, in the form of any one or combination of the following: a. cash or certified check, bank draft, postal or express money order payable to the order of the Company in lawful money of the United States; b. if approved by the Company at the time of exercise, personal check of the Participant; c. if approved by the Company at the time of exercise, a “net exercise” pursuant to which the Company will not require a payment of the exercise price from the Participant but will reduce the number of Shares issued upon the exercise by the largest number of whole Shares that has a Fair Market Value that does not exceed the aggregate exercise price. With respect to any remaining balance of the aggregate exercise price, the Company shall accept payment in a form identified in (a) or (b) of this section; d. if approved by the Company at the time of exercise, by tendering to the Company or its authorized representative Shares which have been owned by the Participant for at least six months prior to said tender, and having a Fair Market Value, as determined by the Company, equal to the Exercise Price. In the event a Participant tenders Shares to pay the Exercise Price, tender of Shares acquired through exercise of an Incentive Stock Option may result in unfavorable income tax consequences unless such Shares are held for at least two years from the Grant Date of the Incentive Stock Option and one year from the date of exercise of the Incentive Stock Option; e. if approved by the Company at the time of exercise, delivery (including by FAX transmission) to the Company or its authorized representative of an executed irrevocable option exercise form together with irrevocable instructions to an approved registered investment broker to sell Shares in an amount sufficient to pay the Exercise Price plus any applicable withholding taxes and to transfer the proceeds of such sale to the Company; and 2. If required by the Company, by giving satisfactory assurance in writing, signed by the Participant, the Participant shall give his or her assurance that the Shares subject to the Option are being purchased for investment and not with a view to 3 --------------------------------------------------------------------------------   the distribution thereof; provided that such assurance shall be deemed inapplicable to (i) any sale of the Shares by such Participant made in accordance with the terms of a registration statement covering such sale, which has heretofore been (or may hereafter be) filed and become effective under the Securities Act of 1933, as amended (the “Securities Act”) and with respect to which no stop order suspending the effectiveness thereof has been issued, and (ii) any other sale of the Shares with respect to which, in the opinion of counsel for the Company, such assurance is not required to be given in order to comply with the provisions of the Securities Act. G. Limitations on Transfer. An Option shall, during a Participant’s lifetime, be exercisable only by the Participant. No Option or any right granted thereunder shall be transferable by the Participant by operation of law or otherwise, other than as set forth in the Plan. In the event of any attempt by a Participant to alienate, assign, pledge, hypothecate, or otherwise dispose of an Option or of any right thereunder, except as provided herein, or in the event of the levy of any attachment, execution, or similar process upon the rights or interest hereby conferred, the Company at its election may terminate the affected Option by notice to the Participant and the Option shall thereupon become null and void. H. No Shareholder Rights. Neither a Participant nor any person entitled to exercise a Participant’s rights in the event of the Participant’s death shall have any of the rights of a shareholder with respect to the Shares subject to an Option except to the extent that an Option has been exercised. IV. RESTRICTED STOCK, RESTRICTED STOCK UNITS, AND PERFORMANCE SHARES A. Agreement. A Restricted Stock Award, Restricted Stock Unit Award, or Performance Share Award granted under the Plan shall be evidenced by an Agreement to be executed by the Participant and the Company setting forth the terms and conditions of the Award. Each Award Agreement shall incorporate by reference and be subject to this Statement of Terms and Conditions and the terms and conditions of the Plan. B. Special Restrictions. Each Restricted Stock Award, Restricted Stock Unit Award, or Performance Share Award made under the Plan shall contain the following terms, conditions and restrictions and such additional terms, conditions and restrictions as may be determined by the Administrator; provided, however, that no Award shall be subject to additional terms, conditions and restrictions which are more favorable to a Participant than the terms, conditions and restrictions set forth in the Plan, the Restricted Stock Agreement, Restricted Stock Unit Award Agreement, Performance Share Award Agreement, or this Statement of Terms and Conditions. 1. Restrictions. Until the restrictions imposed on any Restricted Stock Award shall lapse, shares of Restricted Stock granted to a Participant: (a) shall not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of, and (b) shall, if the Participant’s continuous employment with the 4 --------------------------------------------------------------------------------   Company or an Affiliate shall terminate for any reason (except as otherwise provided in the Plan or in Section IV.B.2) be returned to the Company forthwith, and all the rights of the Participant to such Shares shall immediately terminate. A Participant shall not be permitted to sell, transfer, pledge, assign or encumber such Restricted Stock Units or Performance Shares, other than pursuant to a qualified domestic relations order as defined in the Code or Title I of the Employee Retirement Income Security Act. If a Participant ceases to be a bona fide employee of the Company or an Affiliate (except as otherwise provided in the Plan or in Section IV.B.2) prior to the lapse of the restrictions imposed on a Restricted Stock Unit Award or Performance Share Award, the unvested portion of the Restricted Stock Unit Award or Performance Share Award shall be forfeited to the Company, and all the rights of the Participant to such Award shall immediately terminate. If a Participant is absent from work with the Company or an Affiliate because of his or her short-term disability or because the Participant is on an approved leave of absence, the Participant shall not be deemed during the period of any such absence, by virtue of such absence alone, to have terminated employment with the Company or an Affiliate except as the Administrator may otherwise expressly determine. Notwithstanding the foregoing, if the Participant is on a voluntary leave of absence for the purpose of serving the government of the country of which the Participant is a citizen or in which the Participant’s principal place of employment is located such leave shall be considered an approved leave of absence. 2. Termination of Employment by Reason of Retirement, Disability or Death. a. Restricted Stock Awards and Restricted Stock Unit Awards. Notwithstanding any provision contained herein or in the Plan or the Restricted Stock Agreement or Restricted Stock Unit Agreement to the contrary, if a Participant who has been in the continuous employment of the Company or an Affiliate since the Grant Date of a Restricted Stock Award or Restricted Stock Unit Award ceases to be a bona fide employee of the Company or an Affiliate as a result of Retirement, Disability or death, then the restrictions shall lapse as to the number of Shares or Share Equivalents equal to: (i) 50 percent of the number of Shares or Share Equivalents originally subject to the Award, multiplied by (ii) the number of whole months between the Grant Date (or if the Grant Date occurred more than two years prior to the date of Retirement, Disability or death, the second anniversary of the Grant Date) and the date of Retirement, Disability or death, divided by (iii) 24. b. Performance Share Awards. Notwithstanding any provision contained herein or in the Plan or the Performance Share Agreement to the contrary, if a Participant who has been in the continuous employment 5 --------------------------------------------------------------------------------   of the Company or an Affiliate since the Grant Date of a Performance Share Award ceases to be a bona fide employee of the Company or an Affiliate as a result of Retirement, Disability or death, then at the end of the performance period the restrictions shall lapse as to the number of Share Equivalents equal to: (i) the number of Performance Shares vested in accordance with the performance objectives established by the Administrator for the Award, multiplied by (ii) the number of whole months between the Grant Date and the date of Retirement, Disability or death, divided by (iii) the number of months in the performance period. C. Dividends, Dividend Equivalents, and Business Transactions. Upon cash dividends being paid on outstanding shares of ABM common stock, dividends shall be paid with respect to Restricted Stock during the Restriction Period and shall be converted to additional shares of Restricted Stock, which shall be subject to the same restrictions as the original Award for the duration of the Restricted Period. Upon cash dividends being paid on outstanding shares of ABM common stock, dividend equivalents shall be credited in respect of Restricted Stock Units and Performance Shares, which shall be converted into additional Restricted Stock Units or Performance Shares, which will be subject to all of the terms and conditions of the underlying Restricted Stock Unit Award or Performance Share Award, including the same vesting restrictions as the underlying Award. Upon stock dividends being paid on outstanding shares of ABM common stock or a Business Transaction, the Administrator is authorized to take such actions and make such changes with respect to outstanding Awards, including the performance criteria for the termination of restrictions on Awards, as are consistent with the Plan and this Statement of Terms and Conditions to effect the terms of the Awards. D. Election to Recognize Gross Income in the Year of Grant. If any Participant validly elects within thirty days of the Grant Date, to include in gross income for federal income tax purposes an amount equal to the Fair Market Value of the Shares of Restricted Stock granted on the Grant Date, such Participant shall pay to the Company, or make arrangements satisfactory to the Administrator to pay to the Company in the year of such grant, any federal, state or local taxes required to be withheld with respect to such shares in accordance with Section VII.F. E. No Shareholder Rights for Restricted Stock Units or Performance Shares. Neither a Participant nor any person entitled to exercise a Participant’s rights in the event of the Participant’s death shall have any of the rights of a shareholder with respect to the Share Equivalents subject to a Restricted Stock Unit Award or Performance Share Award except to the extent that a stock certificate has been issued with respect to such Shares upon the payment of any vested Restricted Stock Unit Award or Performance Share Award. F. Time of Payment of Restricted Stock Units and Performance Shares. Upon the lapse of the restriction imposed on Restricted Stock Unit Awards or Performance Share Award, 6 --------------------------------------------------------------------------------   all Restricted Stock Units and Performance Shares that were not forfeited pursuant to Sections IV.B.1 or V shall be paid to the Participant as soon as reasonably practicable after the restrictions lapse but not later than two and one-half months following the end of the calendar year in which the restrictions lapse. Payment shall be made in Shares in the form of a stock certificate. The foregoing notwithstanding, the Participant may elect to defer payment of the Restricted Stock Units in the manner described in Section IV.G. G. Deferral Election. Each Participant, pursuant to rules established by the Administrator, may be entitled to elect to defer all or a percentage of any payment in respect of a Restricted Stock Unit Award or Performance Shares that he or she may be entitled to receive as determined pursuant to Section IV.F. This election shall be made by giving notice in a manner and within the time prescribed by the Administrator and in compliance with Code Section 409A. Each Participant must indicate the percentage (expressed in whole percentages) he or she chooses to defer of any payment he or she may be entitled to receive. If no notice is given, the Participant shall be deemed to have made no deferral election. Each deferral election filed with the Company shall become irrevocable in accordance with the terms and conditions of the Company’s Deferred Compensation Plan (or any successor plan) and in compliance with Code Section 409A. V. SPECIAL FORFEITURE AND REPAYMENT RULES Any other provision of this Statement of Terms and Conditions to the contrary notwithstanding, if the Administrator determines that a Participant has engaged in conduct which constitutes Cause prior to, or during the 12 month period following, the exercise of an Option or the vesting of an Award, the consequences set forth in Section 16 of the Plan govern and the following consequences shall apply: A. Any outstanding Option shall immediately and automatically terminate, be forfeited and shall cease to be exercisable, without limitation. In addition, any shares of Restricted Stock, Restricted Stock Units or Performance Shares as to which the restrictions have not lapsed shall immediately and automatically be forfeited, all of the rights of the Participant to such shares or share equivalents shall immediately terminate, and any Restricted Stock shall be returned to the Company. B. Any exercise of an Option during the period beginning 12 months prior to through 24 months after the Participant’s termination of employment with the Company or an Affiliate shall be rescinded and all outstanding Awards shall be canceled up to 24 months after the Participant’s termination of employment with the Company or an Affiliate. The Participant shall deliver to the Company the Shares received by the Participant upon exercise of an Option if such exercise has been rescinded and the Shares retained by the Participant. C. The lapse of restrictions on or vesting of Restricted Stock, Restricted Stock Units, or Performance Shares that have vested or upon which the restrictions have lapsed during the period beginning 12 months prior to through 24 months after the Participant’s termination of employment with the Company or an Affiliate 7 --------------------------------------------------------------------------------   shall be rescinded and all outstanding Awards shall be cancelled up to 24 months after the Participant’s termination of employment with the Company or an Affiliate. The Participant shall deliver to the Company the Shares delivered upon vesting or lapse of restrictions if such vesting or lapse of restrictions has been rescinded and the Shares retained by the Participant. D. The Participant shall pay over to the Company the proceeds (less the Participant’s purchase price, if any) received by the Participant upon (1) the sale, transfer or other transaction involving the Shares acquired upon the exercise of any Option exercised during the period beginning 12 months prior to through 24 months after the Participant’s termination of employment with the Company or an Affiliate or (2) the sale, transfer or other transaction involving the Shares acquired upon the vesting of any Award or lapse of restrictions on any Award within 12 months prior to through 24 months after the Participant’s termination of employment with the Company or an Affiliate in such manner and on such terms and conditions as may be required, and, without limiting any other remedy the Company or an Affiliate may have, the Company shall be entitled to set-off against the amount of any such proceeds any amount owed the Participant by the Company or an Affiliate to the fullest extent permitted by law. The Administrator shall determine in its sole discretion whether the Participant has engaged in conduct that constitutes Cause. Any provision of Section 16 of the Plan and this Section V which is determined by a court of competent jurisdiction to be invalid or unenforceable should be construed or limited in a manner that is valid and enforceable and that comes closest to the business objectives intended by such invalid or unenforceable provision, without invalidating or rendering unenforceable the remaining provisions of this Section V. VI. CHANGE IN CONTROL A. Effect of Change in Control on Options. Subject to the limitations set forth in Section VI.C, in the event of a Change in Control, the surviving, continuing, successor, or purchasing Company or other business entity or parent thereof, as the case may be (the “Acquiror”) may, without the consent of any Participant, either assume or continue the Company’s rights and obligations under outstanding Options or substitute for outstanding Options substantially equivalent options covering the Acquiror’s stock. Options that are assumed or continued in connection with a Change in Control shall be subject to such additional accelerated vesting and/or exercisability in connection with the Participant’s subsequent termination of employment (i) as are set forth in a Severance Agreement between the Participant and the Company approved by the Board of Directors or the Compensation Committee, or (ii) as the Board may determine. Any Options granted one year or more prior to the Change in Control that are neither assumed nor continued by the Acquiror in connection with the Change in Control shall, contingent on the Change in Control, become fully vested and 8 --------------------------------------------------------------------------------   exercisable immediately prior to the Change in Control. Any Option granted less than one year prior to the Change of Control that is neither assumed nor continued by the Acquiror in connection with the Change in Control shall, to the extent not previously vested and exercisable, immediately prior to the Change in Control become vested and exercisable as to the number of Shares subject to such Option equal to (i) the number of Shares originally subject to such Option, multiplied by (ii) the number of whole months between the Grant Date and the Change in Control, divided by (iii) the number of months between the Grant Date and the date on which all Shares originally subject to such Option would have been fully vested and exercisable; and such Option shall terminate with respect to all remaining Shares subject to such Option. B. Effect of Change in Control on Awards Other than Options. Subject to the limitations set forth in Section VI.C, in the event of a Change in Control, the Acquiror may, without the consent of any Participant, either assume or continue the Company’s rights and obligations under outstanding Awards other than Options or substitute for such Awards substantially equivalent awards covering the Acquiror’s stock. Awards that are assumed or continued in connection with a Change in Control shall be subject to such additional accelerated vesting or lapse of restrictions in connection with the Participant’s subsequent termination of employment without Cause (i) as are set forth in a Severance Agreement between the Participant and the Company approved by the Board of Directors or the Compensation Committee; or (ii) as the Board may determine. Any Award granted one year or more prior to the Change in Control that is neither assumed nor continued by the Acquiror in connection with the Change in Control shall, upon the Change in Control, become fully vested and all restrictions shall be released immediately prior to the Change in Control. Restricted Unit Awards and Performance Share Awards granted one year or more prior to such Change in Control also shall become immediately payable. Subject to the limitations set forth in Section VI.C, in the event of a Change in Control outstanding Awards other than Options granted less than one year prior to the Change in Control, shall, immediately prior to the Change of Control, become vested and all restrictions shall to the extent not previously released be released with respect to the number of Shares equal to (i) the number of Shares originally subject to such Award, multiplied by (ii) the number of whole months between the Grant Date and the Change in Control, divided by (iii) the number of months between the Grant Date and the date on which the restrictions on such Award would otherwise have terminated. To the extent such restrictions are released, Restricted Unit Awards and Performance Share Awards also shall become immediately payable. Awards shall terminate to the extent such Awards do not become vested and restrictions do not terminate. C. Excess Parachute Payments. Subject to a Severance Agreement between the Participant and the Company approved by the Board of Directors or the Compensation Committee, if any amount or benefit to be paid or provided under an Award or any other agreement between a Participant and the Company would be an Excess Parachute Payment but for the application of this sentence, then the payments and benefits to be paid or provided under the Award and any other agreement will be reduced to the minimum extent necessary (but in no event to less than zero) so that no portion of 9 --------------------------------------------------------------------------------   any such payment or benefit, as so reduced, constitutes an Excess Parachute Payment. The determination of whether any reduction in such payments or benefits to be provided under the Award or any other agreement or otherwise is required pursuant to the preceding sentence will be made at the expense of the Company by independent accountants or the Company’s benefits consultant. The fact that the Participant’s right to payments or benefits may be reduced by reason of the limitations contained in this paragraph will not of itself limit or otherwise affect any other rights of the Participant under any other agreement. In the event that any payment or benefit intended to be provided is required to be reduced pursuant to this paragraph, the Participant will be entitled to designate the payments and/or benefits to be so reduced in order to give effect to this paragraph. The Company will provide the Participant with all information reasonably requested by the Participant to permit the Participant to make such designation. In the event that the Participant fails to make such designation within 10 business days after receiving notice from the Company of a reduction under this paragraph, the Company may effect such reduction in any manner it deems appropriate. VII. MISCELLANEOUS A. No Effect on Terms of Employment. Subject to the terms of any employment contract entered into by the Company and a Participant to the contrary, the Company (or an Affiliate which employs him or her) shall have the right to terminate or change the terms of employment of a Participant at any time and for any reason whatsoever. B. Grants to Participants in Foreign Countries. In making grants to Participants in foreign countries, the Administrator has the full discretion to deviate from this Statement of Terms and Conditions in order to adjust Awards under the Plan to prevailing local conditions, including custom and legal and tax requirements. C. Information Notification. Any information required to be given under the terms of an Award Agreement shall be addressed to the Company in writing by mail, overnight delivery service, or by electronic transmission to the Senior Vice President, Human Resources and the Assistant Vice President & Director of Compensation. Any notice to be given to a Participant shall be given in writing by mail, overnight delivery service, or by electronic transmission. D. Administrator Decisions Conclusive. All decisions of the Administrator administering the Plan upon any questions arising under the Plan, under this Statement of Terms and Conditions, or under an Award Agreement, shall be conclusive. E. No Effect on Other Benefit Plans. Nothing herein contained shall affect a Participant’s right to participate in and receive benefits from and in accordance with the then current provisions of any pensions, insurance or other employment welfare plan or program offered by the Company. 10 --------------------------------------------------------------------------------   F. Withholding. Each Participant shall agree to make appropriate arrangements with the Company and his or her employer for satisfaction of any applicable federal, state or local income tax withholding requirements or payroll tax requirements. If approved by the Company at the time of exercise, such arrangements may include an election by a Participant to have the Company retain some portion of the Stock acquired pursuant to exercise of an Option to satisfy such withholding requirements. The election must be made prior to the date on which the amount to be withheld is determined. If a qualifying election is made, then upon exercise of an Option, in whole or in part, the Company will retain the number of Shares having a value equal to the amount necessary to satisfy any withholding requirements. Calculation of the number of Shares to be withheld shall be made based on the Fair Market Value of the Stock. In no event, however, shall the Company be required to issue fractional shares of Stock. The Administrator shall be authorized to establish such rules, forms and procedures as it deems necessary to implement the foregoing. With respect the vesting of an Award other than an Option, if the Participant does not make an arrangement with Company and his or her employer for satisfaction of the applicable income and withholding requirements or social security requirements in advance of the vesting date, the Company shall retain the number of Shares (that otherwise would have been payable to the Participant) having a value equal to the amount necessary to satisfy any withholding requirements. Calculation of the number of such Shares shall be as described above. G. Successors. This Statement of Terms and Conditions and the Award Agreements shall be binding upon and inure to the benefit of any successor or successors of the Company. “Participant” as used herein shall include the Participant’s Beneficiary. H. Governing Law. The interpretation, performance, and enforcement of this Statement of Terms and Conditions and all Award Agreements shall be governed by the laws of the State of Delaware. 11

Exhibit 10.133 FIRST AMENDMENT TO SUBLEASE THIS FIRST AMENDMENT TO SUBLEASE is made and entered into as of this 28th day of February, 2006 (the “Effective Date”), by and between ELECTRONICS FOR IMAGING, INC., a Delaware corporation (“Landlord”) and EQUINIX OPERATING CO., INC. a Delaware corporation (“Tenant”). W I T N E S S E T H WHEREAS, Landlord has leased those certain premises on the 5th floor located at 301 Velocity Way, Foster City, CA, 94404 to Tenant, pursuant to that certain Sublease Agreement dated February 12, 2003, by and between Landlord and Tenant (the “Sublease”). AND WHEREAS, Landlord and Tenant wish to amend the Sublease to (1) add 19,713 of rentable square feet on the 4th floor, as depicted on the attached Exhibit “A”, and (2) extend the term of the Lease through March 31, 2011, upon the same basic terms and conditions as the original Sublease. NOW, THEREFORE, in consideration of these presents and the mutual promises and covenants of the parties contained herein, Landlord and Tenant agree that the Sublease shall be and is hereby amended as follows:     1. The total square footage of the Leased Premises as defined in Section 1.1 shall be increased to 53,787 rentable square feet, consisting of 34,074 square feet with respect to the 5th floor (the “5th Floor Leased Premises”) and 19,713 square feet with respect to the 4th floor (the “4th Floor Leased Premises”). The 4th Floor Leased Premises are outlined on the Floor Plan attached hereto as Exhibit “A”. Exhibit “C” of the Sublease is hereby replaced with the attached Exhibit “A” and Exhibit “B”.     2. The load factor as defined in Section 1.1 shall be increased to 7.56%.     3. Tenant’s Expense Share of the Building as defined in Section 1.1 shall be increased to 34.64%.     4. The Lease Expiration Date as defined in Section 1.1 shall be March 31, 2011, unless (a) earlier terminated by Landlord in accordance with the terms of the Sublease, or (b) extended pursuant to Article 15 of the Sublease.   1 --------------------------------------------------------------------------------   5. The Base Monthly Rent defined in Sections 1.1 and 3.1 shall be amended as follows and shall be due and payable commencing on the 4th Floor Rent Commencement Date (defined below):   04/1/06 – 03/31/07    $148,228.01 04/1/07 – 03/31/08    $152.620.61 04/1/08 – 03/31/09    $157,192.51 04/1/09 – 03/31/10    $161,854.05 04/1/10 – 03/31/11    $166,650.06     6. Landlord’s Work: a. Landlord shall perform the following work and make the following installations in the 4th Floor Leased Premises at Landlord’s sole cost and expense (collectively, the “Landlord’s Work”): i. Landlord will modify the lab areas and kitchen area on the 4th floor as depicted on the attached Exhibit “A” as well as the kitchen area on the 5th floor as depicted on the attached Exhibit “B”. ii. Landlord shall cause to be installed in the 4th Floor Leased Premises the furniture described in the attached Exhibit “C”. Such furniture shall be Herman Miller Ethospace furniture, and shall be consistent with the furniture provided by Landlord in the 5th Floor Leased Premises. iii. Landlord will provide Data, Power and AV as per the attached Exhibit “D”. b. Landlord shall obtain all building and other permits necessary in connection with the Landlord’s Work. c. Landlord shall complete the Landlord’s Work on or before April 1, 2006. Notwithstanding anything to the contrary herein or in the Sublease, the Base Monthly Rent set forth in Section 5 above shall not commence until the later of (1) April 1, 2006, and (2) the date that Landlord’s Work is deemed completed upon verification by Tenant that all structural punch list items have been addressed by Landlord and the Landlord’s Work has been accepted as completed by Tenant (the “4th Floor Rent Commencement Date”). Tenant shall continue to pay the Base Monthly Rent set forth in Section 8 below until the 4th Floor Rent Commencement Date.   2 --------------------------------------------------------------------------------   7. Access: Upon the Effective Date, Landlord shall deliver to Tenant possession of the 4th Floor Leased Premises as shown on Exhibit “A” hereto, which possession shall be governed by all of the terms, conditions, rights and obligations of the Sublease, except as otherwise provided herein.     8. Letter Agreement: That certain Letter Agreement dated as of October 31, 2005, between Landlord and Tenant is hereby deleted its entirety and shall be of no further force and effect. Notwithstanding the foregoing, Tenant shall continue to pay Base Monthly Rent for the Leased Premises in the amount of $102,313.85 until the 4th Floor Rent Commencement Date. 9. Miscellaneous: Except as expressly modified and amended herein, all other terms and conditions of the Sublease shall remain in full force and effect. Defined terms used herein but not otherwise defined shall have the meanings ascribed to such terms in the Sublease. IN WITNESS WHEREOF, Landlord and Tenant have executed this First Amendment to Sublease as of the Effective Date.   LANDLORD ELECTRONICS FOR IMAGING, INC., a Delaware Corporation /s/ Joseph Cutts By: Joseph Cutts, COO TENANT: EQUINIX OPERATING CO., INC., a Delaware Corporation /s/ Keith D. Taylor By: Keith D. Taylor, CFO   3

Exhibit 10.29   FOURTH AMENDMENT OF THE SKY FINANCIAL GROUP, INC. PROFIT SHARING, 401(K) AND ESOP PLAN (As Amended and Restated Effective January 1, 2004)   WHEREAS, Sky Financial Group, Inc. (the “Company”) maintains the Sky Financial Group, Inc. Profit Sharing, 401(k) and ESOP Plan (the “Plan”); and   WHEREAS, the Company has delegated authority to amend the Plan to the Sky Financial Group, Inc. Benefit Plans Committee (the “Committee”), and the Committee has determined that amendment of the Plan is necessary and desirable.   NOW, THEREFORE, pursuant to the power reserved to the Company by Section 10.01 of the Plan, and by virtue of the authority delegated to the Committee, the Plan, as previously amended, is hereby further amended, in the following particulars:   1.      By inserting the phrase “anniversary awards, prizes,” after the phrase “moving expenses,” where it appears in Section 1.03(d) of the Plan, effective as of January 1, 2004.   2.      By substituting the following for the first sentence of Section 5.04 of the Plan, effective March 27, 2005:   “If a Participant terminates employment with the Employers, and the value of the Participant’s vested Accounts is not (or at the time of any prior, periodic distribution was not) greater than $1,000, the Participant will receive a distribution of the value of the entire vested portion of his or her Accounts and the nonvested portion will be treated as a forfeiture.”   3.      By substituting the following for the second sentence of Section 6.01 of the Plan, effective March 27, 2005:   “If the nonforfeitable portion of the Participant’s Account exceeds (or at the time of any prior, periodic distribution ever exceeded) $1,000, the Plan shall -------------------------------------------------------------------------------- not distribute the Participant’s Account before the Participant attains Normal Retirement Date, unless the Participant consents to such distribution in writing.”   4.      By substituting the following for the second paragraph of Section 6.01 of the Plan, effective March 27, 2005:   “Subject to the rules in Section 6.03, the surviving spouse shall begin to receive payments immediately, unless such surviving spouse elects a later date, except that the surviving spouse shall receive an immediate distribution if the value of the Participant’s vested Accounts is not (or at the time of any prior, periodic distribution was not) greater than $1,000.”   *        *        *   IN WITNESS WHEREOF, on behalf of the Committee, the undersigned Committee member has executed this amendment this 30th day of December 2004.   SKY FINANCIAL GROUP, INC. BENEFIT PLANS COMMITTEE By:   /s/ Thomas A. Sciorilli Its:   SVP & Chief Human Resources Officer       - 2 -

Exhibit 10.1   SEPARATION AGREEMENT AND GENERAL RELEASE   This Separation Agreement and General Release (hereafter “Agreement”) is entered into between Gary Wright (“Employee”), and Omnicell, Inc. (“Employer”).   WHEREAS, Employee is, or prior to the execution of this Agreement has been, employed by Employer;   WHEREAS, Employee’s employment with Employer will terminate, and Employee and Employer (collectively “the Parties”) each now agree that certain potential claims and contentions between them should be fully and finally resolved;   THEREFORE, in exchange for the good and valuable consideration set forth herein, the Parties hereby agree as follows:   1.             Termination of Employment. Employer and Employee have reached a mutual understanding that Employee will pursue other opportunities. Employee hereby irrevocably agrees that Employee’s full-time employment with Employer will terminate or has terminated effective at the close of business on March 31, 2006, (the “Separation Date”).   2.             Standard Severance. Pursuant to Employer’s normal policy, whether this Agreement is executed or not, Employee will receive:   a.             Accrued Salary and Paid Time Off. Employee will be paid (to the extent not previously paid by Employer) on the Separation Date, all earned and accrued salary and bonus amounts and all accrued and unused vacation.   b.             Accrued Expenses. Employer agrees to promptly process all expense reports properly submitted by Employee in accordance with existing Company practice, including all required receipts and supporting documentation.   c.             Stock Vesting. Employee’s stock options will cease vesting immediately after the Separation Date, and Employee will have (i) thirty (30) days for options granted under the 1992 Stock Plan; or (ii) three (3) months for options granted under the 1999 Stock Plan following the Separation Date to exercise his stock options.   3.             Separation Package. In consideration of Employee’s obligations set forth in this Agreement, Employer agrees to provide to Employee the following (the “Separation Benefits”):   a.             Separation Payment. Employer agrees to pay to Employee a separation payment of four hundred fifty-six thousand dollars ($456,000.00) which is the equivalent of eighteen (18) months of pay (of which 12 months is paid in accordance with Employee’s employment letter agreement, dated April 7, 2003 (the “Employment Letter”), plus an additional 6 months), calculated at Employee’s base rate of pay in effect immediately prior to the Separation Date (the “Separation Payment”). The Separation Payment will be subject to standard payroll deductions and withholdings, plus eligible 401(K) contributions, and will be paid in one lump sum within ten (10) days following the expiration of the revocation period set forth in Section 7.b. below.   --------------------------------------------------------------------------------   b.             Stock Acceleration. The vesting of the following list of Employee’s unvested stock options on the Separation Date will immediately accelerate and become fully vested, and thereafter subject to the exercise and expiration terms set forth in Section 2.c above.   Grant Number   Grant Date   Grant Price   Option Plan   Shares Accelerated   00002910   12/20/2002   $ 3.03   1999   3,188   99-350 & 99-350A   07/02/2003   $ 10.00   1999   25,001   99-1904 & 99-1904A   12/04/2003   $ 13.16   1999   4,376   99-1905 & 99-1905A   12/04/2003   $ 13.16   1999   4,845   99-2003 & 99-2003A   12/04/2003   $ 13.16   1999   15,000   99-2004A   12/04/2003   $ 13.16   1999   15,000   99-2649A   12/01/2004   $ 10.75   1999   68,751     c.             COBRA Health Insurance Benefits. Employee shall have the opportunity to elect, by written notice, continuation health care coverage pursuant to COBRA, 29 U.S.C. § 1161 et seq., for a period beginning after the Separation Date and continuing for so long as required by law. To the extent that Employee is entitled to elect and does elect COBRA coverage, Employer will reimburse a portion of Employee’s COBRA premiums for a period of eighteen (18) months after the Separation Date, or until Employee becomes eligible for coverage under any other group health plan, whichever period is shorter; provided that under no circumstances will Employer pay COBRA premiums for Employee for any period during which Employee has had the opportunity to elect, after the execution of this Agreement, coverage under any other group health plan.   d.             Outplacement Services. Employer agrees to provide Employee with outplacement services from Right Associates (or similar service) for a period of six (6) to twelve (12) months immediately following the Separation Date.   e.             No Other Payments. Employee understands and agrees that Employer and the other entities released herein shall neither make nor cause to be made any other payments to Employee, Employee’s beneficiaries or dependents, or otherwise on Employee’s behalf, except as specifically referenced herein. Employee represents and warrants that he has not assigned or alienated to any person any of the claims released herein.   Employer will make tax withholding and other appropriate deductions from any payments described in this paragraph 3. Any payments described in this paragraph 3 that have been paid to Employee prior to execution of this Agreement will be applied towards satisfaction of Employer’s obligations hereunder.   4.             Employee Obligations. In consideration of Employer’s offer of payment set forth herein, Employee agrees to the following obligations:   a.             Agreement Not to Compete. Employee agrees that, in consideration of the compensation and benefits set forth in Section 3 above, for a period of twelve (12) months immediately following the Separation Date, he shall not in any manner, directly or indirectly: (i) own, manage or operate any business owned or operated by; or (ii) perform services (whether as an employee, consultant or otherwise) on behalf of: Cardinal Health, Inc., or Cerner Corporation (including their respective subsidiaries and affiliates). This provision will not be construed to prohibit Employee from owning less than five percent (5%) in any business regularly and actively traded on national exchanges or in the over-the-counter market. In the event Employee is seeking employment with a particular division of one of the above listed companies that is not   2 --------------------------------------------------------------------------------   competitive with Employer, Employee may seek a waiver to this non-competition obligation by submitting written justification to Employer’s CEO, such waiver to be granted at Employer’s sole and absolute discretion.   b.             Agreement Not to Induce. Employee agrees that for a period of twelve (12) months immediately following the Separation Date, he shall not either directly or indirectly:  (i) solicit, induce, recruit or encourage any of Employer’s employees or exclusive consultants to leave their employment, or take away from Employer such employees or exclusive consultant, or attempt to solicit, induce, recruit, encourage or take away from Employer employees or exclusive consultants, either for Employee or for any other person or entity; or (ii) solicit, induce, recruit, or encourage any customer of Employer or potential customer who Employer has identified during the term of Employee’s employment with Employer to terminate its business relationship with Employer, or solicit, induce, recruit, divert or take away any such customer’s business or patronage with Employer either for Employee or for any other person or entity.   c.             Return of Employer Property. Employee agrees that, upon execution of this Agreement, he will return (or has returned) to Employer all Company equipment and materials received by him in the course of his employment, including without limitation any computer or laptop computer, printer, and fax machine provided to Employee, all paper and electronic Company confidential or proprietary documents including memoranda, customer lists, price lists, marketing materials, reports and analyses, and all copies thereof, and that Employee has destroyed any electronic copies of such materials remaining in his possession after he has complied with the requirements of this paragraph. This paragraph 4.c is not intended to, nor does it prevent Employee from retaining certain personal memoranda and documentation that does not contain Company information that is of a confidential or proprietary nature for personal reference.   d.             Proprietary Information Obligations. Employee hereby acknowledges and represents he has complied with all the terms of the Employer’s standard Proprietary Information Agreement (a copy of which will be provided at Employee’s request), including the reporting of any inventions and original works of authorship (as defined therein), conceived or made by Employee (solely or jointly with others) covered by that agreement’s terms. Further, Employee agrees that he has, preserved in compliance with the standard Proprietary Information Agreement terms, and will continue to preserve as confidential all trade secrets, confidential knowledge, data or other proprietary information relating to customers, customer lists, business and sales plans,  products, processes, know-how, designs, formulas, developmental or experimental work, computer programs, databases, other original works of authorship, financial information or other subject matter pertaining to any business of Employer or any of its employees, customers, clients, consultants or licensees.   e.             Transition Support (Before and After Separation Date). Employee agrees that for a reasonable period following Employee’s Separation Date, he will make himself reasonably available for consultation with Employer and Employer’s agents and employees regarding Employee’s prior work for Employer and the effective transition of Employee’s duties to his replacement. Each party acknowledges that such support shall only be requested and provided in accordance with all federal, state and local laws and regulations.   5.             Mutual Obligations.   a.             Announcement of Departure. Both Employee and Employer agree to work in good faith to accurately message the circumstances of Employee’s departure (through press release and scripted question and answer examples, and the like) to the mutual satisfaction of both parties.   b.             Non-Disparagement. Both Employee and Employer (through its executive officers and directors) agree not to disparage the other party, in any manner likely to be harmful to them or their business, business reputation or personal reputation; provided that both Employee and Employer will respond accurately and fully to any question, inquiry or request for information when required by legal process. Unless any other employee of the Employer is specifically designated by Employee as, and is in agreement to be, utilized as a personal reference by the Employee in his search for other business or employment opportunities (in which case Employer shall not be responsible for the content of such individual’s response), Employee agrees to direct any and all employment verification requests to Employer’s Human Resources Department, and Employer’s HR   3 --------------------------------------------------------------------------------   department will be instructed to respond to such requests only with Employee’s start and end dates of employment and Employee’s title while employed with Employer.   6.             General Release of Claims and Covenant Not to Sue by Employee. Also in consideration of the payments made hereunder, to the maximum extent permitted by law, Employee agrees for himself and his heirs, beneficiaries, devisees, executors, administrators, attorneys, personal representatives, successors and assigns, hereby forever to release, and discharge, and covenant not to sue Employer, its past, present, or future parents, subsidiaries, and/or other affiliates; all of the past and present directors, officers, shareholders, general or limited partners, employees, attorneys, and other agents and representatives of such entities; and any employee benefit plans in which Employee is or has been a participant by virtue of employment with Employer from or for any and all claims, debts, demands, accounts, judgments, rights, causes of action, claims for equitable relief, damages, costs, charges, complaints, obligations, promises, agreements, controversies, suits, expenses, compensation, responsibility and liability of every kind and character whatever (including attorneys’ fees and costs), whether in law or equity, known or unknown, asserted or unasserted, suspected or unsuspected, which Employee has against such entities as of the execution of this Agreement, including without limitation any and all claims arising out of Employee’s employment with Employer or the termination thereof, and any and all claims arising under federal, state, or local laws relating to employment, including without limitation claims of wrongful discharge, retaliation, breach of express or implied contract, fraud, misrepresentation, defamation, or liability in tort, claims of any kind that may be brought in any court or administrative agency, including without limitation claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Family and Medical Leave Act, and similar state or local statutes, ordinances, and regulations, provided, however, that this Release shall not extend to claims for pension, retirement, or savings benefits which are inalienable under the terms of any employee benefit plan and provided further however, this release shall not extend to any Employee right of or claim for indemnification pursuant to any indemnification contract, insurance policy, or any corporate charter or bylaw. Employee further covenants not to sue, or initiate any other proceeding against, Employer as to any claims released herein.   7.             Release of Age Discrimination Claims; Periods for Review and Reconsideration.   a.             Employee understands and agrees that this Agreement includes a release of claims arising under the Age Discrimination in Employment Act (ADEA), and that this Agreement does not waive rights or claims that may arise after the date the waiver is executed. Employee understands and warrants that he has been given a period of twenty-one (21) days to review and consider this Agreement. Employee is hereby advised to consult with an attorney prior to executing the Agreement. By Employee’s signature below, Employee warrants that he has had the opportunity to do so and to be fully and fairly advised by that legal counsel as to the terms of the Agreement. Employee further understands that he may use as much or all of this 21-day period as he wishes before signing, and warrants that he has done so. Employee also acknowledges that the consideration given for the ADEA Waiver is in addition to anything of value to which Employee was already entitled.   b.             Employee further understands that he has seven (7) days after signing this Agreement to revoke the Agreement by notice in writing to: Vice President, Human Resources, Omnicell, Inc., 1201 Charleston Road, Mountain View, CA 94043 (“Employer Contact”). This Agreement shall be binding, effective, and enforceable upon Employee upon the expiration of this seven-day revocation period without the Employer Contact having received such revocation, but not before such time. Employee understands and agrees that any payments hereunder shall not be made prior to the expiration of this seven-day revocation period.   4 --------------------------------------------------------------------------------   8.             Waiver of California Civil Code § 1542. Employee hereby agrees to waive Section 1542 of the California Civil Code, which states:   A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected her settlement with the debtor.   9.             Taxes. Other than any taxes which may be the obligation of Employer, to the extent any taxes may be due beyond those withheld by Employer on any portion of the salary continuation or other consideration provided pursuant to this Agreement, Employee agrees to pay such taxes and to indemnify and hold Employer and its agents and affiliates harmless for any tax payments owed, interest, penalties, levies or assessments as a result of any failure by Employee to pay such taxes.   10.           Unemployment Benefits. Employer agrees that it will not contest any claim for unemployment benefits that may be filed by Employee after the Separation Date.   11.           No Admission. Employee understands and agrees that Employer has admitted no liability or obligation to provide the consideration contemplated herein.   12.           Confidentiality. Employee agrees not to disclose the existence or terms of this Agreement to any person other than Employee’s lawyer, accountant, income tax preparer, and spouse (if any), except pursuant to written authorization by Employer or as compelled by law, and that Employee will be responsible for any further disclosure of such information made by such persons. This Agreement may be used as evidence in any subsequent proceeding alleging its breach   13.           Severability and Consequences of Invalid Terms. Should any portion or provision of this Agreement be found void or unenforceable for any reason by a Court of competent jurisdiction, the Court should enforce all portions and provisions of this Agreement to the maximum extent which would have been enforceable in the original Agreement. If such portion or provision cannot be so modified to be enforceable, the unenforceable portion shall be deemed severed from the remaining portions and provisions of this Agreement, which shall otherwise remain in full force and effect. If any portion or provision of this Agreement is so found to be void or unenforceable for any reason in regard to any one or more persons, entities, or subject matters, such portion or provision shall remain in full force and effect with respect to all other persons, entities, and subject matters.   14.           Multiple Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together shall constitute one and the same instrument.   15.           Governing Law. This Agreement shall be governed and construed in all respects in accordance with the laws of the State of California without regard to the conflict of laws rules contained therein.   16.           Understanding and Authority. The Parties understand and agree that all terms of this Agreement are contractual and are not a mere recital, and represent and warrant that they are competent to covenant and agree as herein provided. This Agreement constitutes the complete, final and exclusive embodiment of the entire agreement between Employee and Employer with regard to this subject matter. It is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises, warranties or representations, including the Employment Letter, however, nothing in this Agreement shall effect the rights and obligations of Employee and Employer as set forth in Employee’s Indemnity Agreement with Employer effective June 7, 2004. This Agreement may not be modified or amended except in a writing signed by both Employee and a duly authorized officer of Employer. The Parties have carefully read this Agreement in its entirety; fully understand and agree to its terms and provisions; and intend and agree that it be final and binding.   EMPLOYEE REPRESENTS AND WARRANTS THAT IN NEGOTIATING AND EXECUTING THIS AGREEMENT, HE HAS HAD AN ADEQUATE OPPORTUNITY TO CONSULT WITH COMPETENT LEGAL COUNSEL OF EMPLOYEE’S CHOOSING CONCERNING THE MEANING AND EFFECT OF EACH TERM AND PROVISION HEREOF. EMPLOYEE ACKNOWLEDGES THAT HE IS SIGNING THIS AGREEMENT KNOWINGLY, WILLINGLY AND VOLUNTARILY IN EXCHANGE FOR THE BENEFITS DESCRIBED IN PARAGRAPH 3. EMPLOYEE   5 --------------------------------------------------------------------------------   UNDERSTANDS THAT HE IS GIVING UP ANY LEGAL CLAIMS HE HAS AGAINST THE PARTIES RELEASED ABOVE BY SIGNING THIS AGREEMENT.   IN WITNESS WHEREOF, and intending to be legally bound, the Parties have executed the foregoing on the dates shown below.   GARY E. WRIGHT                 /s/ Gary E. Wright   March 30, 2006   Signature   Date                   OMNICELL, INC.                       By: /s/ Randoll A. Lipps   March 30, 2006         Date             Title: Chairman, President and Chief Executive Officer     6 --------------------------------------------------------------------------------

EXHIBIT 10.2   BOSTON SCIENTIFIC CORPORATION INTENT TO GRANT DEFERRED STOCK UNIT AWARD AGREEMENT   This Agreement, dated as of the _____ day of ____________, 2006 (the "Grant Date"), is between Boston Scientific Corporation, a Delaware corporation (the "Company"), and the person whose name appears on the Signature Page of this Agreement (the "Participant"), an employee of the Company or any of its affiliates or subsidiaries. All capitalized terms not otherwise defined herein shall have the meaning ascribed thereto in the Company's Long-Term Incentive Plan set forth on the Signature Page of this Agreement (the "Plan"). This Agreement must be signed by the Participant and returned to the Stock Award Administration Department of the Company at least six (6) months prior to the first intended issue date described herein in order to be effective. 1.  Grant and Acceptance of Award. The Company hereby indicates its intent to award to the Participant that number of Deferred Stock Units set forth on the Signature Page of this Agreement (the "Unit"), each Unit representing the Company's commitment to issue to Participant one share of the Company's common stock, par value $.01 per share (the "Stock"), subject to certain eligibility and other conditions set forth herein. The award is intended to be granted pursuant to and is subject to the terms and conditions of this Agreement and the provisions of the Plan. 2.  Eligibility Conditions upon Award of Units. Participant hereby acknowledges the intent of the Company to award Units subject to certain eligibility and other conditions set forth herein. 3.  Satisfaction of Conditions. Except as otherwise provided in Section 5 hereof (relating to death of the Participant), Section 6 hereof (relating to Disability of the Participant) and Section 8 hereof (relating to Change in Control of the Company), the Company intends to award shares of Stock hereunder subject to the eligibility conditions described in Section 7 hereof in approximately equal annual installments on each of four anniversaries of the date first set forth above, beginning on the second anniversary of the date of grant. No shares of Stock shall be issued to Participant prior to the date on which the Units vest.     --------------------------------------------------------------------------------     4.  Participant's Rights in Stock. The shares of Stock if and when issued hereunder shall be registered in the name of the Participant and evidenced in the manner as the Company may determine. During the period prior to the issuance of Stock, the Participant will have no rights of a stockholder of the Company with respect to the Stock, including no right to receive dividends or vote the shares of Stock. 5.  Death. Upon the death of the Participant while employed by the Company and its affiliates or subsidiaries, the Company will issue to the Participant or beneficiary of the Participant as set forth under the provisions of the Company's program of life insurance for employees, any shares of Stock to Participant to be awarded hereunder that remain subject to eligibility conditions. 6.  Disability. In the event of the Participant's Disability, the Company will issue to Participant any shares of Stock to be awarded hereunder that remain subject to eligibility conditions. 7.  Other Termination of Employment -- Eligibility Conditions. If the employment of the Participant with the Company and its affiliates or subsidiaries is terminated or Participant separates from the Company and its affiliates or subsidiaries for any reason (including Retirement) other than death, Disability, any Units that remain subject to eligibility conditions shall be void and no Stock shall be issued. Eligibility to be issued shares of Stock is conditioned on Participant’s continuous employment with the Company through and on the applicable anniversary of the date as set forth in Section 3 above. 8.  Change in Control of the Company. In the event of a Change in Control of the Company, the Company will issue to Participant any shares of Stock to be awarded hereunder that remain subject to eligibility conditions. 9.  Consideration for Stock. The shares of Stock are intended to be issued for no cash consideration. 10.            Delivery of Stock. The Company shall not be obligated to deliver any shares of Stock to be awarded hereunder until (i) all federal and state laws and regulations as the Company may deem applicable have been complied with; (ii) the shares have been listed or authorized for listing upon official notice to the New York Stock Exchange, Inc. or have otherwise been accorded trading privileges; and (iii) all other legal matters in connection with the issuance and delivery of the shares have been approved by the Company's legal department. 11.            Tax Withholding. The Participant shall be responsible for the payment of any taxes of any kind required by any national or local law to be paid with respect to the Units or the shares of Stock to be awarded hereunder, including, without limitation, the payment of any applicable withholding, income, social and similar taxes or obligations. Except as otherwise provided in this Section, upon the issuance of Stock or the satisfaction of any eligibility condition with respect to the Stock to be issued hereunder, the Company shall hold back from the total number of shares of Stock to be delivered to the Participant, and shall cause to be     2 --------------------------------------------------------------------------------     transferred to the Company, whole shares of Stock having a Fair Market Value on the date the shares are subject to issuance an amount as nearly as possible equal to (rounded to the next whole share) the Company’s withholding, income, social and similar tax obligations with respect to the Stock. To the extent of the Fair Market Value of the withheld shares, Participant shall be deemed to have satisfied Participant’s responsibility under this Section 11 to pay these obligations. The Participant shall satisfy Participant’s responsibility to pay any other withholding, income, social or similar tax obligations with respect to the Stock, and (subject to such rules as the Committee may prescribe) may satisfy Participant’s responsibility to pay the tax obligations described in the immediately preceding sentence, by so indicating to the Company in writing at least thirty (30) days prior to the date the shares of Stock are subject to issuance and paying the amount of these tax obligations in cash to the Company within ten (10) business days following the date the Units vest or by making other arrangements satisfactory to the Committee for payment of these obligations. In no event shall whole shares be withheld by or delivered to the Company in satisfaction of tax withholding requirements in excess of the maximum statutory tax withholding required by law. The Participant agrees to indemnify the Company against any and all liabilities, damages, costs and expenses that the Company may hereafter incur, suffer or be required to pay with respect to the payment or withholding of any taxes. The obligations of the Company under this Agreement and the Plan shall be conditional upon such payment or arrangements, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant.   12.            Investment Intent. The Participant acknowledges that the acquisition of the Stock to be issued hereunder is for investment purposes without a view to distribution thereof. 13.            Limits on Transferability. Until the eligibility conditions of this award have been satisfied and shares of Stock have been issued in accordance with the terms of this Agreement or by action of the Committee, the Units awarded hereunder are not transferable and shall not be sold, transferred, assigned, pledged, gifted, hypothecated or otherwise disposed of or encumbered by the Participant. Transfers of shares of Stock by the Participant are subject to the Company’s Stock Trading Policy. 14.            Award Subject to the Plan. The award to be made pursuant to this Agreement is made subject to the Plan. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained in this Agreement and a term or provision of the Plan, the applicable terms and conditions of the Plan will govern and prevail. However, no amendment of the Plan after the date hereof may adversely alter or impair the issuance of the Stock to be made pursuant to this Agreement. 15.            No Rights to Continued Employment. The Company’s intent to grant the shares of Stock hereunder shall not confer upon the Participant any right to continued employment or other association with the Company or any of its affiliates or subsidiaries; and this Agreement shall not be construed in any way to limit the right of the Company or any of its subsidiaries or affiliates to terminate the employment or other association of the Participant with the Company or to change the terms of such employment or association at any time.   3 --------------------------------------------------------------------------------   16.            Legal Notices. Any legal notice necessary under this Agreement shall be addressed to the Company in care of its General Counsel at the principle executive offices of the Company and to the Participant at the address appearing in the personnel records of the Company for such Participant or to either party at such other address as either party may designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee. 17.            Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of The Commonwealth of Massachusetts (without regard to the conflict of laws principles thereof) and applicable federal laws. 18.            Headings. The headings contained in this Agreement are for convenience only and shall not affect the meaning or interpretation of this Agreement. 19.            Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to the one and the same instrument. IN WITNESS WHEREOF, the Company, by its duly authorized officer, and the Participant have executed and delivered this Agreement as a sealed instrument as of the date and year first above written.     PLAN: 2003 LONG-TERM INCENTIVE PLAN Number of Deferred Stock Units:   [       ] Issuance Schedule 25%  Date of Second Anniversary 25%  Date of Third Anniversary 25%  Date of Fourth Anniversary 25%  Date of Fifth Anniversary     BOSTON SCIENTIFIC CORPORATION By:_________________________________ Name: Authorized Officer   PARTICIPANT ____________________________________ [Name]           4 --------------------------------------------------------------------------------  

Exhibit 10.1 MANAGEMENT CONSULTING AGREEMENT THIS AGREEMENT is made effective the 1st day of May, 2006. BETWEEN: FREESTONE ENERGY LLC, of 41 Elk Lane, Littleton, CO 80127 (the “Consultant”) AND: EDEN ENERGY CORP., a Nevada company having an office at Suite 1925 – 200 Burrard Street, Vancouver, British Columbia, V6C 3L6 (the “Company”) WHEREAS: A.                         The Company is a United States reporting company under the US Securities Exchange Act of 1934; and B.                          The Company wishes to engage the Consultant to provide, and the Consultant has agreed to provide to the Company, certain management services, as the Chief Operating Officer for the Company. NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the sum of $1.00 now paid by each of the parties to the other and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by both parties) and in consideration of the premises and the mutual covenants and agreements set forth herein, the parties hereto covenant and agree as follows: ARTICLE 1 DEFINITIONS AND INTERPRETATIONS Definitions 1.01                      In this Agreement, the following words and phrases, unless there is something in the context inconsistent therewith, shall have the following meanings: (a) “Agreement” means this agreement dated as of May 1, 2006 and made between the Company and the Consultant as the same is from time to time amended; (b) “Board” means the Board of Directors of the Company; (c) “Business” means the business carried on by the Company from time to time;     --------------------------------------------------------------------------------   - 2 -     (d) “Business Day” means any day other than a day which is a Saturday, a Sunday or a statutory holiday in Vancouver, British Columbia; (e) “Term” means the term during which this Agreement shall be in full force as defined by section 5.01 of this Agreement; and any other capitalized term shall have the meaning ascribed to it in this Agreement. Captions and Section Numbers 1.02                      The headings and section references in this Agreement are for convenience of reference only and do not form a part of this Agreement and are not intended to interpret, define or limit the scope, extent or intent of this Agreement or any provision thereof. Extended Meanings 1.03                      The words “hereof”, “herein”, “hereunder” and similar expressions used in any clause, paragraph or section of this Agreement shall relate to the whole of this Agreement and not to that clause, paragraph or section only, unless otherwise expressly provided. Number and Gender 1.04                      Whenever the singular or masculine or neuter is used in this Agreement, the same shall be construed to mean the plural or feminine or body corporate where the context of this agreement or the parties hereto so require. Section References 1.05                      Any reference to a particular “article”, “section”, “subsection” or other subdivision is to the particular article, section or other subdivision of this Agreement. Governing Law 1.06                      This Agreement and all matters arising hereunder shall be governed by, construed and enforced in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable therein and all disputes arising under this Agreement shall be referred to the Courts of the Province of British Columbia. Severability of Clauses 1.07                      In the event that any provision of this Agreement or any part thereof is invalid, illegal or unenforceable, such provision shall be ineffective to the extent of such illegality or unenforceability, but shall not invalidate or affect the validity, legality and enforceability of the remaining provisions of this Agreement. Currency 1.08                      All sums of money to be paid or calculated pursuant to this Agreement shall be paid or calculated in currency of the United States unless otherwise expressly stated.     --------------------------------------------------------------------------------   - 3 -     No Contra Proferentum 1.09                      The language in all parts of this Agreement shall in all cases be construed as a whole and neither strictly for nor strictly against any of the parties. Statutes 1.10                      Unless otherwise stated, any reference to a statute includes and is a reference to such statute and to the regulations made pursuant thereto, with all amendments made thereto and in force from time to time, and to any statute or regulations that may be passed which supplement or supersede such statute or such regulations. Action on Non-Business Day 1.11                      If by the terms of this Agreement any payment, delivery or event provided for herein is scheduled to take place at a time which falls on a day which is not a Business Day, such delivery, payment or event shall take place on the first Business Day next following. ARTICLE 2 ENGAGEMENT OF CONSULTANT Engagement of Consultant 2.01                      Subject to the terms and conditions of this Agreement, the Company hereby engages the Consultant for the Term to provide to the Company certain management services including, without limitation, budgeting and establishing a functioning office in Denver, reporting to the Chief Executive Officer and close liaison with the Chief Financial Officer. Duties and Responsibilities 2.02 Without limiting the generality of section 2.01, the Consultant shall: (a) perform such management services in relation to the Company and the Business as the Board from time to time may request of him; (b) in the performance of his management services, observe and comply with all policies and guidelines of the Company and all resolutions and directions from time to time made or given by the Board; (c) comply with all applicable laws, rules, regulations and orders of any authority having jurisdiction over the affairs of the Company and the Business; (d) perform his management services honestly, in good faith and in the best interests of the Company exercising the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances;     --------------------------------------------------------------------------------   - 4 -     (e) devote so much time and attention to the affairs of the Company as is required to complete, or cause the completion of, his management services as described in Section 2.01 herein, on a timely basis; (f) conform to such hours of work as may from time to time be reasonably required of it; and (g) perform his management services in such manner as the Consultant sees fit provided that such performance shall always meet with the standards of the Company. Consultant Status 2.03                      The Consultant shall perform his management services as an independent contractor of the Company and neither the Consultant nor any of the Consultant’s employees is nor shall be deemed to be an employee of, or co-venturer or partner of, the Company and nothing in this Agreement shall be construed so as to make either the Consultant or any of the Consultant’s employees an employee of, or co-venturer or partner of, the Company. Without limiting the generality of the foregoing, this Agreement is an independent contractor agreement and is not nor will it be deemed to be an employment agreement, co-venturer agreement or partnership agreement and nothing in this Agreement will be construed so as to make this Agreement an employment agreement, co-venturer agreement or partnership agreement. No Employment Benefits 2.04                      Neither the Consultant nor any of his employees shall be entitled to any registered pension fund or plan contributions, group sickness or accident insurance coverage, medical service plan coverage, supplementary employment benefits, profit sharing or group term life insurance, vacation pay or any other type of benefit provided by the Company to the employees of the Company. No Unemployment Benefits 2.05                      The Consultant acknowledges that as an independent contractor, the Consultant shall not qualify for any assistance under any Employment Insurance Act in Canada or the United States. ARTICLE 3 REMUNERATION Remuneration 3.01                      As compensation for his management services, the Consultant shall receive a monthly management fee of US$10,000.00. The Company shall pay such management fee monthly on the first day of the month to which payment of such management fee relates. Expenses 3.02                      In addition to the remuneration referred to in section 3.01, the Company shall reimburse the Consultant for all expenses actually and reasonably incurred by the Consultant for     --------------------------------------------------------------------------------   - 5 -     the benefit of the Company up to a maximum of US$500 per month including telephone and travel expenses without the prior approval of the board. Own Consultant Expenses 3.03                      Except as specifically provided for in this Agreement, the Consultant shall be responsible for all the costs associated with providing his management services. Stock Options 3.04                      As further compensation for his management services, the Company has agreed to grant to the Consultant stock options to acquire up to 150,000 common shares of the Company at a price of $2.50 per share, exercisable until May 1, 2011. ARTICLE 4 CONFIDENTIALITY AND COMPANY CLIENTS Company Confidential Information 4.01 The Consultant acknowledges and agrees that: (a) proprietary, financial and confidential information and materials relating to the Company have been, and will in the future be, disclosed to the Consultant (the “Company Confidential Information”); (b) the Company Confidential Information is the exclusive property of the Company and that all right, title and interest in and to the Company Confidential Information shall remain the property of Company and shall be held in confidence by the Consultant; and (c) the Company Confidential Information derives its value from not being generally known to the public or by other persons who can obtain economic value or other advantage from its disclosure and use, and is subject to efforts by the Company to maintain its confidentiality. Consultant Confidentiality Covenants 4.02 The Consultant covenants and agrees that: (a) he shall not directly or indirectly acquire any proprietary interest in, or otherwise deal with or use, the Company Confidential Information except as reasonably required for the Business; (b) he shall use his best efforts to keep confidential and protect the Company Confidential Information and the interests of the Company in the Company Confidential Information and shall exercise the degree of care that the owner of such information would reasonably be expected to employ for his own benefit with respect to his own proprietary and confidential information; and     --------------------------------------------------------------------------------   - 6 -     (c) he shall not directly or indirectly disclose, allow access to, or transfer the Company Confidential Information to third parties, excluding employees of the Consultant, without the prior written consent of the Company. Covenants Survive 4.03 The covenants and agreements in sections 4.02: (a) are in addition to and not in derogation from any of the obligations of the Consultant to the Company; and (b) shall survive the termination of this Agreement. ARTICLE 5 TERM AND TERMINATION Term 5.01                      Unless otherwise terminated as provided for in section 5.03, this Agreement shall be in full force for an initial term commencing the date first above written and ending April 30, 2007. Renewal 5.02                      Unless notice of termination has been given by either the Company or the Consultant not less than 30 days prior to the expiry of the Term, this Agreement shall be automatically renewed for a further one year term from and including the day immediately following the last day of the Term on the same terms and conditions as contained in this Agreement (including this term and condition) as amended from time to time, unless earlier terminated pursuant to section 5.03. Termination 5.03                      Notwithstanding the other provisions of this Agreement, this Agreement shall be terminated as follows: (a) forthwith by the Company on written notice to the Consultant in the event of:   (i) the commission by the Consultant of any material fraudulent act in performing any of the Consultant’s obligations under this Agreement;   (ii) the commission of any material misrepresentation to the Company by the Consultant;   (iii) failure of the Consultant to perform his duties and discharge his obligations under this Agreement;   (iv) the malfeasance or misfeasance of the Consultant in performing his duties and discharging his obligations under this Agreement; or     --------------------------------------------------------------------------------   - 7 -       (v) other just cause; or (b) forthwith upon the mutual agreements of all the parties to this Agreement; or (c) forthwith upon the occurrence of any one of the following events: (A) if either the Company or the Consultant becomes or acknowledges that it is insolvent or makes a voluntary assignment or proposal under bankruptcy legislation applicable to them; (B) if a bankruptcy petition is filed or presented against either the Company or the Consultant and is not continually contested; (C) if any order is made or resolution passed for the winding up, dissolution or liquidation of the Company, or if the Company has its existence otherwise terminated; or (D) either the Company or the Consultant ceases to carry on business in the ordinary course; or (d) forthwith by the Company and the Consultant upon the Company and the Consultant being advised in writing by any securities authority having jurisdiction over the affairs of the Company that this Agreement is unsatisfactory for a public company, provided that the Company and the Consultant have entered into a new management agreement on terms and conditions acceptable to the Company, the Consultant and, as necessary, all securities regulatory authorities having jurisdiction over the affairs of the Company. Effect of Termination 5.04                      Upon the termination of this Agreement, the obligations of the parties shall cease and determine except: (a) the Consultant shall deliver to the Company, in a reasonable state of repair, all property, personal or real, owned or leased by the Company and bailed to the Consultant and used by, or in the possession of, the Consultant or any of the Consultant’s employees; (b) the provisions of Articles 4 and 5 shall continue to bind the Company and the Consultant; and (c) the Company shall pay all amounts due to the Consultant as of such termination date. Sole Provisions 5.05                      This Agreement may only be terminated in accordance with the provisions of this Article.     --------------------------------------------------------------------------------   - 8 -     ARTICLE 6 GENERAL PROVISIONS Notices 6.01                      All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by telecopier or hand or mailed postage prepaid addressed as set out on the face page of this Agreement or to such other address as may be given in writing by the parties and shall be deemed to have been received, if delivered by telecopier or hand, on the date of delivery and if mailed as aforesaid to the addresses set out above then on the fifth business day following the posting thereof provided that if there shall be between the time of mailing and the actual receipt of the notice a mail strike, slowdown or other labour dispute which might affect the delivery of the notice by the mails, then the notice shall only be effective if actually delivered. Time of Essence 6.02                      Time is hereby expressly made of the essence of this Agreement with respect to the performance by the parties of their respective obligations under this Agreement. Arbitration 6.03                      Any dispute or disagreement among the parties with respect to this Agreement may be referred to a single arbitrator pursuant to the Arbitration Act (British Columbia) provided that if the parties are unable to agree on the appointment of a single arbitrator, each of the Company and the Consultant will appoint an arbitrator and the two arbitrators so appointed will appoint a third arbitrator to act as chairman. The determination of the arbitrator or arbitrators will be final and binding on the parties hereto and the cost of arbitration will be borne equally by the Company and the Consultant. Binding Effect 6.04                      This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, personal representatives, successors and assigns. Entire Agreement 6.05                      This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous expectations, understandings, communications, representations and agreements whether verbal or written between the parties with respect to the subject matter hereof.     --------------------------------------------------------------------------------   - 9 -     Further Assurances 6.06                      Each of the parties hereto hereby covenants and agrees to execute such further and other documents and instruments and do such further and other things as may be necessary or desirable to implement and carry out the intent of this Agreement. Assignment 6.07                      None of the parties may assign or transfer their respective rights under this Agreement without the prior written consent of the other party hereto. Amendments 6.08                      No amendment to this Agreement shall be valid unless it is evidenced by a written agreement executed by all of the parties hereto. Counterparts 6.09                      This Agreement may be executed in several counterparts each of which when executed by any party hereto shall be deemed to be an original and such counterparts shall together constitute one and the same instrument. IN WITNESS WHEREOF the parties hereto have executed this Agreement on the day and year first above written.   WITNESSED BY: Robert J. Ross Name 43 Elk Lane Address Littleton, CO 80127 Fire Protection Contractor Occupation ) ) ) ) ) ) ) ) ) ) /s/ Larry B. Kellison LARRY B. KELLISON President, Freestone Energy LLC   EDEN ENERGY CORP.     Per: /s/ Donald Sharpe   Signature     Dated: April 27, 2006          

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Exhibit 10.159   [***] DENOTES CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.   MTV LEASE AGREEMENT   This MTV Lease Agreement (this “Lease”) is made as of the 6th day of January, 2006, by and between MICRON TECHNOLOGY, INC., a Delaware corporation (hereinafter referred to as the “Landlord”), and IM FLASH TECHNOLOGIES, LLC, a Delaware limited liability company (hereinafter referred to as “Tenant”).   RECITALS   A.            Landlord and Intel Corporation (“Intel”) entered into that certain Master Agreement dated as of the 18th day of November, 2005 (the “Master Agreement”) with respect to the formation of Tenant;   B.            Pursuant to the Master Agreement, Landlord and Intel entered into that certain Limited Liability Company Operating Agreement dated as of the 6th day of January, 2006 (the “Operating Agreement”), pursuant to which Landlord and Intel set forth their agreement regarding the operation of Tenant, of which Landlord and Intel are each Members (as defined in the Operating Agreement);   C.            Pursuant to the Master Agreement, Landlord and Tenant have entered into that certain Manufacturing Services Agreement as of the 6th day of January, 2006 (the “Manufacturing Services Agreement”), which controls Landlord’s and Tenant’s relationship with respect to certain services provided by Landlord in connection with the manufacture and production of certain product described in the Manufacturing Services Agreement (the “Product”);   D.            Landlord is the owner of a wafer fabrication building (the “Building”) situated on a parcel of land located in Manassas, Virginia, more particularly described on Exhibit A attached hereto (the “Land”; the Building and the Land collectively, the “MTV Site”);   E.             The Building consists of two modules, known as “Module 1” and “Module 2”, each of which contains approximately 78,000 square feet of clean room space;   F.             Pursuant to the Operating Agreement, Landlord has agreed to lease to Tenant, and Tenant has agreed to lease from Landlord, Module 1, which is depicted on Exhibit B attached hereto (the “Premises”);   NOW, THEREFORE, in consideration of the mutual premises, covenants, terms and conditions herein contained and intending to be legally bound, Landlord and Tenant hereby agree as follows:   ARTICLE 1 GRANT   1.1                       PREMISES.  SUBJECT TO THE PROVISIONS OF THE OPERATING AGREEMENT AND THE MANUFACTURING SERVICES AGREEMENT, LANDLORD, IN CONSIDERATION OF ITS MEMBERSHIP INTEREST IN TENANT, DOES HEREBY LEASE THE PREMISES TO TENANT.  THE CONFIGURATION OF THE PREMISES WITHIN THE   --------------------------------------------------------------------------------   Building may be modified from time to time by mutual agreement of Landlord and Tenant.  Tenant acknowledges that Landlord retains the right to use up to 1,000 square feet of the Premises as shown on Exhibit B for the operation of DRAM tools used in connection with Landlord’s manufacturing activities in Module II of the Building.   1.2                       COMMON AREAS.  TENANT SHALL HAVE THE NONEXCLUSIVE RIGHT, IN COMMON WITH LANDLORD AND ANY OTHER OCCUPANTS OF THE BUILDING AND THE LAND, TO USE (1) THE PUBLIC AND COMMON AREAS OF THE BUILDING AND ANY OTHER BUILDING AMENITIES OR FACILITIES WHICH ARE NECESSARY IN CONNECTION WITH THE MANUFACTURING OF PRODUCT AS PROVIDED BY THE MANUFACTURING SERVICES AGREEMENT OR AS OTHERWISE CONTEMPLATED BY THE MANUFACTURING SERVICES AGREEMENT; AND (2) ANY ENTRANCES, STAIRS, RIGHTS OF PEDESTRIAN AND VEHICULAR INGRESS, EGRESS AND ACCESS, ELEVATORS, DRIVEWAYS, ALLEYS, FIRE CORRIDORS, PUBLIC RESTROOMS, CAFETERIAS, PARKING LOTS, AND LOADING DOCKS WITHIN THE BUILDING OR LOCATED ON THE LAND THAT ARE GENERALLY NECESSARY IN CONNECTION WITH THE MANUFACTURING OF PRODUCT AS PROVIDED BY THE MANUFACTURING SERVICES AGREEMENT, ALL UPON THE TERMS AND CONDITIONS HEREINAFTER SET FORTH (COLLECTIVELY, THE “COMMON AREAS”).  LANDLORD SHALL BE RESPONSIBLE AT ITS EXPENSE TO MAINTAIN THE COMMON AREAS IN ACCORDANCE WITH LANDLORD’S STANDARD OF MAINTENANCE EXISTING ON THE DATE HEREOF.   1.3                       RIGHTS RETAINED BY LANDLORD.  SUBJECT TO THE PROVISIONS OF THE MANUFACTURING SERVICES AGREEMENT, LANDLORD HEREBY RESERVES THE FOLLOWING RIGHTS WITH RESPECT TO THE COMMON AREAS:  TO ESTABLISH REASONABLE AND NON-DISCRIMINATORY RULES AND REGULATIONS FOR THE USE THEREOF; TO USE OR PERMIT THE USE BY OTHERS TO WHOM LANDLORD MAY HAVE GRANTED SUCH RIGHTS; TO CLOSE ALL OR ANY PORTION THEREOF AS MAY BE DEEMED NECESSARY BY LANDLORD TO PREVENT A DEDICATION THEREOF OR THE ACCRUAL OF ANY RIGHTS BY ANY PERSON OR THE PUBLIC THEREIN; AND TO CHANGE THE LAYOUT OF THE COMMON AREAS, INCLUDING THE RIGHT TO REASONABLY ADD TO OR SUBTRACT FROM THEIR SHAPE AND SIZE, WHETHER BY THE ADDITION OF BUILDING IMPROVEMENTS OR OTHERWISE, PROVIDED IN ALL SUCH CASES REASONABLY EQUIVALENT ACCESS TO THE PREMISES SHALL BE MAINTAINED.   1.4                       CONDITION OF PREMISES.  THE PARTIES ACKNOWLEDGE THAT THE PREMISES NEED TO BE IMPROVED BY LANDLORD AS SPECIFIED IN EXHIBIT C ATTACHED HERETO SO THAT THE PREMISES WILL BE READY FOR THE INSTALLATION OF THE TENANT’S MANUFACTURING TOOLS (AS DEFINED THEREIN, THE “IMPROVEMENTS”).  AT SUCH TIME AS THE IMPROVEMENTS HAVE BEEN COMPLETED BY LANDLORD AND TENANT HAS APPROVED THE IMPROVEMENTS IN ACCORDANCE WITH THE SIGN OFF PROCEDURES PROVIDED BELOW, TENANT SHALL TAKE POSSESSION OF THE PREMISES.  TENANT WILL BE DEEMED TO HAVE APPROVED THE IMPROVEMENTS WHEN ALL OF THE FOLLOWING SIGN OFF PROCEDURES ARE COMPLETED:   (A)           LANDLORD SHALL HAVE PROVIDED WRITTEN NOTIFICATION TO THE TENANT THAT THE CLEAN ROOM BALLROOMS, BAY AND CHASES HAVE BEEN CERTIFIED BY LANDLORD’S MICRO CONTAMINATION TEAM TO HAVE MET LANDLORD’S DESIGN PARAMETERS FOR THE PREMISES;   (B)           LANDLORD AND/OR ITS CONTRACTOR(S) SHALL HAVE PROVIDED WRITTEN NOTIFICATION THAT THE TOOL UTILITY GENERATION AND DISTRIBUTION SYSTEMS HAVE BEEN INSTALLED, ARE OPERATING AS DESIGNED, AND ARE READY FOR TOOL CONNECTION;   (C)           LANDLORD SHALL HAVE PROVIDED WRITTEN NOTIFICATION TO TENANT THAT ITS FACILITIES TECHNICIANS ARE ALL TRAINED IN THE OPERATION AND MAINTENANCE OF THE SYSTEMS THAT ARE PART OF THE IMPROVEMENTS;   --------------------------------------------------------------------------------   (D)           LANDLORD SHALL HAVE PROVIDED WRITTEN NOTIFICATION TO TENANT THAT THE BULK AND PROCESS CHEMICAL AND GAS SYSTEMS HAVE BEEN CORRECTLY INSTALLED AND QUALIFIED AS REQUIRED FOR THE NAND MANUFACTURING PROCESS CHEMISTRY USED TO MANUFACTURE THE PRODUCT; AND   (E)           LANDLORD SHALL HAVE PROVIDED TO TENANT A COPY OF THE CERTIFICATE OF OCCUPANCY FOR THE PREMISES.   FOLLOWING RECEIPT OF THE NOTIFICATION PURSUANT TO SUBSECTION (A) AND WHILE THE APPROVAL PROCESS CONTINUES, TENANT MAY COMMENCE INSTALLATION OF ITS MANUFACTURING TOOLS.   ARTICLE 2 LEASE TERM   2.1                       TERM.  THE TERM OF THIS LEASE (THE “TERM”) SHALL BEGIN ON THE DATE HEREOF (THE “COMMENCEMENT DATE”) AND CONTINUE FOR A PERIOD OF TEN (10) YEARS AND THEREAFTER UNTIL THE LIQUIDATION DATE, AS DEFINED IN THE OPERATING AGREEMENT (THE “EXPIRATION DATE”); PROVIDED, HOWEVER, THAT THE TERM SHALL TERMINATE ON THE EARLIER TO OCCUR OF (I) A LIQUIDATION DATE THAT OCCURS PRIOR TO THE EXPIRATION DATE, (II) THE TERMINATION OR EXPIRATION OF THE MANUFACTURING SERVICES AGREEMENT, (III) THE DATE ON WHICH THE CLOSING OF THE MICRON [***] PURCHASE OPTION, AS DEFINED IN THE OPERATING AGREEMENT, OCCURS, OR (IV) THE “MINORITY CLOSING” AS DEFINED IN THE OPERATING AGREEMENT.   ARTICLE 3 RENT   3.1                       RENT.  LANDLORD AND TENANT ACKNOWLEDGE AND AGREE THAT THE CONSIDERATION FOR THIS LEASE RECITED IN THE OPERATING AGREEMENT CONSTITUTES VALUABLE AND ADEQUATE CONSIDERATION FOR THIS LEASE, AND THAT, EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN SECTION 3.2 BELOW, NO FURTHER PAYMENT FROM TENANT SHALL BE REQUIRED HEREUNDER.   3.2                       OTHER AMOUNTS.  LANDLORD AND TENANT ACKNOWLEDGE THAT TENANT’S SHARE OF THE COSTS INCURRED BY LANDLORD HEREUNDER (INCLUDING, FOR EXAMPLE, REAL ESTATE TAXES AS HEREINAFTER DEFINED, PERSONAL PROPERTY AND OTHER AD VALOREM TAXES PAID BY LANDLORD AS REFERRED TO IN SECTION 4.2, SERVICES, UTILITIES, INSURANCE AND MAINTENANCE), SHALL BE REIMBURSED BY TENANT AS A COMPONENT OF THE COSTS OF PRODUCTION PURSUANT TO THE TERMS OF THE MANUFACTURING SERVICES AGREEMENT.  NOTHING IN THIS LEASE SHALL BE CONSTRUED AS LIMITING OR PRECLUDING THE ALLOCATION OF ANY COSTS OR EXPENSES AS PROVIDED FOR IN THE MANUFACTURING SERVICES AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY REFERENCES HEREIN THAT LANDLORD IS OBLIGATED TO PROVIDE A CERTAIN THING OR THAT AN OBLIGATION IS AT THE EXPENSE OF OR AT THE COST OF LANDLORD.  NO OTHER COSTS BESIDES THOSE CHARGED PURSUANT TO THE MANUFACTURING SERVICES AGREEMENT WILL BE IMPOSED ON TENANT FOR OCCUPATION AND USE OF THE PREMISES PURSUANT TO THIS LEASE.   ARTICLE 4 TAXES   4.1                       REAL ESTATE TAXES.  LANDLORD SHALL PAY, PRIOR TO DELINQUENCY, ALL REAL ESTATE TAXES AND ASSESSMENTS, GENERAL OR SPECIAL, WHICH AT ANY TIME DURING THE TERM MAY BE ASSESSED,   3 --------------------------------------------------------------------------------   LEVIED, IMPOSED UPON, OR GROW OR BECOME DUE AND PAYABLE OUT OF OR IN RESPECT OF, THE PREMISES (THE “REAL ESTATE TAXES”).   4.2                       PERSONAL PROPERTY TAXES.  LANDLORD AND TENANT SHALL COOPERATE IN THE FILING OF PERSONAL PROPERTY TAX RETURNS AND PAYMENT OF ALL TAXES, CHARGES, AND OTHER GOVERNMENTAL IMPOSITIONS ASSESSED AGAINST, OR LEVIED UPON, TENANT’S TRADE FIXTURES, FURNISHINGS, EQUIPMENT, AND OTHER PERSONAL PROPERTY, IF ANY (COLLECTIVELY, “TENANT’S PERSONAL PROPERTY”), LOCATED UPON THE PREMISES.  NOTWITHSTANDING THE PRECEDING SENTENCE, THE PARTY TO THIS AGREEMENT THAT IS THE OWNER OF RECORD OF TENANT’S PERSONAL PROPERTY SHALL PAY, PRIOR TO DELINQUENCY, ALL AFOREMENTIONED TAXES, CHARGES AND OTHER GOVERNMENTAL IMPOSITIONS ASSESSED AGAINST TENANT’S PERSONAL PROPERTY.   ARTICLE 5 BUILDING SERVICES   5.1                       SERVICES.  LANDLORD SHALL FURNISH ALL OF THE SERVICES TO TENANT THAT ARE NECESSARY FOR ITS OPERATIONS AND PRODUCTION OF THE PRODUCT ON THE PREMISES, IN EACH CASE DURING SUCH TIMES AND IN SUCH AMOUNTS AND PURSUANT TO SUCH STANDARDS AS PROVIDED IN THE MANUFACTURING SERVICES AGREEMENT, INCLUDING BUT NOT LIMITED TO THE FOLLOWING SERVICES:  (I) HEATING, VENTILATING AND AIR CONDITIONING; (II) ALL UTILITIES, INCLUDING, WITHOUT LIMITATION, ELECTRICITY, NATURAL GAS, TELEPHONE AND WATER BOTH FOR PRODUCTION AND FOR SANITARY USES; (III) OIL FREE (OR CLEAN DRY) AIR, VACUUM, SPECIALTY GASES, ULTRA PURE WATER, ACID WASTE NEUTRALIZATION SYSTEM AND ANY OTHER WASTE WATER TREATMENT SYSTEM WITHIN THE BUILDING, (IV) JANITOR SERVICE; (V) SECURITY (VI) EXHAUST AND ABATEMENT SYSTEMS; AND (VII) MAINTENANCE OF (A) THE STRUCTURAL ELEMENTS OF THE BUILDING, (B) THE COMMUNICATIONS AND NETWORK WIRING SERVING THE BUILDING, (C) THE MECHANICAL, ELECTRICAL, PLUMBING AND FIRE/LIFE SAFETY SYSTEMS SERVING THE BUILDING IN GENERAL, (D) THE COMMON AREAS, AND (E) THE BUILDING IN GENERAL, INCLUDING WITHOUT LIMITATION THE ROOF THEREOF.   5.2                       INTERRUPTION OF SERVICES.  LANDLORD SHALL BE LIABLE TO TENANT AS A RESULT OF THE INTERRUPTION OF ANY SERVICES PROVIDED PURSUANT TO SECTION 5.1 ONLY (I) TO THE EXTENT THAT SUCH INTERRUPTION IS CAUSED BY LANDLORD, ANY OF ITS AGENTS, PARTNERS, EMPLOYEES, INVITEES OR CONTRACTORS, AND (II) BY A CLAIM BROUGHT UNDER THE MANUFACTURING SERVICES AGREEMENT, WHICH CLAIM SHALL BE SUBJECT TO LIMITATIONS SET FORTH IN ARTICLE 12 THEREOF.   ARTICLE 6 USE; COMPLIANCE WITH LAWS   6.1                       USE.  TENANT AGREES THAT IT SHALL OCCUPY AND USE THE PREMISES ONLY FOR THE PURPOSES AS CONTEMPLATED BY THE MANUFACTURING SERVICES AGREEMENT AND ANCILLARY USES AND FOR NO OTHER PURPOSES (THE “PERMITTED USE”).  LANDLORD SHALL PROVIDE AND MAINTAIN ALL OCCUPANCY RELATED LICENSES AND PERMITS LEGALLY NECESSARY FOR THE OPERATION OF THE BUSINESS WITHIN THE BUILDING, WHICH EXCLUDES, WITHOUT LIMITATION, ANY INTELLECTUAL PROPERTY LICENSES RELATING TO TENANT’S BUSINESS.  TENANT ACKNOWLEDGES THAT LANDLORD SHALL HAVE ACCESS TO AND SHALL USE THE PREMISES AS PROVIDED IN THE MANUFACTURING SERVICES AGREEMENT.   6.2                       COMPLIANCE WITH LAW. TENANT SHALL COMPLY WITH ALL APPLICABLE LAWS AS DEFINED IN THE MASTER AGREEMENT IN ITS USE OF THE PREMISES.   4 --------------------------------------------------------------------------------   6.3                       COMPLIANCE WITH INSURANCE REQUIREMENTS.  TENANT FURTHER AGREES TO OBEY AND FULLY COMPLY WITH ALL REQUIREMENTS AND PROVISIONS OF ANY AND ALL INSURANCE POLICIES WHICH LANDLORD MAINTAINS, AND SHALL NOT MAKE OR PERMIT ANY USE OF THE PREMISES, OR PERMIT TO BE DONE ANYTHING IN OR UPON THE PREMISES OR THE BUILDING, OR BRING OR KEEP ANYTHING IN THE PREMISES OR THE BUILDING, WHICH MAY INVALIDATE OR INCREASE THE RATE OF INSURANCE ON THE BUILDING, ITS APPURTENANCES, CONTENTS OR OPERATIONS.   6.4                       NO TENANT DUTIES.  LANDLORD ACKNOWLEDGES AND AGREES THAT TENANT SHALL HAVE NO DUTIES OR OBLIGATIONS WITH RESPECT TO THE REPAIR AND/OR MAINTENANCE OF THE PREMISES AND THAT, EXCEPT AS MAY BE OTHERWISE PROVIDED IN THE MANUFACTURING SERVICES AGREEMENT, LANDLORD IS SOLELY RESPONSIBLE FOR THE OPERATIONS WITHIN THE PREMISES.  NOTWITHSTANDING THE FOREGOING, LANDLORD ACKNOWLEDGES AND AGREES THAT ANY OFFICER OR EMPLOYEE OF TENANT MAY, AT ANY TIME, HAVE ACCESS TO THE PREMISES.   ARTICLE 7 TENANT’S INSURANCE AND INDEMNITY   7.1                       PROPERTY INSURANCE.  EXCEPT AS SET FORTH IN SECTION 7.3, AT ITS EXPENSE, TENANT SHALL MAINTAIN PROPERTY INSURANCE INSURING TENANT’S TENANT IMPROVEMENTS IN THE PREMISES AND TENANT’S PERSONAL PROPERTY AGAINST LOSS DUE TO CAUSES TYPICALLY INSURED AGAINST UNDER “ALL RISK” OR “SPECIAL CAUSES OF LOSS” POLICY FORMS, AT A LIMIT EQUAL TO THE FULL INSURABLE REPLACEMENT COST OF SUCH IMPROVEMENTS AND PERSONAL PROPERTY, WITH COINSURANCE WAIVED AND PERMITTING THE INSURED TO WAIVE SUBROGATION RIGHTS PRIOR TO LOSS.   7.2                       LIABILITY INSURANCE.  EXCEPT AS SET FORTH IN SECTION 7.3, AT ITS EXPENSE, TENANT SHALL, COMMENCING ON THE FIRST DAY OF THE TERM AND CONTINUING THROUGHOUT THE ENTIRE TERM MAINTAIN OR CAUSE TO BE MAINTAINED, UNDER THE PROVISIONS OF THE MANUFACTURING SERVICES AGREEMENT OR OTHERWISE, FOR THE BENEFIT OF LANDLORD, LANDLORD’S LENDER, IF ANY, AND TENANT AS THEIR INTERESTS MAY APPEAR, A COMPREHENSIVE COMMERCIAL PUBLIC LIABILITY INSURANCE POLICY AGAINST SUCH RISKS AS ARE CUSTOMARILY INSURED AGAINST WHICH ARISE OUT OF THE USE, OCCUPANCY, REPAIR, MAINTENANCE OR ALTERATION OF THE PREMISES AND ALL AREAS APPURTENANT THERETO, INCLUDING LIABILITY FOR THE ACTS OF TENANT’S INDEPENDENT CONTRACTORS WITH REGARD TO ANY ACTIVITIES OF SUCH INDEPENDENT CONTRACTORS.  SUCH INSURANCE SHALL HAVE A MINIMUM LIMIT OF TEN MILLION DOLLARS ($10,000,000) PER OCCURRENCE FOR BODILY INJURY AND PROPERTY DAMAGE COMBINED.   7.3                       MEMBER INSURANCE PROGRAMS.  UPON MUTUAL AGREEMENT OF THE PARTIES, TENANT MAY SATISFY ITS OBLIGATIONS UNDER SECTION 7.1 AND/OR SECTION 7.2 BY POLICIES ISSUED UNDER ANY CORPORATE INSURANCE PROGRAM(S) MAINTAINED BY ANY OF TENANT’S MEMBERS.   7.4                       NOTICE OF CANCELLATION.  REASONABLE EFFORTS WILL BE MADE TO HAVE ALL INSURANCE REQUIRED TO BE CARRIED UNDER THIS ARTICLE 7 NOT BE SUBJECT TO CANCELLATION OR MATERIAL CHANGE WITHOUT AT LEAST THIRTY (30) DAYS’ PRIOR NOTICE TO LANDLORD AND LANDLORD’S LENDER, IF ANY, AND SUCH INSURANCE SHALL BE WITH INSURANCE COMPANIES REASONABLY ACCEPTABLE TO LANDLORD AND LANDLORD’S LENDER, IF ANY, AND SHALL NAME LANDLORD, LANDLORD’S LENDER, IF ANY, AND TENANT AS INSUREDS, AS THEIR INTERESTS MAY APPEAR.   5 --------------------------------------------------------------------------------   7.5                       EVIDENCE OF INSURANCE.  PRIOR TO THE COMMENCEMENT OF THE TERM OF THIS LEASE, OR AS SOON AS IS REASONABLY PRACTICABLE AFTER THAT DATE, TENANT SHALL PROVIDE AT LANDLORD’S REQUEST TO LANDLORD AND LANDLORD’S LENDER, IF ANY, CERTIFICATES OF THE INSURANCE POLICIES REFERRED TO IN THIS ARTICLE 7.  TENANT ALSO SHALL FURNISH ANNUALLY, TO LANDLORD AND LANDLORD’S LENDER, IF ANY, THROUGHOUT THE TERM, CERTIFICATES OF RENEWALS OF SUCH POLICIES.   7.6                       LANDLORD’S RIGHTS.  IF TENANT FAILS TO PROCURE, MAINTAIN AND/OR PAY FOR, AT THE TIMES AND FOR THE DURATIONS SPECIFIED IN THIS LEASE, THE INSURANCE REQUIRED UNDER THIS ARTICLE 7, LANDLORD MAY (BUT WITHOUT OBLIGATION TO DO SO), WITHOUT NOTICE TO TENANT, PERFORM SUCH OBLIGATIONS ON BEHALF OF TENANT, AND THE COST THEREOF SHALL IMMEDIATELY BECOME DUE AND PAYABLE TO LANDLORD.   7.7                       INDEMNITY OF LANDLORD BY TENANT.  SUBJECT TO THE PROVISIONS OF THE MANUFACTURING SERVICES AGREEMENT, TENANT SHALL INDEMNIFY, DEFEND AND SAVE LANDLORD, ITS AFFILIATES, PARTNERS, SHAREHOLDERS, MEMBERS, DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS HARMLESS FROM AND AGAINST ALL LOSSES, CLAIMS, COSTS, LIABILITIES, FINES AND PENALTIES OF ANY NATURE (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES AND EXPENSES) (COLLECTIVELY, “CLAIMS”) ARISING OR OCCURRING, FROM AND AFTER THE DATE OF THIS LEASE, OUT OF (I) TENANT’S FAILURE TO COMPLY WITH THE TERMS AND CONDITIONS SET FORTH IN THIS LEASE, (II) ANY PERSONAL INJURY OR DEATH, DAMAGE TO OR DESTRUCTION OF THE LAND OR BUILDING CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL ACTS OR OMISSIONS OF TENANT OR ITS REPRESENTATIVES AND/OR (III) ANY OTHER CLAIM MADE BY ANY AFFILIATE, PARTNER, MEMBER, DIRECTOR, OFFICER, EMPLOYEE, VISITOR, INVITEE, LICENSEE OR LESSEE OF TENANT AGAINST LANDLORD ARISING OUT OF TENANT’S USE OF THE LAND OR BUILDING; PROVIDED, HOWEVER, THAT FOR THE PURPOSES OF THIS SECTION, IN NO EVENT SHALL THE ACTIONS OR OMISSIONS OF LANDLORD PURSUANT TO THE MANUFACTURING SERVICES AGREEMENT BE DEEMED TO BE GROSS NEGLIGENCE OR WILLFUL ACTS OR OMISSIONS OF TENANT.   ARTICLE 8 LANDLORD’S INSURANCE REQUIREMENTS   8.1           Property Insurance.  Landlord shall maintain property insurance insuring the Premises against loss due to causes typically insured against under “all risk” or “special causes of loss” policy forms, at a limit equal to the full insurable replacement cost of the Building, with coinsurance waived and permitting the insured to waive subrogation rights prior to loss.   8.2           Liability Insurance.  At its sole cost and expense, Landlord shall, commencing on the first day of the Term and continuing throughout the entire Term maintain for the benefit of Landlord, Landlord’s lender, if any, and Tenant as their interests may appear, a comprehensive commercial public liability insurance policy against such risks as are customarily insured against which arise out of Landlord’s activities relating to the Premises including liability for the acts of Landlord’s independent contractors with regard to any activities of such independent contractors.  Such insurance shall have a minimum limit of ten million dollars ($10,000,000) per occurrence for bodily injury and property damage combined.   8.3           Indemnity of Tenant by Landlord.  Landlord shall indemnify, defend and save Tenant, its affiliates, partners, shareholders, members, directors, officers, employees and agents harmless from and against all Claims arising or occurring, from and after the date of this Lease, out of (i) Landlord’s failure to comply with the terms and conditions set forth in this Lease   6 --------------------------------------------------------------------------------   (except as otherwise provided in Section 5.2), (ii) any personal injury or death, damage to or destruction of the Premises, Tenant’s tenant improvements and Tenant’s personal property caused by the gross negligence or willful acts or omissions of Landlord or its representatives and/or (iii) any other Claim made by any affiliate, partner, member, director, officer, employee, visitor, invitee, licensee or lessee of Landlord against Tenant arising out of Landlord’s gross negligence or willful misconduct.   8.4                       LIMITATION ON TENANT’S CLAIMS.  NOTWITHSTANDING ANYTHING IN THIS LEASE TO THE CONTRARY, IF TENANT HAS ANY CLAIM UNDER THIS LEASE AGAINST LANDLORD, FOR INDEMNITY OR OTHERWISE, TENANT SHALL BE REQUIRED TO BRING SUCH CLAIM UNDER ANOTHER JOINT VENTURE DOCUMENT (AS DEFINED IN THE MASTER AGREEMENT) AND NOT UNDER THIS LEASE IF SUCH CLAIM CAN BE MADE UNDER SUCH OTHER JOINT VENTURE DOCUMENT (NOTWITHSTANDING THAT RECOVERY UNDER SUCH CLAIM MAY BE SUBJECT TO DEDUCTIBLES, CAPS OR LIMITATIONS ON SURVIVAL SET FORTH THEREIN); PROVIDED, HOWEVER, THAT THIS LIMITATION SHALL NOT APPLY TO CLAIMS MADE BY TENANT AGAINST LANDLORD FOR DAMAGE TO BUILDINGS, IMPROVEMENTS, FIXTURES AND MANUFACTURING TOOLS AND EQUIPMENT.   ARTICLE 9 WAIVER OF SUBROGATION   Any other provisions of this Lease to the contrary notwithstanding, if (a) either party shall suffer any loss required to be insured against hereunder or (b) any portion of the Premises or Tenant’s trade fixtures, equipment or other personal property in the Premises shall be damaged or destroyed by fire, explosion or other casualty required to be insured against hereunder, whether or not such loss, damage or destruction is caused, or claimed to be caused, by the negligence or misconduct of Landlord or Tenant, or any of their respective managers, members, officers, employees, agents, contractors or invitees, neither Landlord, Tenant nor their respective insurance company(ies), shall have any right of action, by way of subrogation or otherwise, against Tenant or Landlord, or any of their respective managers, members, officers, employees, agents, contractors or invitees, arising from such damage or destruction, and each policy of insurance required pursuant to this Lease shall provide a waiver and release by the insurer of any such right.  Landlord and Tenant further agree that during or after Tenant’s occupancy of the Premises, each will indemnify and hold the other harmless from any claim against the other made by way of subrogation by Landlord’s or Tenant’s liability and property insurance carrier(s).   ARTICLE 10 ALTERATIONS   10.1                     REQUIREMENTS.  TENANT MAY NOT MAKE ANY REPLACEMENT, ALTERATION, IMPROVEMENT OR ADDITION TO OR REMOVAL FROM THE PREMISES (COLLECTIVELY AN “ALTERATION”) WITHOUT THE PRIOR WRITTEN CONSENT OF LANDLORD, SUCH CONSENT NOT TO BE WITHHELD IF THE ALTERATION IS COMMERCIALLY REASONABLE; PROVIDED, HOWEVER, THAT TENANT MAY MAKE ANY ALTERATIONS NECESSARY OR DESIRABLE IN ORDER FOR THE SERVICES TO BE PROVIDED UNDER THE MANUFACTURING SERVICES AGREEMENT.  TENANT AGREES THAT EACH ALTERATION SHALL BE PERFORMED IN A GOOD AND WORKMANLIKE MANNER, AND SHALL MEET OR EXCEED THE STANDARDS FOR CONSTRUCTION AND QUALITY OF MATERIALS ESTABLISHED BY LANDLORD FOR THE BUILDING.  IN ADDITION, EACH ALTERATION SHALL BE PERFORMED IN COMPLIANCE WITH ALL APPLICABLE LAWS. EACH ALTERATION, WHETHER TEMPORARY OR PERMANENT IN CHARACTER, MADE BY   7 --------------------------------------------------------------------------------   LANDLORD OR TENANT IN OR UPON THE PREMISES SHALL BECOME LANDLORD’S PROPERTY AND SHALL REMAIN UPON THE PREMISES AT THE EXPIRATION OR TERMINATION OF THIS LEASE WITHOUT COMPENSATION TO TENANT.  TENANT SHALL NOT BE OBLIGATED TO REMOVE SUCH ALTERATIONS AT THE END OF THE TERM.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS SECTION 10.1, ALTERATIONS DO NOT INCLUDE THE ASSOCIATED ASSETS (AS DEFINED IN SECTION 20.1 BELOW) THAT TENANT MAY REMOVE AS PROVIDED IN SECTION 20.1.   10.2                     COVENANT AGAINST LIENS.  TENANT SHALL NOT CAUSE OR PERMIT ANY LIEN OR ENCUMBRANCE OF ANY KIND WHATSOEVER, WHETHER CREATED BY ACT OF TENANT, OPERATION OF LAW OR OTHERWISE, TO ATTACH TO OR BE PLACED UPON LANDLORD’S TITLE OR INTEREST IN THE BUILDING OR THE PREMISES, AND ANY AND ALL LIENS AND ENCUMBRANCES CREATED BY TENANT SHALL ATTACH TO TENANT’S INTEREST ONLY.  TENANT COVENANTS AND AGREES NOT TO SUFFER OR PERMIT ANY LIENS TO BE PLACED AGAINST THE BUILDING OR THE PREMISES AS A RESULT OF WORK PERFORMED OR MATERIALS SUPPLIED BY OR ON BEHALF OF TENANT AND IN CASE OF ANY SUCH LIEN ATTACHING OR CLAIM THEREOF BEING ASSERTED, TENANT COVENANTS AND AGREES NO LATER THAN FORTY-FIVE (45) DAYS FROM NOTICE TO TENANT OF THE FILING THEREOF TO (I) CAUSE IT TO BE RELEASED AND REMOVED OF RECORD, (II) DELIVER TO LANDLORD A SURETY BOND IN AN AMOUNT SUFFICIENT TO DISCHARGE THE LIEN, OR (III) PROVIDE LANDLORD, WITH ENDORSEMENTS (SATISFACTORY TO LANDLORD) TO LANDLORD’S TITLE INSURANCE POLICY INSURING AGAINST THE EXISTENCE OF OR ATTEMPTED ENFORCEMENT OF SUCH LIEN.  IN THE EVENT THAT SUCH LIEN IS NOT RELEASED, REMOVED, OR BONDED OR INSURED OVER WITHIN SAID FORTY-FIVE (45) DAY PERIOD, LANDLORD, AT ITS SOLE OPTION, MAY TAKE ALL ACTION NECESSARY TO RELEASE AND REMOVE SUCH LIEN (WITHOUT ANY DUTY TO INVESTIGATE THE VALIDITY THEREOF) AND TENANT SHALL, WITHIN TEN (10) DAYS FOLLOWING NOTICE, EITHER BEFORE OR AFTER SUCH RELEASE AND REMOVAL, PAY OR REIMBURSE LANDLORD FOR ALL SUMS, COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES AND COURT COSTS) INCURRED BY LANDLORD IN CONNECTION WITH REMOVAL OF SUCH LIEN.   ARTICLE 11 CASUALTY   11.1                     DAMAGE.  IF THE PREMISES, OR SO MUCH THEREOF AS TO CAUSE THE PREMISES TO BE UNUSABLE IN FURTHERANCE OF THE TERMS OF THE MANUFACTURING SERVICES AGREEMENT, ARE DAMAGED BY ANY CASUALTY SO AS TO CAUSE THE PREMISES TO BE UNINHABITABLE, AND THE DAMAGE (EXCLUSIVE OF ANY PROPERTY OR IMPROVEMENTS INSTALLED BY TENANT IN THE PREMISES) CAN BE REPAIRED IN LANDLORD’S REASONABLE JUDGMENT WITHIN ONE HUNDRED EIGHTY (180) DAYS WITHOUT THE PAYMENT OF AN AMOUNT MORE THAN 120% OF THE AMOUNT OF INSURANCE PROCEEDS, TENANT SHALL WAIVE ALL RIGHTS TO ANY INSURANCE PROCEEDS THEREFOR IN FAVOR OF LANDLORD, AND LANDLORD SHALL REPAIR SUCH DAMAGE AS SOON AS PRACTICABLE AND THIS LEASE SHALL CONTINUE IN FULL FORCE AND EFFECT.  LANDLORD AGREES TO GIVE TENANT WRITTEN NOTICE WITHIN SIXTY (60) DAYS AFTER THE OCCURRENCE OF ANY SUCH DAMAGE OR DESTRUCTION INDICATING THE ANTICIPATED TIME PERIOD OF SUCH RESTORATION (THE “REPAIR ESTIMATE”).  IF THE PREMISES, OR SO MUCH OF THEREOF AS TO CAUSE THE PREMISES TO BE UNUSABLE IN FURTHERANCE OF THE TERMS OF THE MANUFACTURING SERVICES AGREEMENT, ARE DAMAGED BY ANY CASUALTY, AND THE DAMAGE (EXCLUSIVE OF ANY PROPERTY OR IMPROVEMENTS INSTALLED BY TENANT IN THE PREMISES) CANNOT BE REPAIRED IN LANDLORD’S REASONABLE JUDGMENT WITHIN ONE HUNDRED EIGHTY (180) DAYS WITHOUT THE PAYMENT OF AN AMOUNT MORE THAN 120% OF THE AMOUNT OF INSURANCE PROCEEDS, LANDLORD MAY GIVE TENANT WRITTEN NOTICE WITHIN THIRTY (30) DAYS AFTER LANDLORD DELIVERS TO TENANT ITS REPAIR ESTIMATE OF LANDLORD’S INTENTION TO TERMINATE THIS LEASE, IN WHICH EVENT THIS LEASE SHALL TERMINATE AS OF THE DATE OF THE OCCURRENCE OF SUCH DAMAGE.   8 --------------------------------------------------------------------------------   11.2                     INSURANCE PROCEEDS UPON TERMINATION.  IF THIS LEASE IS TERMINATED AS PERMITTED UNDER SECTION 11.1, ALL INSURANCE PROCEEDS PAYABLE WITH RESPECT TO THE DAMAGE GIVING RISE TO SUCH RIGHT OF TERMINATION SHALL BE PAID TO LANDLORD OR LANDLORD’S LENDER, IF ANY.   ARTICLE 12 CONDEMNATION   12.1                     NOTICE.  LANDLORD AND TENANT SHALL EACH NOTIFY THE OTHER IF EITHER PARTY BECOMES AWARE THAT ANY PORTION OF THE PREMISES WILL BE TAKEN IN CONDEMNATION PROCEEDINGS OR BY EXERCISE OF ANY RIGHT OF EMINENT DOMAIN (ANY SUCH ACTION BEING HEREINAFTER REFERRED TO AS A “TAKING”), OR IF IT BECOMES AWARE OF THE COMMENCEMENT OF ANY PROCEEDINGS WHICH MIGHT RESULT IN A TAKING.   12.2                     TAKING.  IN THE EVENT OF THE TAKING OF ALL OR ANY PORTION OF THE PREMISES RENDERS THE PREMISES UNSUITABLE FOR TENANT’S BUSINESS OBJECTIVES, TENANT, AT ITS SOLE ELECTION, MAY TERMINATE THIS LEASE AS OF THE DATE OF SUCH TAKING.  IN THE EVENT TENANT CHOOSES NOT TO TERMINATE THIS LEASE, THE PORTION OF THE PREMISES SO TAKEN SHALL BE EXCLUDED FROM THE DEFINITION OF THE PREMISES HEREUNDER, AND THIS LEASE SHALL CONTINUE IN FULL FORCE AND EFFECT AS TO THE REMAINDER OF THE PREMISES.   12.3                     AWARD.  TENANT SHALL BE ENTITLED TO ALL CONDEMNATION AWARDS GRANTED ON ACCOUNT OF THE TAKING OF ALL OR ANY PORTION OF THE PREMISES.   ARTICLE 13 ASSIGNMENT AND SUBLETTING   13.1                     NO LANDLORD ASSIGNMENT. LANDLORD SHALL NOT HAVE THE RIGHT TO TRANSFER, ASSIGN OR CONVEY, IN WHOLE OR IN PART, THE LAND OR THE BUILDING OR ANY OR ALL OF ITS RIGHTS UNDER THIS LEASE; PROVIDED, HOWEVER, THAT SUCH PROHIBITION SHALL NOT APPLY TO (I) ANY TRANSFER, ASSIGNMENT OR CONVEYANCE BY LANDLORD TO AN AFFILIATE (AS DEFINED IN THE OPERATING AGREEMENT) OF LANDLORD, (II) ANY LEASES OF ANY PORTION OF THE LAND OR THE BUILDING OTHER THAN THE PREMISES TO ANY THIRD PARTY PROVIDED THAT SUCH LEASE DOES NOT MATERIALLY ADVERSELY AFFECT THE OPERATION OF THE TENANT’S BUSINESS AT THE PREMISES AND IS TO A THIRD PARTY WHO IS NOT MANUFACTURING AND IS ONLY PROVIDING SERVICES OR SUPPLIES INCIDENTAL TO LANDLORD’S OPERATIONS, OR (III) THE GRANTING OF ANY MORTGAGE, DEED OF TRUST, OR SIMILAR ENCUMBRANCES AS SECURITY FOR INDEBTEDNESS.  FOR PURPOSES HEREOF, TRANSFER, ASSIGN OR CONVEY SHALL NOT INCLUDE ANY REORGANIZATION WHICH SIMPLY RESULTS IN A CHANGE IN THE STATE OF INCORPORATION AND MICRON CONTINUES TO HOLD THE LAND AND BUILDING, ANY RECAPITALIZATION IN WHICH MICRON CONTINUES TO HOLD THE LAND AND BUILDING OR ANY MERGER OR CHANGE OF CONTROL OF LANDLORD.   13.2                     NO TENANT ASSIGNMENT.  TENANT SHALL NOT HAVE THE RIGHT TO TRANSFER, ASSIGN OR CONVEY, IN WHOLE OR IN PART, THE PREMISE OR ANY OR ALL OF ITS RIGHTS UNDER THIS LEASE; PROVIDED, HOWEVER, THAT SUCH PROHIBITION SHALL NOT APPLY TO ANY TRANSFER, ASSIGNMENT OR CONVEYANCE BY TENANT TO AN AFFILIATE OF TENANT.   9 --------------------------------------------------------------------------------   ARTICLE 14 DEFAULT   14.1                     TENANT’S DEFAULT.  THE OCCURRENCE OF ANY OF THE FOLLOWING SHALL CONSTITUTE A DEFAULT (A “DEFAULT”) BY TENANT UNDER THIS LEASE:  (I) TENANT IS IN DEFAULT UNDER THE TERMS OF THE MANUFACTURING SERVICES AGREEMENT; (II) TENANT EFFECTS OR ATTEMPTS TO EFFECT A TRANSFER WITHOUT LANDLORD’S CONSENT; (III) TENANT FAILS TO PERFORM ANY OTHER PROVISION OF THIS LEASE AND SUCH FAILURE IS NOT CURED WITHIN THIRTY (30) DAYS AFTER WRITTEN NOTICE THEREOF IS GIVEN TO TENANT (OR IMMEDIATELY IF THE FAILURE INVOLVES A HAZARDOUS OR DANGEROUS CONDITION), PROVIDED THAT IN THE EVENT SUCH MATTER DOES NOT INVOLVE A HAZARDOUS OR DANGEROUS CONDITION AND CANNOT BE REASONABLY CURED WITHIN SUCH THIRTY (30) DAY PERIOD DESPITE TENANT’S DILIGENT EFFORTS THEN TENANT SHALL BE PERMITTED SUCH REASONABLE TIME AS REASONABLY REQUIRED TO CURE SUCH DEFAULT, PROVIDED THAT TENANT HAS COMMENCED SUCH CURE WITHIN THE THIRTY (30) DAY PERIOD AND DILIGENTLY PROSECUTES SUCH CURE TO COMPLETION; (IV) THE LEASEHOLD INTEREST OF TENANT IS LEVIED UPON OR ATTACHED UNDER PROCESS OF LAW; OR (V) ANY VOLUNTARY OR INVOLUNTARY PROCEEDINGS ARE FILED BY OR AGAINST TENANT UNDER ANY BANKRUPTCY, INSOLVENCY OR SIMILAR LAWS AND, IN THE CASE OF ANY INVOLUNTARY PROCEEDINGS, ARE NOT DISMISSED WITHIN SIXTY (60) DAYS AFTER FILING.   14.2                     LANDLORD’S REMEDIES.  IN THE EVENT OF A TENANT DEFAULT AND TENANT FAILS TO CURE SUCH DEFAULT WITHIN A COMMERCIALLY REASONABLE PERIOD OF TIME AFTER RECEIPT OF WRITTEN NOTICE FROM LANDLORD, LANDLORD SHALL HAVE THE RIGHT TO CURE SUCH DEFAULT AND THEREAFTER BE REIMBURSED BY TENANT WITHIN THIRTY (30) DAYS AFTER RECEIPT OF AN INVOICE TOGETHER WITH APPROPRIATE BACKUP DOCUMENTATION.  IN THE EVENT A TENANT DEFAULT CANNOT BE REASONABLY CURED BY LANDLORD AND SUCH DEFAULT MATERIALLY ADVERSELY AFFECTS THE PREMISES OR THE BUILDING (A “TENANT MATERIAL DEFAULT”), TENANT AGREES THAT LANDLORD SHALL BE ENTITLED TO OBTAIN SPECIFIC PERFORMANCE AND ANY OTHER EQUITABLE REMEDY AVAILABLE BY LAW.  NOTWITHSTANDING ANY TENANT DEFAULT OR TENANT MATERIAL DEFAULT, LANDLORD SHALL NOT BE ENTITLED TO TERMINATE THIS LEASE EXCEPT AS PROVIDED IN SECTION 2.1(I), (II), (III) OR (IV) ABOVE.   14.3                     LANDLORD’S DEFAULT AND TENANT’S REMEDIES.  IN THE EVENT THAT LANDLORD DEFAULTS UNDER ANY PROVISIONS OF THIS LEASE AND FAILS TO CURE SUCH DEFAULT WITHIN A COMMERCIALLY REASONABLE PERIOD OF TIME AFTER RECEIPT OF WRITTEN NOTICE FROM TENANT, IN ADDITION TO ANY AND ALL REMEDIES THAT TENANT MAY HAVE AT LAW OR EQUITY, INCLUDING WITHOUT LIMITATION SPECIFIC PERFORMANCE, TENANT SHALL HAVE THE RIGHT TO CURE SUCH DEFAULT AND THEREAFTER BE REIMBURSED BY LANDLORD WITHIN THIRTY (30) DAYS AFTER RECEIPT OF AN INVOICE TOGETHER WITH APPROPRIATE BACKUP DOCUMENTATION.  IN THE EVENT OF A LANDLORD EVENT OF DEFAULT (AS DEFINED IN SECTION 13.2 OF THE OPERATING AGREEMENT), TENANT SHALL ALSO HAVE THE RIGHTS AND REMEDIES SPECIFIED IN ARTICLE 13 OF THE OPERATING AGREEMENT.   14.4                     NO OTHER REMEDIES.  THE REMEDIES OF EACH PARTY SHALL ONLY BE AS PROVIDED IN SECTION 14.2 AND 14.3 HEREOF AND NEITHER PARTY SHALL BE ENTITLED TO ANY OTHER RIGHT OR REMEDY OTHERWISE AVAILABLE TO SUCH PARTY.   10 --------------------------------------------------------------------------------   ARTICLE 15 NOTICES   Any notice, summons or other process of notification to be served under the Lease or in connection with any proceeding or action arising out of this Lease or the tenancy created thereby shall be provided to the addresses and in the manner as set forth in the Manufacturing Services Agreement.   ARTICLE 16 REAL ESTATE BROKERS   Tenant warrants and represents to Landlord that no commission, fee or other compensation is or will become due and payable to any real estate broker, salesman, consultant, finder or agent it has hired as a result of the creation of this Lease or any transaction described in this Lease.  Landlord warrants and represents to Tenant that no commission, fee or other compensation is or will become due and payable to any real estate broker, salesman, consultant, finder or agent it has hired as a result of the creation of this Lease or any transaction described in this Lease.   ARTICLE 17 NO WAIVER   No waiver of any condition or covenant of this Lease or of the breach of any such covenant or condition shall be deemed to constitute a waiver of any subsequent breach of such covenant or condition or to justify the non-observance on any other occasion of the same or of any other covenant or condition hereof.   ARTICLE 18 ESTOPPEL CERTIFICATES   Tenant agrees that, from time to time upon not less than twenty (20) days’ prior request by Landlord, Tenant shall execute and deliver to Landlord a written certificate certifying:  (i) that this Lease is unmodified and in full force and effect (or if there have been modifications, a description of such modifications and that this Lease as modified is in full force and effect); (ii) whether Tenant is in possession of the Premises, if that is the case; (iii) that to Tenant’s knowledge Landlord is not in default under this Lease, or, if Tenant believes Landlord is in default, the nature thereof in detail; (iv) that to Tenant’s knowledge Tenant is not in default under this Lease; (v) that Landlord is not obligated to perform any tenant improvement work in the Premises, (vi) that to Tenant’s knowledge Tenant has no off-sets or defenses to the performance of its obligations under this Lease (or if Tenant believes there are any off-sets or defenses, a full and complete explanation thereof); and (vii) such additional matters as may be reasonably requested by Landlord, it being agreed that such certificate may be relied upon by any prospective purchaser, mortgagee or other person having or acquiring an interest in the Building, the Premises, or any portion thereof.   11 --------------------------------------------------------------------------------   ARTICLE 19 SUBORDINATION   This Lease is and shall be expressly subject and subordinate at all times to the lien of any present or future mortgage or deed of trust encumbering fee title to the Land or the Building. The foregoing provision is declared to be self-operative and no further instruments shall be required to effect such subordination and/or attornment; provided, however, that Tenant agrees upon request by any such mortgagee, beneficiary, lessor or purchaser at foreclosure or transfer, as the case may be, to execute such reasonable subordination and/or attornment instruments as may be required by such person to confirm such subordination and/or attornment on the reasonable form customarily used by such party.  Notwithstanding anything to the contrary contained herein, Tenant’s agreement to subordinate this Lease shall not be effective unless and until the mortgagee, beneficiary or lessor, as the case may be, shall execute and deliver to Tenant a commercially reasonable non-disturbance agreement providing, among other things, that if any mortgage is foreclosed (or if the Land or the Building is transferred in lieu of foreclosure), such mortgagee or purchaser shall agree to accept this Lease and not disturb Tenant’s occupancy (so long as Tenant is not in default hereunder beyond all applicable notice and cure periods).   ARTICLE 20 SURRENDER; [***]; ACQUISITION   20.1                     SURRENDER.  UPON TERMINATION OF THE TERM FOR ANY REASON, (I) TENANT SHALL RETURN THE PREMISES TO LANDLORD BROOM CLEAN, IN GOOD ORDER AND CONDITION, ORDINARY WEAR AND TEAR EXCEPTED, IN COMPLIANCE WITH ALL APPLICABLE LAWS; PROVIDED, HOWEVER, THAT TENANT SHALL NOT BE RESPONSIBLE TO REMOVE ANY RESIDUE OR OTHER MATERIALS WITHIN PIPES, DUCTS, UTILITIES AND TREATMENT FACILITIES WITHIN THE BUILDING.  IN THE EVENT THAT LANDLORD DOES NOT EXERCISE THE MICRON [***] PURCHASE OPTION (AS DEFINED IN THE OPERATING AGREEMENT) TO PURCHASE [***] OWNED BY TENANT, TENANT AND ITS MEMBERS SHALL, SUBJECT TO SECTION 20.2 BELOW, HAVE THE RIGHT FOR A PERIOD OF UP TO SIXTY (60) DAYS AFTER THE EXPIRATION OF THE MICRON [***] PURCHASE OPTION, TO REMOVE ALL OR ANY PORTION OF [***].  TENANT SHALL NOT BE OBLIGATED TO [***] AT THE END OF THE TERM.   20.2                     REPAIR.  IN THE EVENT THAT TENANT SHALL DAMAGE THE BUILDING IN CONNECTION WITH THE REMOVAL OF ANY ASSOCIATED ASSETS OWNED BY TENANT, TENANT SHALL, AT ITS EXPENSE, REPAIR SUCH DAMAGE TO RETURN THE BUILDING TO ITS FORMER CONDITION, REASONABLE WEAR AND TEAR EXCEPTED.   ARTICLE 21 APPLICABLE LAW AND CONSTRUCTION   21.1                     GOVERNING LAW.  THIS LEASE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE AS TO ALL MATTERS OTHER THAN THOSE MATTERS PERTAINING TO REAL PROPERTY WHICH ARE CUSTOMARILY GOVERNED BY THE LAWS OF THE STATE WHERE THE PREMISES IS LOCATED.   21.2                     INDEPENDENT PROVISIONS.  ANY PROVISION OF THIS LEASE WHICH IS CONTRARY TO A LAW, WHICH THE PARTIES CANNOT LEGALLY WAIVE OR CONTRACT AGAINST (SUCH, FOR EXAMPLE, AS LABOR LAWS AND ANTI-TRUST LAWS) IS AND SHALL BE VOID AND NOT BINDING ON EITHER PARTY HERETO; PROVIDED,   12 --------------------------------------------------------------------------------   HOWEVER, THAT THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION OF THIS LEASE SHALL NOT AFFECT OR IMPAIR ANY OTHER PROVISION OF THIS LEASE.   ARTICLE 22 QUIET ENJOYMENT   Landlord hereby covenants and agrees that if Tenant shall perform all of the covenants and agreements herein stipulated to be performed on Tenant’s part, Tenant shall at all times during the continuance hereof have peaceable and quiet enjoyment and possession of the Premises without hindrance from Landlord or any person or persons lawfully claiming the Premises.   ARTICLE 23 SUCCESSORS AND ASSIGNS   THE TERMS, CONDITIONS AND AGREEMENTS OF THIS LEASE AND ALL RIGHTS AND OBLIGATIONS HEREIN GIVEN TO OR IMPOSED UPON THE PARTIES HERETO SHALL BIND AND INURE TO THE BENEFIT OF THE RESPECTIVE HEIRS, EXECUTORS, ADMINISTRATORS, SUCCESSORS AND PERMITTED ASSIGNS OF THE PARTIES HERETO.  NO RIGHTS, HOWEVER, SHALL INURE TO THE BENEFIT OF ANY ASSIGNEE OF A PARTY UNLESS THE ASSIGNMENT TO SUCH ASSIGNEE HAS BEEN APPROVED (IF REQUIRED) BY THE OTHER PARTY.   ARTICLE 24 MISCELLANEOUS   24.1                     EXECUTION AND DELIVERY.  SUBMISSION OF THIS INSTRUMENT FOR EXAMINATION OR SIGNATURE BY TENANT DOES NOT CONSTITUTE A RESERVATION OF SPACE OR AN OPTION FOR LEASE, AND IT IS NOT EFFECTIVE UNTIL EXECUTION AND DELIVERY BY BOTH LANDLORD AND TENANT.   24.2                     MEMORANDUM OF LEASE.  THIS LEASE SHALL NOT BE RECORDED, EITHER INDEPENDENTLY OR AS AN EXHIBIT, SCHEDULE, ANNEX, OR ADDENDUM TO ANY OTHER DOCUMENT.  HOWEVER, A MEMORANDUM OF LEASE, IN SUBSTANTIALLY THE FORM ATTACHED HERETO AS EXHIBIT D, SHALL BE EXECUTED, ACKNOWLEDGED AND DELIVERED FOR RECORDING BY BOTH PARTIES.  THE COST OF SUCH RECORDING SHALL BE DIVIDED EQUALLY BETWEEN THE PARTIES.   24.3                     CAPTIONS.  THE HEADINGS AND TITLES IN THIS LEASE ARE FOR CONVENIENCE ONLY AND SHALL HAVE NO EFFECT UPON THE CONSTRUCTION OR INTERPRETATION OF THIS LEASE.   24.4                     JURISDICTION; VENUE.  ANY SUIT, ACTION OR PROCEEDING SEEKING TO ENFORCE ANY PROVISION OF, OR BASED ON ANY MATTER ARISING OUT OF OR IN CONNECTION WITH, THIS LEASE SHALL BE BROUGHT IN A STATE OR FEDERAL COURT LOCATED IN DELAWARE AND EACH OF THE PARTIES TO THIS LEASE HEREBY CONSENTS AND SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS (AND OF THE APPROPRIATE APPELLATE COURTS THEREFROM) IN ANY SUCH SUIT, ACTION OR PROCEEDING AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAWS, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT ANY SUCH SUIT, ACTION OR PROCEEDING WHICH IS BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE SERVED ON ANY PARTY ANYWHERE IN THE WORLD, WHETHER WITHIN OR WITHOUT THE JURISDICTION OF ANY SUCH COURT.   13 --------------------------------------------------------------------------------   24.5                     DUE AUTHORITY.  THE INDIVIDUALS EXECUTING THIS LEASE REPRESENT AND WARRANT TO EACH PARTY THAT THEY HAVE FULL RIGHT, POWER AND AUTHORITY TO EXECUTE THIS LEASE ON BEHALF OF SUCH PARTY.   24.6                     ONLY LANDLORD/TENANT RELATIONSHIP.  NOTHING CONTAINED HEREIN SHALL BE DEEMED OR CONSTRUED BY THE PARTIES HERETO NOR BY ANY THIRD PARTY, AS CREATING THE RELATIONSHIP OF PRINCIPAL AND AGENT OR OF PARTNERSHIP OR OF JOINT VENTURE BETWEEN THE PARTIES HERETO OR ANY OTHER RELATIONSHIP, OTHER THAN THE RELATIONSHIP OF LANDLORD AND TENANT.   24.7                     COUNTERPARTS.  THIS LEASE MAY BE EXECUTED IN ONE OR MORE COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN ORIGINAL, BUT ALL OF WHICH TOGETHER SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT.   24.8                     CONSTRUCTION.  ANY REFERENCE TO ANY APPLICABLE LAW SHALL BE DEEMED ALSO TO REFER TO ALL RULES AND REGULATIONS PROMULGATED THEREUNDER UNLESS THE CONTEXT REQUIRES OTHERWISE.  WHENEVER REQUIRED BY THE CONTEXT, ANY GENDER SHALL INCLUDE ANY OTHER GENDER, THE SINGULAR SHALL INCLUDE THE PLURAL AND THE PLURAL SHALL INCLUDE THE SINGULAR.  THE WORDS “HEREIN,” “HEREOF,” “HEREUNDER,” AND WORDS OF SIMILAR IMPORT REFER TO THIS LEASE AS A WHOLE AND NOT TO A PARTICULAR SECTION.  WHENEVER THE WORD “INCLUDING” IS USED IN THIS LEASE, IT SHALL BE DEEMED TO MEAN “INCLUDING WITHOUT LIMITATION,” “INCLUDING, BUT NOT LIMITED TO” OR OTHER WORDS OF SIMILAR IMPORT SUCH THAT THE ITEMS FOLLOWING THE WORD “INCLUDING” SHALL BE DEEMED TO BE A LIST BY WAY OF ILLUSTRATION ONLY AND SHALL NOT BE DEEMED TO BE AN EXHAUSTIVE LIST OF APPLICABLE ITEMS IN THE CONTEXT THEREOF.  REFERENCES TO SECTIONS AND EXHIBITS IN THIS LEASE ARE REFERENCES TO SECTIONS OF, AND EXHIBITS TO, THIS LEASE UNLESS OTHERWISE INDICATED.   24.9                     ENTIRE AGREEMENT.  THIS LEASE, THE MASTER AGREEMENT, THE MANUFACTURING SERVICES AGREEMENT, AND THE OPERATING AGREEMENT SETS FORTH ALL OF THE COVENANTS, PROMISES, AGREEMENTS, CONDITIONS, AND UNDERSTANDINGS OF THE PARTIES HERETO WITH RESPECT TO THE PREMISES.  NO ALTERATION, MODIFICATION, AMENDMENT, CHANGE OR ADDITION TO THIS LEASE SHALL BE EFFECTIVE UNLESS THE SAME SHALL BE REDUCED TO WRITING AND SIGNED BY BOTH PARTIES HERETO.   24.10                   TIME IS OF THE ESSENCE.  TIME IS OF THE ESSENCE IN THE PERFORMANCE OF ALL TERMS AND CONDITIONS OF THIS LEASE IN WHICH TIME IS AN ELEMENT.   24.11                   CONFIDENTIALITY.  LANDLORD AND TENANT SHALL ABIDE BY THE TERMS OF THAT CERTAIN MUTUAL CONFIDENTIALITY AGREEMENT AMONG LANDLORD, TENANT AND INTEL DATED AS OF THE EFFECTIVE DATE OF THE OPERATING AGREEMENT, AND AS MAY BE AMENDED OR REPLACED FROM TIME TO TIME (THE “CONFIDENTIALITY AGREEMENT”), WHICH AGREEMENT IS INCORPORATED HEREIN BY REFERENCE.  LANDLORD AND TENANT AGREE THAT THE CONFIDENTIALITY AGREEMENT SHALL GOVERN THE CONFIDENTIALITY, NON-DISCLOSURE AND NON-USE OBLIGATIONS BETWEEN THE PARTIES RESPECTING THE INFORMATION PROVIDED OR DISCLOSED PURSUANT TO THIS LEASE.  IF THE CONFIDENTIALITY AGREEMENT IS TERMINATED OR EXPIRES AND IS NOT REPLACED, SUCH CONFIDENTIALITY AGREEMENT SHALL CONTINUE WITH RESPECT TO CONFIDENTIAL INFORMATION PROVIDED IN CONNECTION WITH THIS LEASE, NOTWITHSTANDING SUCH EXPIRATION OR TERMINATION, FOR THE DURATION OF THE TERM OF THIS LEASE OR UNTIL A NEW CONFIDENTIALITY AGREEMENT IS ENTERED INTO BETWEEN THE LANDLORD AND TENANT.  TO THE EXTENT THERE IS A CONFLICT BETWEEN THIS LEASE AND THE CONFIDENTIALITY AGREEMENT, THE TERMS OF THIS LEASE SHALL CONTROL.  THIS LEASE AND ITS TERMS SHALL BE DEEMED “CONFIDENTIAL INFORMATION” UNDER THE CONFIDENTIALITY AGREEMENT.   14 --------------------------------------------------------------------------------   24.12                   DAMAGES LIMITATION.  EXCEPT AS PROVIDED BELOW, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL OR OTHER INDIRECT DAMAGES OR ANY PUNITIVE OR EXEMPLARY DAMAGES ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, WHETHER SUCH DAMAGES ARE BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHER THEORY OF LIABILITY, AND EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.  NOTWITHSTANDING THE FOREGOING, SUCH LIMITATION SHALL NOT APPLY TO EITHER PARTY’S BREACH OF SECTION 24.11.  EACH PARTY SHALL HAVE A DUTY TO USE COMMERCIALLY REASONABLE EFFORTS TO MITIGATE DAMAGES FOR WHICH THE OTHER PARTY IS RESPONSIBLE.   24.13                   INDEMNIFICATION PROCEDURES.   (a)           If any person who or which is entitled to seek indemnification under this Lease (an “Indemnified Party”) obtains knowledge of, or receives notice of, any Claim against the person against whom or which such indemnification is being sought hereunder (an “Indemnifying Party”), the Indemnified Party will give such Indemnifying Party reasonably prompt written notice thereof, but in any event not later than ten (10) days after knowledge or notice of such Claim.  Such notice by the Indemnified Party will describe the Claim in reasonable detail, will include copies of all available material written evidence thereof and will indicate the estimated amount, if reasonably practicable, of the damages that have been or may be sustained by the Indemnified Party.  The Indemnifying Party will have the right to participate in, or, by giving written notice to the Indemnified Party, to assume, the defense of any Claim at such Indemnifying Party’s own expense and by such Indemnifying Party’s own counsel (reasonably satisfactory to the Indemnified Party), and the Indemnified Party will cooperate in good faith in such defense.   (b)           If, within ten (10) days after giving notice of a Claim to an Indemnifying Party pursuant to Section 24.13(a), an Indemnified Party receives written notice from the Indemnifying Party that the Indemnifying Party has elected to assume the defense of such Claim as provided in the last sentence of Section 24.13(a), the Indemnifying Party will not be liable for any legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof; provided, however, that if the Indemnifying Party fails to take reasonable steps necessary to defend diligently such Claim within ten (10) days after receiving written notice from the Indemnified Party that the Indemnified Party believes the Indemnifying Party has failed to take such steps or if the Indemnifying Party has not undertaken fully to indemnify the Indemnified Party in respect of all damages relating to the matter, the Indemnified Party may assume its own defense, and the Indemnifying Party will be liable for all reasonable costs and expenses paid or incurred in connection therewith and the Indemnified Party may employ separate counsel, and the Indemnifying Party will bear the expenses of such separate counsel, if in the written opinion of counsel to the Indemnified Party use of counsel of the Indemnifying Party’s choice would be expected to give rise to a conflict of interest.  Without the prior written consent of the Indemnified Party, the Indemnifying Party will not enter into any settlement of any Claim that would lead to loss, liability or create any financial or other obligation on the part of any Indemnified Party for which such Indemnified Party is not entitled to indemnification   15 --------------------------------------------------------------------------------   hereunder, or which provides for injunctive or other non-monetary relief applicable to any Indemnified Party, or does not include an unconditional release of all Indemnified Parties.   (c)           A failure to give timely notice or to include any specified information in any notice as provided in Sections 24.13(a) or (b) will not affect the rights or obligations of any party hereunder, except and only to the extent that, as a result of such failure, any party that was entitled to receive such notice was materially prejudiced as a result of such failure   (d)           Notwithstanding anything to the contrary contained herein, Landlord and Tenant agree that, for the purposes of this section, in no event shall the actions or omissions of Landlord pursuant to the Manufacturing Services Agreement be deemed acts or omissions of Tenant.   24.14                   FORCE MAJEURE.  THE PARTIES SHALL BE EXCUSED FROM ANY FAILURE TO PERFORM ANY OBLIGATION HEREUNDER TO THE EXTENT SUCH FAILURE IS CAUSED BY A FORCE MAJEURE EVENT.  A FORCE MAJEURE EVENT SHALL OPERATE TO EXCUSE A FAILURE TO PERFORM AN OBLIGATION HEREUNDER ONLY FOR THE PERIOD OF TIME DURING WHICH THE FORCE MAJEURE EVENT RENDERS PERFORMANCE IMPOSSIBLE OR INFEASIBLE AND ONLY IF THE PARTY ASSERTING FORCE MAJEURE AS AN EXCUSE FOR ITS FAILURE TO PERFORM HAS PROVIDED WRITTEN NOTICE TO THE OTHER PARTY SPECIFYING THE OBLIGATION TO BE EXCUSED AND DESCRIBING THE EVENTS OR CONDITIONS CONSTITUTING THE FORCE MAJEURE EVENT.  AS USED HEREIN, “FORCE MAJEURE EVENT” MEANS THE OCCURRENCE OF AN EVENT OR CIRCUMSTANCE BEYOND THE REASONABLE CONTROL OF THE PARTY FAILING TO PERFORM, INCLUDING, WITHOUT LIMITATION, (A) EXPLOSIONS, FIRES, FLOOD, EARTHQUAKES, CATASTROPHIC WEATHER CONDITIONS, OR OTHER ELEMENTS OF NATURE OR ACTS OF GOD; (B) ACTS OF WAR (DECLARED OR UNDECLARED), ACTS OF TERRORISM, INSURRECTION, RIOTS, CIVIL DISORDERS, REBELLION OR SABOTAGE; (C) ACTS OF FEDERAL, STATE, LOCAL OR FOREIGN GOVERNMENTAL AUTHORITIES OR COURTS; (D) LABOR DISPUTES, LOCKOUTS, STRIKES OR OTHER INDUSTRIAL ACTION, WHETHER DIRECT OR INDIRECT AND WHETHER LAWFUL OR UNLAWFUL; (E) FAILURES OR FLUCTUATIONS IN ELECTRICAL POWER OR TELECOMMUNICATIONS SERVICE OR EQUIPMENT; AND (F) DELAYS CAUSED BY THE OTHER PARTY’S NONPERFORMANCE HEREUNDER.   Signature Page Follows   16 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have caused this Lease to be duly executed on the day and year first above written.     MICRON TECHNOLOGY, INC.           By: /s/ STEVEN R. APPLETON     Name: Steven R. Appleton   Title: Chief Executive Officer and President           IM FLASH TECHNOLOGIES, LLC           By: /s/ DAVID A. BAGLEE     Name: David A. Baglee   Title: Authorized Officer       By: /s/ RODNEY MORGAN     Name: Rodney Morgan   Title: Authorized Officer     THIS IS THE SIGNATURE PAGE FOR THE MTV LEASE AGREEMENT ENTERED INTO BY AND BETWEEN MICRON TECHNOLOGY, INC. AND IM FLASH TECHNOLOGIES, LLC   17 --------------------------------------------------------------------------------   Exhibit A   Legal Description of Land     All of that certain lot, piece or parcel of land lying, being and situate in the City of Manassas, Virginia, being more particularly described as follows:   Parcel “B”, consisting of 123.5353 acres, more or less, a Subdivision of the Property of International Business Machines Corporation, as the same is shown on a plat attached to the Deed of Subdivision recorded in Deed Book 2119 at page 1774 among the land records of Prince William County, Virginia.   LESS AND EXCEPT the “overhead industrial waste discharge lines” and associated fixtures attached thereto, as shown on the plat dated December 13, 1995, made by Ross, France & Ratliff, Ltd. entitled “Composite Plat Showing Overhead Industrial Waste Discharge Lines Parcel B”, a copy of which plat is attached to and recorded with a deed dated December 11, 1995 and recorded in Deed Book 2297 at page 1711, said plat recorded in Map Drawer 170 at page 121.   ALSO LESS AND EXCEPT 0.1190 acres, more or less, dedicated for public use for street purposes and conveyed to the City of Manassas by Deed of Dedication and Deed of Easement recorded in Deed Book 2333 at page 1035.   AND BEING a portion of the same property which was conveyed to Dominion Semiconductor L.L.C., a Virginia limited liability company, by Special Warranty Deed from Virginia LLC Holding, Inc., a Virginia corporation, dated February 5, 1996 and recorded February 7, 1996 in Deed Book 2309 at page 1638 in the Clerk’s Office of the Circuit Court of Prince William County, Virginia.   TOGETHER WITH those certain permanent, non-exclusive easements for ingress and egress over and across Parcel A, which parcel is shown on plat attached to Deed of Subdivision recorded in Deed Book 2119 at page 1774, as more particularly set forth in Reciprocal Ingress and Egress Access Easements and Agreement of Indemnification by Dominion recorded in the aforesaid Clerk’s Office on December 26, 2001 as Instrument No. 200112260137848.   FURTHER TOGETHER WITH that certain permanent, non-exclusive domestic sanitary sewer easement and right-of-way thereto across said Parcel A, as more particularly set forth in Domestic Sanitary Sewer Easement recorded in the aforesaid Clerk’s Office on December 26, 2001 as Instrument No. 200112260137840.   FURTHER TOGETHER WITH that certain permanent, non-exclusive sixty-five (65) ft. wide easement and right-of-way for the transmission of domestic water supply, fire system water supply and sanitary sewer flows by underground pipelines, and the transmission of industrial chemicals and utility services by overhead trestle over said Parcel A, as more particularly set forth in Building 130 Utility, Chemical Transmission and Access Easement and Agreement of   18 --------------------------------------------------------------------------------   Indemnification by Dominion recorded in the aforesaid Clerk’s Office on December 26, 2001 as Instrument No. 200112260137846.   FURTHER TOGETHER WITH that certain permanent, non-exclusive fire protection water supply line and maintenance easement and right-of-way thereto across said Parcel A as more particularly set forth in Fire Protection Water Supply Line and Maintenance Easement recorded in the aforesaid Clerk’s Office on December 26, 2001 as Instrument No. 200112260137852.   FURTHER TOGETHER WITH that certain permanent, non-exclusive easement for ingress and egress to and from the public road, i.e., Godwin Drive (Virginia State Route 661) over and across said Parcel A as more particularly set forth in Ingress and Egress Access Easement recorded in the aforesaid Clerk’s Office on December 26, 2001 as Instrument No. 200112260137856.   BEING the same property conveyed to Micron Technology, Inc., a Delaware corporation, by Special Warranty Deed from Dominion Semiconductor L.L.C., a Virginia limited liability company, dated April 22, 2002 and recorded April 22, 2002 among the land records of Prince William County, Virginia as Instrument No. 200204220051249, recorded April 26, 2002 as Instrument No. 200204260053995.   19 --------------------------------------------------------------------------------   Exhibit B   Depiction of the Premises   [Picture Showing Premises]   20 --------------------------------------------------------------------------------   Exhibit C   Scope of Work   SCOPE   Estimated Start   Estimated Finish   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***]     21 --------------------------------------------------------------------------------   Exhibit D   Memorandum of Lease   When recorded, return to: Jones Waldo Holbrook & McDonough, P.C. 170 S. Main Street, Suite 1500 Salt Lake City, Utah  84101-1622 Attn:  Glen D. Watkins     Space above for recorder’s use   DEED OF LEASE   This Deed of Lease is dated as of January 6, 2006, by and between IM Flash Technologies, LLC, a Delaware limited liability company with an address at 1550 East 3400 North, Lehi, Utah 84043 (“Tenant”) and Micron Technology, Inc., a Delaware corporation with an address at 8000 S. Federal Way, Mail Stop 1-507, Boise, ID  83716 (“Landlord”).   1.   For and in consideration of Ten Dollars ($10.00) and other good and valuable consideration paid and exchanged between Landlord and Tenant, Landlord has leased to Tenant and Tenant has leased from Landlord, a designated portion (as shown on Exhibit A) of a certain building located at 9600 Godwin Drive, Manassas, Virginia, 20110 (the “Building”), on property more particularly described on Exhibit B attached hereto (the “Land”), pursuant to a certain MTV Lease Agreement dated as of even date herewith between Landlord and Tenant (the “Lease”).  Under the Lease and in accordance with its terms, Tenant has the nonexclusive right to use the Common Areas (as defined therein) that are located within the Building and on the Land.   2.   The term of the Lease commenced on the date hereof and expires, unless sooner terminated as set forth in the Lease, on the tenth anniversary of the date hereof; provided, however, that the term shall automatically extend for a period coterminous with any Renewal Term as defined in that certain Operating Agreement dated January 6, 2006 between Micron and Intel (the “Term”).   3.   Landlord and Tenant execute this Deed of Lease for purposes of recordation and notice of the Lease and do not intend to change any provision of the Lease.   NOTE TO RECORDER:  THIS INSTRUMENT IS EXEMPT FROM THE STATE OF VIRGINIA RECORDATION TAX (AS IMPOSED BY § 58.1-801 OF THE VIRGINIA CODE) PURSUANT TO § 58.1-811A(10) OF THE VIRGINIA CODE SINCE THIS INSTRUMENT EVIDENCES A CONVEYANCE TO A LIMITED LIABILITY COMPANY WHERE THE   22 --------------------------------------------------------------------------------   GRANTOR (LANDLORD) IS ENTITLED TO RECEIVE NOT LESS THAN 50% OF THE PROFITS AND SURPLUS OF SUCH LIMITED LIABILITY COMPANY.     IN WITNESS WHEREOF, Landlord and Tenant have executed this Deed of Lease as of the date first above written.     Micron Technology, Inc.       By:       Name:       Title:           IM Flash Technologies, LLC       By:       Name:       Title:       STATE OF )   ) SS. COUNTY OF )   Acknowledged before me a Notary Public in and for the aforementioned County and State this       day of January, 2006 by                                 the                                 of Micron Technology, Inc., a Delaware corporation, on behalf of such corporation.       Notary Public   STATE OF )   ) SS. COUNTY OF )   Acknowledged before me a Notary Public in and for the aforementioned County and State this       day of January, 2006 by                                 the                                 of IM Flash Technologies, LLC, a Delaware limited liability company, on behalf of such company.     Notary Public   23 --------------------------------------------------------------------------------

ASSIGNMENT AND ASSUMPTION AGREEMENT ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of June 28, 2006, between Residential Funding Corporation, a Delaware corporation ("RFC"), and Residential Asset Mortgage Products, Inc., a Delaware corporation (the "Company"). Recitals A. RFC has entered into seller contracts ("Seller Contracts") with the seller/servicers. B. The Company wishes to purchase from RFC certain Mortgage Loans (as hereinafter defined) originated pursuant to the Seller Contracts with respect thereto. C. The Company, RFC, as master servicer, and JPMorgan Chase Bank, N.A., as trustee (the "Trustee"), are entering into a Pooling and Servicing Agreement, dated as of June 1, 2006 (the "Pooling and Servicing Agreement"), pursuant to which the Trust proposes to issue Mortgage Asset-Backed Pass-Through Certificates, Series 2006-RS4 (the "Certificates") consisting of sixteen classes designated as Class A-1, Class A-2, Class A-3, Class A-4, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class M-9, Class SB, Class R-I and Class R-II Certificates representing beneficial ownership interests in a trust fund consisting primarily of a pool of mortgage loans identified in Exhibit G to the Pooling and Servicing Agreement (the "Mortgage Loans"). D. In connection with the purchase of the Mortgage Loans, the Company will assign to or at the direction of RFC the Class SB, Class R-I and Class R-II Certificates (collectively, the "Retained Certificates"). E. In connection with the purchase of the Mortgage Loans and the issuance of the Certificates, RFC wishes to make certain representations and warranties to the Company and to assign certain of its rights under the Seller Contracts to the Company, and the Company wishes to assume certain of RFC's obligations under the Seller Contracts. F. The Company and RFC intend that the conveyance by RFC to the Company of all its right, title and interest in and to the Mortgage Loans pursuant to this Agreement shall constitute a purchase and sale and not a loan. NOW THEREFORE, in consideration of the recitals and the mutual promises herein and other good and valuable consideration, the parties agree as follows: 1. All capitalized terms used but not defined herein shall have the meanings assigned thereto in the Pooling and Servicing Agreement. 2. Concurrently with the execution and delivery hereof, RFC hereby assigns to the Company without recourse all of its right, title and interest in and to the Mortgage Loans, including all interest and principal received on or with respect to the Mortgage Loans after the Cut-off Date (other than payments of principal and interest due on the Mortgage Loans in June, 2006). In consideration of such assignment, RFC will receive from the Company, in immediately available funds, an amount equal to $885,319,155 and the Retained Certificates. In connection with such assignment and at the Company's direction, RFC has in respect of each Mortgage Loan endorsed the related Mortgage Note (other than any Destroyed Mortgage Note) to the order of the Trustee and delivered an assignment of mortgage in recordable form to the Trustee or its agent. A Destroyed Mortgage Note means a Mortgage Note the original of which was permanently lost or destroyed. The Company and RFC intend that the conveyance by RFC to the Company of all its right, title and interest in and to the Mortgage Loans pursuant to this Section 2 shall be, and shall be construed as, a sale of the Mortgage Loans by RFC to the Company. It is, further, not intended that such conveyance be deemed to be a pledge of the Mortgage Loans by RFC to the Company to secure a debt or other obligation of RFC. However, in the event that the Mortgage Loans are held to be property of RFC, or if for any reason this Agreement is held or deemed to create a security interest in the Mortgage Loans, then it is intended that (a) this Agreement shall also be deemed to be a security agreement within the meaning of Articles 8 and 9 of the Minnesota Uniform Commercial Code and the Uniform Commercial Code of any other applicable jurisdiction; (b) the conveyance provided for in this Section shall be deemed to be a grant by RFC to the Company of a security interest in all of RFC's right (including the power to convey title thereto), title and interest, whether now owned or hereafter acquired, in and to (A) the Mortgage Loans, including (i) with respect to each Cooperative Loan, the related Mortgage Note, Security Agreement, Assignment of Proprietary Lease, Cooperative Stock Certificate, Cooperative Lease, any insurance policies and all other documents in the related Mortgage File and (ii) with respect to each Mortgage Loan other than a Cooperative Loan, the Mortgage Notes, the Mortgages, any related insurance policies and all other documents in the related Mortgage Files, (B) all amounts payable pursuant to the Mortgage Loans in accordance with the terms thereof and (C) any and all general intangibles, payment intangibles, accounts, chattel paper, instruments, documents, money, deposit accounts, certificates of deposit, goods, letters of credit, advices of credit and investment property and other property of whatever kind or description now existing or hereafter acquired consisting of, arising from or relating to any of the foregoing, and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, instruments, securities or other property, including, without limitation, all amounts from time to time held or invested in the Certificate Account or the Custodial Account, whether in the form of cash, instruments, securities or other property; (c) the possession by the Trustee, the Custodian or any other agent of the Trustee of Mortgage Notes or such other items of property as constitute instruments, money, negotiable documents or chattel paper shall be deemed to be "possession by the secured party", or possession by a purchaser or a person designated by him, for purposes of perfecting the security interest pursuant to the Minnesota Uniform Commercial Code and the Uniform Commercial Code of any other applicable jurisdiction (including, without limitation, Section 9-305, 8-313 or 8-321 thereof); and (d) notifications to persons holding such property, and acknowledgments, receipts or confirmations from persons holding such property, shall be deemed notifications to, or acknowledgments, receipts or confirmations from, financial intermediaries, bailees or agents (as applicable) of the Trustee for the purpose of perfecting such security interest under applicable law. RFC shall, to the extent consistent with this Agreement, take such reasonable actions as may be necessary to ensure that, if this Agreement were deemed to create a security interest in the Mortgage Loans and the other property described above, such security interest would be deemed to be a perfected security interest of first priority under applicable law and will be maintained as such throughout the term of this Agreement. Without limiting the generality of the foregoing, RFC shall prepare and deliver to the Company no less 2 than 15 days prior to any filing date, and the Company shall file, or shall cause to be filed, at the expense of RFC, all filings necessary to maintain the effectiveness of any original filings necessary under the Uniform Commercial Code as in effect in any jurisdiction to perfect the Company's security interest in or lien on the Mortgage Loans including without limitation (x) continuation statements and (y) such other statements as may be occasioned by (1) any change of name of RFC or the Company, (2) any change of location of the state of formation, place of business or the chief executive office of RFC, or (3) any transfer of any interest of RFC in any Mortgage Loan. 3. Concurrently with the execution and delivery hereof, the Company hereby assigns to or at the direction of RFC without recourse all of its right, title and interest in and to the Retained Certificates as part of the consideration payable to RFC by the Company pursuant to this Agreement. 4. RFC represents and warrants to the Company, with respect to each Mortgage Loan that on the date of execution hereof (or, if otherwise specified below, as of the date so specified), (a) The information set forth in the Mortgage Loan Schedule for such Mortgage Loans is true and correct in all material respects as of the date or dates respecting which such information is furnished; (b) Each Mortgage Loan constitutes a qualified mortgage under Section 860G(a)(3)(A) of the Code and Treasury Regulations Section 1.860G-2(a)(1); (c) Immediately prior to the conveyance of the Mortgage Loans to the Trustee, RFC had good title to, and was the sole owner of, each Mortgage Loan free and clear of any pledge, lien, encumbrance or security interest (other than rights to servicing and related compensation) and such conveyance validly transfers ownership of the Mortgage Loans to the Trustee free and clear of any pledge, lien, encumbrance or security interest; (d) Each Mortgage Note constitutes a legal, valid and binding obligation of the Mortgagor enforceable in accordance with its terms except as limited by bankruptcy, insolvency or other similar laws affecting generally the enforcement of creditors' rights; (e) To the best of RFC's knowledge as of the Cut-off Date, and except as noted in (h) below, there is no default, breach, violation or event of acceleration existing under the terms of any Mortgage Note or Mortgage and no event which, with notice and expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration under the terms of any Mortgage Note or Mortgage, and no such default, breach, violation or event of acceleration has been waived by RFC or by any other entity involved in servicing a Mortgage Loan; 3 (f) Each of the Mortgage Loans with Loan-to-Value Ratios at origination in excess of 80% will be insured by a Primary Insurance Policy covering the amount of such Mortgage Loan in excess of 75% except for up to 50.9% of the Mortgage Loans, which are Mortgage Loans with a Loan-to-Value Ratio at origination in excess of 80% that are not insured by a Primary Insurance Policy; (g) The related Mortgagor is not currently in bankruptcy proceedings with respect to any of the Mortgage Loans; (h) As of the Cut-Off Date, 0.5% of the Mortgage Loans are 30 to 59 days delinquent in payment of principal and interest and none of the Mortgage Loans are 60 or more days Delinquent in payment of principal and interest; (i) None of the Mortgage Loans are Buy-Down Mortgage Loans; (j) To the best of RFC's knowledge, there is no delinquent tax or assessment lien against any related Mortgaged Property; (k) No Mortgagor has any valid right of offset, defense or counterclaim as to the related Mortgage Note or Mortgage, except as may be provided under the Servicemembers Civil Relief Act; (l) No Mortgage Loan provides for payments that are subject to reduction by withholding taxes levied by any foreign (non-United States) sovereign government; (m) (1) The proceeds of each Mortgage Loan have been fully disbursed and (2) to the best of RFC's knowledge, there is no requirement for future advances thereunder and any and all requirements as to completion of any on-site or off site improvements and as to disbursements of any escrow funds therefor (including any escrow funds held to make Monthly Payments pending completion of such improvements) have been complied with. All costs, fees and expenses incurred in making, closing or recording the Mortgage Loans were paid; (n) To the best of RFC's knowledge, with respect to each Mortgage Loan, there are no mechanics' liens or claims for work, labor or material affecting any Mortgaged Property which are or may be a lien prior to, or equal with, the lien of the related Mortgage, except such liens that are insured or indemnified against by a title insurance policy; (o) With respect to each Mortgage Loan, a policy of title insurance was effective as of the closing of each Mortgage Loan, is valid and binding, and remains in full force and effect, unless the Mortgaged Properties are located in the State of Iowa and an attorney's certificate has been provided; (p) Each Mortgaged Property is free of damage and in good repair and no notice of condemnation has been given with respect thereto and RFC knows of nothing involving any Mortgaged Property that could reasonably be expected to materially adversely affect the value or marketability of any Mortgaged Property; 4 (q) Each Mortgage contains customary and enforceable provisions which render the rights and remedies of the holder adequate to realize the benefits of the security against the Mortgaged Property, including (i) in the case of a Mortgage that is a deed of trust, by trustee's sale, or (ii) by judicial foreclosure or, if applicable, non judicial foreclosure, and to the best of RFC's knowledge, there is no homestead or other exemption available to the Mortgagor that would interfere with such right to sell at a trustee's sale or right to foreclosure, subject in each case to applicable federal and state laws and judicial precedents with respect to bankruptcy and right of redemption; (r) To the best of RFC's knowledge, with respect to each Mortgage that is a deed of trust, a trustee duly qualified under applicable law to serve as such is properly named, designated and serving, and except in connection with a trustee's sale after default by a Mortgagor, no fees or expenses are payable by the seller or RFC to the trustee under any Mortgage that is a deed of trust; (s) If the improvements securing a Mortgage Loan are located in a federal designated special flood hazard area, flood insurance in the amount required under the Program Guide covers such Mortgaged Property (either by coverage under the federal flood insurance program or by coverage from private insurers); (t) To the extent an appraisal was made on a Mortgage Loan, the appraisal was made by an appraiser who meets the minimum qualifications for appraisers as specified in the Program Guide; (u) Each Mortgage Loan is covered by a standard hazard insurance policy; (v) If any of the Mortgage Loans are secured by a leasehold interest, with respect to each leasehold interest: the use of leasehold estates for residential properties is an accepted practice in the area where the related Mortgaged Property is located; residential property in such area consisting of leasehold estates is readily marketable; the lease is recorded and no party is in any way in breach of any provision of such lease; the leasehold is in full force and effect and is not subject to any prior lien or encumbrance by which the leasehold could be terminated or subject to any charge or penalty; and the remaining term of the lease does not terminate less than ten years after the maturity date of such Mortgage Loan; (w) To the best of RFC's knowledge, any escrow arrangements established with respect to any Mortgage Loan are in compliance with all applicable local, state and federal laws and are in compliance with the terms of the related Mortgage Note; (x) None of the Mortgage Loans in the mortgage pool are loans that, under applicable state or local law in effect at the time of origination of the loan, are referred to as (1) "high-cost" or "covered" loans or (2) any other similar designation if the law imposes greater restrictions or additional legal liability for residential mortgage loans with high interest rates, points and/or fees; (y) None of the proceeds for the Mortgage Loans were used to finance the purchase of single premium credit insurance policies; 5 (z) None of the Mortgage Loans contain prepayment penalties that extend beyond five years after the date of origination; (aa) None of the Mortgage Loans are subject to the Homeownership Act; (bb) Each Mortgage Loan at the time it was made complied in all material respects with applicable local, state, and federal laws, including, but not limited to, all applicable anti-predatory lending laws; (cc) No Mortgage Loan was originated on or after October 1, 2002 and before March 7, 2003, which is secured by property located in the State of Georgia; (dd) No Mortgage Loan is a High Cost Loan or Covered Loan, as applicable (as such terms are defined in Appendix E of the Standard & Poor's Glossary For File Format For LEVELS(R) Version 5.6c Revised (attached hereto as Exhibit 1)); and (ee) Each Mortgage Loan listed on the attached Schedule B has an original term to maturity of 360 months and an original amortization term of 480 months. Upon discovery by RFC or upon notice from the Company or the Trustee of a breach of the foregoing representations and warranties in respect of any Mortgage Loan, or upon the occurrence of a Repurchase Event as described in Section 5 below, which materially and adversely affects the interests of any holders of the Certificates or the Company in such Mortgage Loan (notice of which shall be given to the Company by RFC, if it discovers the same), RFC shall, within 90 days after the earlier of its discovery or receipt of notice thereof, either cure such breach or Repurchase Event in all material respects or, except as otherwise provided in Section 2.04 of the Pooling and Servicing Agreement, either (i) purchase such Mortgage Loan from the Trustee or the Company, as the case may be, at a price equal to the Purchase Price for such Mortgage Loan or (ii) substitute a Qualified Substitute Mortgage Loan or Loans for such Mortgage Loan in the manner and subject to the limitations set forth in Section 2.04 of the Pooling and Servicing Agreement. If the breach of representation and warranty that gave rise to the obligation to repurchase or substitute a Mortgage Loan pursuant to this Section 4 was the representation and warranty set forth in clause (bb) of this Section 4, then RFC shall pay to the Trust Fund, concurrently with and in addition to the remedies provided in the preceding sentence, an amount equal to any liability, penalty or expense that was actually incurred and paid out of or on behalf of the Trust Fund, and that directly resulted from such breach, or if incurred and paid by the Trust Fund thereafter, concurrently with such payment. Notwithstanding the foregoing, RFC shall not be required to cure breaches, Repurchase Events or purchase or substitute for Mortgage Loans as provided above if the substance of such breach or Repurchase Event also constitutes fraud in the origination of the Mortgage Loan. 6 5. With respect to each Mortgage Loan, a repurchase event ("Repurchase Event") shall have occurred if one or both of the following occur: (A) it is discovered that, as of the date hereof, the related Mortgage was not a valid first lien on the related Mortgaged Property subject only to (i) the lien of real property taxes and assessments not yet due and payable, (ii) covenants, conditions, and restrictions, rights of way, easements and other matters of public record as of the date of recording of such Mortgage and such other permissible title exceptions as are listed in the Program Guide and (iii) other matters to which like properties are commonly subject which do not materially adversely affect the value, use, enjoyment or marketability of the Mortgaged Property or (B) it is discovered that, as of the time of its origination and as of the date of execution hereof, the Mortgage Loan did not comply in all material respects with all applicable local, state and federal laws. In addition, with respect to any Mortgage Loan listed on the attached Schedule A with respect to which any document or documents constituting a part of the Mortgage File are missing or defective in any material respect, if such Mortgage Loan subsequently is in default and the enforcement thereof or of the related Mortgage is materially and adversely affected by the absence or defectiveness of any such document or documents, a Repurchase Event shall be deemed to have occurred and RFC will be obligated to repurchase or substitute for such Mortgage Loan in the manner set forth in Section 4 above. 6. Concurrently with the execution and delivery hereof, RFC hereby assigns to the Company, and the Company hereby assumes, all of RFC's rights and obligations under the Seller Contracts with respect to the Mortgage Loans to be serviced under the Pooling and Servicing Agreement, insofar as such rights and obligations relate to (a) any representations and warranties regarding a Mortgage Loan made by a Seller under any Seller Contract and any remedies available under the Seller Contract for a breach of any such representations and warranties if (i) the substance of such breach also constitutes fraud in the origination of the Mortgage Loan or (ii) the representation and warranty relates to the absence of toxic materials or other environmental hazards that could affect the Mortgaged Property, or (b) the Seller's obligation to deliver to RFC the documents required to be contained in the Mortgage File and any rights and remedies available to RFC under the Seller Contract in respect of such obligation or in the event of a breach of such obligation; provided that, notwithstanding the assignment and assumption hereunder, RFC shall have the concurrent right to exercise remedies and pursue indemnification upon a breach by a Seller under any Seller Contract of any of its representations and warranties and RFC shall exercise reasonable efforts to enforce a Seller's obligation to purchase a Mortgage Loan from the Company in accordance with the time frame described in the Program Guide. If the Company or RFC asserts that it is not required to cure breaches or to purchase or substitute for Mortgage Loans under the Pooling and Servicing Agreement because the substance of the breach also constitutes fraud in the origination of any Mortgage Loan, then the substance of the related breach shall automatically be deemed to constitute fraud in the origination of a Mortgage Loan for purposes of clause (i) of this Section 6; provided, however, that if the related Seller provides RFC with reasonable evidence that the substance of such breach does not constitute fraud, then it shall no longer be deemed to constitute fraud in the origination of a Mortgage Loan for purposes of clause (i) of this Section 6. 7. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns, and no other person shall have any right or obligation hereunder. 7 8. RFC, as master servicer under the Pooling and Servicing Agreement (the "Master Servicer"), shall not waive (or permit a sub-servicer to waive) any Prepayment Charge unless: (i) the enforceability thereof shall have been limited by bankruptcy, insolvency, moratorium, receivership and other similar laws relating to creditors' rights generally, (ii) the enforcement thereof is illegal, or any local, state or federal agency has threatened legal action if the prepayment penalty is enforced, (iii) the collectability thereof shall have been limited due to acceleration in connection with a foreclosure or other involuntary payment or (iv) such waiver is standard and customary in servicing similar Mortgage Loans and relates to a default or a reasonably foreseeable default and would, in the reasonable judgment of the Master Servicer, maximize recovery of total proceeds taking into account the value of such Prepayment Charge and the related Mortgage Loan. In no event will the Master Servicer waive a Prepayment Charge in connection with a refinancing of a Mortgage Loan that is not related to a default or a reasonably foreseeable default. If a Prepayment Charge is waived, but does not meet the standards described above, then the Master Servicer is required to pay the amount of such waived Prepayment Charge to the holder of the Class SB Certificates at the time that the amount prepaid on the related Mortgage Loan is required to be deposited into the Custodial Account. Notwithstanding any other provisions of this Agreement, any payments made by the Master Servicer in respect of any waived Prepayment Charges pursuant to this Section shall be deemed to be paid outside of the Trust Fund and not part of any REMIC. 9. This Agreement will be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of law principles thereof, other than Sections 5-1401 and 5-1402 of the New York General Obligations Law. 8 IN WITNESS WHEREOF, the parties have entered into this Assignment and Assumption Agreement as of the date first above written. RESIDENTIAL FUNDING CORPORATION By: /s/ Tim Jacobson ------------------------------------- Name: Tim Jacobson Title: Associate RESIDENTIAL ASSET MORTGAGE PRODUCTS, INC. By: /s/ Joseph Orning ------------------------------------- Name: Joseph Orning Title: Vice President SCHEDULE A Schedule of Mortgage Loans with Defective Mortgage Files (see attached) SCHEDULE B Schedule of Mortgage Loans with original term to maturity of 360 months and an original amortization term of 480 months (see attached) EXHIBIT 1 APPENDIX E - STANDARD & POOR'S PREDATORY LENDING CATEGORIES Standard & Poor's has categorized loans governed by anti-predatory lending laws in the Jurisdictions listed below into three categories based upon a combination of factors that include (a) the risk exposure associated with the assignee liability and (b) the tests and thresholds set forth in those laws. Note that certain loans classified by the relevant statute as Covered are included in Standard & Poor's High Cost Loan Category because they included thresholds and tests that are typical of what is generally considered High Cost by the industry. REVISED April 18, 2006 STANDARD & POOR'S HIGH COST LOAN CATEGORIZATION --------------------------------------------------------------------------------------------------------------------- State/Jurisdiction Name of Anti-Predatory Lending Category under Applicable Law/Effective Date Anti-Predatory Lending Law --------------------------------------------------------------------------------------------------------------------- Arkansas Arkansas Home Loan Protection Act, Ark. Code High Cost Home Loan Ann. ss.ss. 23-53-101 et seq. Effective July 16, 2003 --------------------------------------------------------------------------------------------------------------------- Cleveland Heights, OH Ordinance No. 72-2003 (PSH), Mun. Code ss.ss. Covered Loan 757.01 et seq. Effective June 2, 2003 --------------------------------------------------------------------------------------------------------------------- Colorado Consumer Equity Protection, Colo. Stat. Ann. Covered Loan ss.ss. 5-3.5-101 et seq. Effective for covered loans offered or entered into on or after January 1, 2003. Other provisions of the Act took effect on June 7, 2002 --------------------------------------------------------------------------------------------------------------------- Connecticut Connecticut Abusive Home Loan Lending Practices High Cost Home Loan Act, Conn. Gen. Stat. ss.ss. 36a-746 et seq. Effective October 1, 2001 --------------------------------------------------------------------------------------------------------------------- District of Columbia Home Loan Protection Act, D.C. Code ss.ss. Covered Loan 26-1151.01 et seq. Effective for loans closed on or after January 28, 2003 --------------------------------------------------------------------------------------------------------------------- Florida Fair Lending Act, Fla. Stat. Ann. ss.ss. High Cost Home Loan 494.0078 et seq. Effective October 2, 2002 --------------------------------------------------------------------------------------------------------------------- STANDARD & POOR'S HIGH COST LOAN CATEGORIZATION --------------------------------------------------------------------------------------------------------------------- State/Jurisdiction Name of Anti-Predatory Lending Category under Applicable Law/Effective Date Anti-Predatory Lending Law --------------------------------------------------------------------------------------------------------------------- Georgia (Oct. 1, 2002 - Mar. 6, Georgia Fair Lending Act, Ga. Code Ann. ss.ss. High Cost Home Loan 2003) 7-6A-1 et seq. Effective October 1, 2002 - March 6, 2003 --------------------------------------------------------------------------------------------------------------------- Georgia as amended (Mar. 7, 2003 Georgia Fair Lending Act, Ga. Code Ann. ss.ss. High Cost Home Loan - current) 7-6A-1 et seq. Effective for loans closed on or after March 7, 2003 --------------------------------------------------------------------------------------------------------------------- HOEPA Section 32 Home Ownership and Equity Protection Act of High Cost Loan 1994, 15 U.S.C. ss. 1639, 12 C.F.R. ss.ss. 226.32 and 226.34 Effective October 1, 1995, amendments October 1, 2002 --------------------------------------------------------------------------------------------------------------------- Illinois High Risk Home Loan Act, Ill. Comp. Stat. tit. High Risk Home Loan 815, ss.ss. 137/5 et seq. Effective January 1, 2004 (prior to this date, regulations under Residential Mortgage License Act effective from May 14, 2001) --------------------------------------------------------------------------------------------------------------------- Kansas Consumer Credit Code, Kan. Stat. Ann. ss.ss. High Loan to Value Consumer 16a-1-101 et seq. Loan (id. ss. 16a-3-207) and; Sections 16a-1-301 and 16a-3-207 became effective April 14, 1999; Section 16a-3-308a -------------------------------- became effective July 1, 1999 High APR Consumer Loan (id. ss. 16a-3-308a) --------------------------------------------------------------------------------------------------------------------- Kentucky 2003 KY H.B. 287 - High Cost Home Loan Act, Ky. High Cost Home Loan Rev. Stat. ss.ss. 360.100 et seq. Effective June 24, 2003 --------------------------------------------------------------------------------------------------------------------- Maine Truth in Lending, Me. Rev. Stat. tit. 9-A, High Rate High Fee Mortgage ss.ss. 8-101 et seq. Effective September 29, 1995 and as amended from time to time --------------------------------------------------------------------------------------------------------------------- STANDARD & POOR'S HIGH COST LOAN CATEGORIZATION --------------------------------------------------------------------------------------------------------------------- State/Jurisdiction Name of Anti-Predatory Lending Category under Applicable Law/Effective Date Anti-Predatory Lending Law --------------------------------------------------------------------------------------------------------------------- Massachusetts Part 40 and Part 32, 209 C.M.R. ss.ss. 32.00 et High Cost Home Loan seq. and 209 C.M.R. ss.ss. 40.01 et seq. Effective March 22, 2001 and amended from time to time --------------------------------------------------------------------------------------------------------------------- Nevada Assembly Bill No. 284, Nev. Rev. Stat. ss.ss. Home Loan 598D.010 et seq. Effective October 1, 2003 --------------------------------------------------------------------------------------------------------------------- New Jersey New Jersey Home Ownership Security Act of 2002, High Cost Home Loan N.J. Rev. Stat. ss.ss. 46:10B-22 et seq. Effective for loans closed on or after November 27, 2003 --------------------------------------------------------------------------------------------------------------------- New Mexico Home Loan Protection Act, N.M. Rev. Stat. High Cost Home Loan ss.ss. 58-21A-1 et seq. Effective as of January 1, 2004; Revised as of February 26, 2004 --------------------------------------------------------------------------------------------------------------------- New York N.Y. Banking Law Article 6-l High Cost Home Loan Effective for applications made on or after April 1, 2003 --------------------------------------------------------------------------------------------------------------------- North Carolina Restrictions and Limitations on High Cost Home High Cost Home Loan Loans, N.C. Gen. Stat. ss.ss. 24-1.1E et seq. Effective July 1, 2000; amended October 1, 2003 (adding open-end lines of credit) --------------------------------------------------------------------------------------------------------------------- Ohio H.B. 386 (codified in various sections of the Covered Loan Ohio Code), Ohio Rev. Code Ann. ss.ss. 1349.25 et seq. Effective May 24, 2002 --------------------------------------------------------------------------------------------------------------------- Oklahoma Consumer Credit Code (codified in various Subsection 10 Mortgage sections of Title 14A) Effective July 1, 2000; amended effective January 1, 2004 --------------------------------------------------------------------------------------------------------------------- STANDARD & POOR'S HIGH COST LOAN CATEGORIZATION --------------------------------------------------------------------------------------------------------------------- State/Jurisdiction Name of Anti-Predatory Lending Category under Applicable Law/Effective Date Anti-Predatory Lending Law --------------------------------------------------------------------------------------------------------------------- South Carolina South Carolina High Cost and Consumer Home High Cost Home Loan Loans Act, S.C. Code Ann. ss.ss. 37-23-10 et seq. Effective for loans taken on or after January 1, 2004 --------------------------------------------------------------------------------------------------------------------- West Virginia West Virginia Residential Mortgage Lender, West Virginia Mortgage Loan Broker and Servicer Act, W. Va. Code Ann. Act Loan ss.ss. 31-17-1 et seq. Effective June 5, 2002 --------------------------------------------------------------------------------------------------------------------- STANDARD & POOR'S COVERED LOAN CATEGORIZATION --------------------------------------------------------------------------------------------------------------------- Category under Name of Anti-Predatory Lending Applicable Anti- State/Jurisdiction Law/Effective Date Predatory Lending Law --------------------------------------------------------------------------------------------------------------------- Georgia (Oct. 1, 2002 - Mar. 6, Georgia Fair Lending Act, Ga. Code Ann. ss.ss. Covered Loan 2003) 7-6A-1 et seq. Effective October 1, 2002 - March 6, 2003 --------------------------------------------------------------------------------------------------------------------- New Jersey New Jersey Home Ownership Security Act of 2002, Covered Home Loan N.J. Rev. Stat. ss.ss. 46:10B-22 et seq. Effective November 27, 2003 - July 5, 2004 --------------------------------------------------------------------------------------------------------------------- Standard & Poor's Home Loan Categorization --------------------------------------------------------------------------------------------------------------------- Category under Name of Anti-Predatory Lending Applicable Anti- State/Jurisdiction Law/Effective Date Predatory Lending Law --------------------------------------------------------------------------------------------------------------------- Georgia (Oct. 1, 2002 - Mar. 6, Georgia Fair Lending Act, Ga. Code Ann. ss.ss. Home Loan 2003) 7-6A-1 et seq. Effective October 1, 2002 - March 6, 2003 --------------------------------------------------------------------------------------------------------------------- New Jersey New Jersey Home Ownership Security Act of 2002, Home Loan N.J. Rev. Stat. ss.ss. 46:10B-22 et seq. Effective for loans closed on or after November 27, 2003 --------------------------------------------------------------------------------------------------------------------- New Mexico Home Loan Protection Act, N.M. Rev. Stat. Home Loan ss.ss. 58-21A-1 et seq. Effective as of January 1, 2004; Revised as of February 26, 2004 --------------------------------------------------------------------------------------------------------------------- North Carolina Restrictions and Limitations on High Cost Home Consumer Home Loan Loans, N.C. Gen. Stat. ss.ss. 24-1.1E et seq. Effective July 1, 2000; amended October 1, 2003 (adding open-end lines of credit) --------------------------------------------------------------------------------------------------------------------- South Carolina South Carolina High Cost and Consumer Home Consumer Home Loan Loans Act, S.C. Code Ann. ss.ss. 37-23-10 et seq. Effective for loans taken on or after January 1, 2004 ---------------------------------------------------------------------------------------------------------------------

  [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Exhibit 10.25 EXECUTION COPY   PURCHASE OPTION AGREEMENT by and among DYNAVAX TECHNOLOGIES CORPORATION, SYMPHONY DYNAMO HOLDINGS LLC and SYMPHONY DYNAMO, INC.   Dated as of April 18, 2006           [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement   --------------------------------------------------------------------------------   TABLE OF CONTENTS               Page Section 1. Grant of Purchase Option     2             Section 2. Exercise of Purchase Option     3             Section 2A. Put Option     6             Section 3. Dynavax Representations, Warranties and Covenants     7             Section 4. Holdings Representations, Warranties and Covenants     9             Section 5. Symphony Dynamo Representations, Warranties and Covenants     13             Section 6. Notice of Material Event     21             Section 7. Assignment; Transfers; Legend     21             Section 8. Costs and Expenses; Payments     22             Section 9. Expiration; Termination of Agreement     22             Section 10. Survival; Indemnification     22             Section 11. No Petition     25             Section 12. Third-Party Beneficiary     25             Section 13. Notices     25             Section 14. Governing Law; Consent to Jurisdiction and Service of Process     27             SECTION 15. WAIVER OF JURY TRIAL     27             Section 16. Entire Agreement     27             Section 17. Amendment; Successors; Counterparts     27             Section 18. Specific Performance     28             Section 19. Severability     28             Section 20. Tax Reporting     28             Schedule I Quarterly Price Table                   Annex A Certain Definitions                   Exhibit 1 Purchase Option Exercise Notice                   Exhibit 2 Form of opinion of Cooley Godward LLP         [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement   --------------------------------------------------------------------------------   PURCHASE OPTION AGREEMENT           This PURCHASE OPTION AGREEMENT (this “Agreement”) is entered into as of April 18, 2006 (the “Closing Date”) by and among DYNAVAX TECHNOLOGIES CORPORATION, a Delaware corporation (“Dynavax”), SYMPHONY DYNAMO HOLDINGS LLC, a Delaware limited liability company (“Holdings”), and SYMPHONY DYNAMO, INC., a Delaware corporation (“Symphony Dynamo”). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in Annex A attached hereto. PRELIMINARY STATEMENT           WHEREAS, Dynavax and Holdings have entered into a Technology License Agreement pursuant to which Dynavax has granted Holdings an exclusive license (the “License”) to the use of certain intellectual property related to the Programs owned or controlled by Dynavax;           WHEREAS, contemporaneously with the execution of this Agreement, Dynavax, Holdings and Symphony Dynamo are entering into a Novated and Restated Technology License Agreement, pursuant to which, among other things, Holdings will assign by way of novation the License to Symphony Dynamo;           WHEREAS, Dynavax and Holdings have entered into a Research and Development Agreement pursuant to which Dynavax has agreed, among other things, to perform, on behalf of Holdings, research and development of the Programs;           WHEREAS, contemporaneously with the execution of this Agreement, Dynavax, Holdings and Symphony Dynamo are entering into an Amended and Restated Research and Development Agreement, pursuant to which, among other things, Holdings will assign its rights and obligations under the Research and Development Agreement to Symphony Dynamo;           WHEREAS, contemporaneously with the execution of this Agreement, in order to fund such research and development, institutional investors are committing to invest $50,000,000 in Holdings (the “Financing”) in exchange for membership interests in Holdings and for a warrant to purchase up to a total of 2,000,000 shares of Dynavax Common Stock (the “Warrant”), to be initially issued to Holdings, and Holdings will agree to contribute the net proceeds of the Financing to Symphony Dynamo;           WHEREAS, Holdings desires, in consideration for the Warrant, to grant Dynavax an option to purchase all of the Common Stock of Symphony Dynamo and any other Equity Securities issued by Symphony Dynamo (together, the “Symphony Dynamo Equity Securities”) owned, or hereinafter acquired, by Holdings on the terms described in this Agreement; and           WHEREAS, Symphony Dynamo and Holdings have determined that it is in each of its best interest to perform and comply with certain agreements and covenants relating to each of its ongoing operations contained in this Agreement; [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement   --------------------------------------------------------------------------------             NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto (the “Parties”) agree as follows:           Section 1. Grant of Purchase Option.           (a) Holdings hereby grants to Dynavax an exclusive option (the “Purchase Option”) to purchase all, but not less than all, of the outstanding Symphony Dynamo Equity Securities owned or hereinafter acquired by Holdings, in accordance with the terms of this Agreement.           (b) Symphony Dynamo hereby covenants and agrees that all Symphony Dynamo Equity Securities issued by Symphony Dynamo at any time prior to the expiration of the Term (including to Holdings on, prior to, or after the date hereof or to any other Person at any time whatsoever, in all cases prior to the expiration of the Term) shall be subject to a purchase option on the same terms as the Purchase Option (except as provided by the immediately following sentence) and all of the other terms and conditions of this Agreement without any additional action on the part of Dynavax or Holdings. Further, to the extent Symphony Dynamo shall issue any Symphony Dynamo Equity Securities (including any issuance in respect of a transfer of Symphony Dynamo Equity Securities by any holder thereof, including Holdings) after the date hereof to any Person (including Holdings) (any issuance of such Symphony Dynamo Equity Securities being subject to the prior written consent of Dynavax as set forth in Sections 5(c) and 7(b) hereof, as applicable), Symphony Dynamo hereby covenants and agrees that it shall cause such Symphony Dynamo Equity Securities to be subject to the Purchase Option without the payment of, or any obligation to pay, any additional consideration in respect of such Symphony Dynamo Equity Securities by Dynavax, Symphony Dynamo or any Symphony Dynamo Subsidiary to the Person(s) acquiring such subsequently issued Symphony Dynamo Equity Securities, the Parties acknowledging and agreeing that the sole consideration payable by Dynavax pursuant to this Agreement for all of the outstanding Symphony Dynamo Equity Securities now or hereinafter owned by any Person shall be the Purchase Price.           (c) Dynavax’s right to exercise the Purchase Option granted hereby is subject to the following conditions:      (i) The Purchase Option may only be exercised for the purchase of all, and not less than all, of Holdings’ Symphony Dynamo Equity Securities;           (ii) The Purchase Option may only be exercised a single time;      (iii) Except as expressly provided in Section 1(c)(iv), the Purchase Option may be exercised only during the period (the “Purchase Option Period”) commencing on and including April 18, 2007, (the “Purchase Option Commencement Date”) and ending on and including the earlier of (x) April 18, 2011 and (y) the [ * ] day immediately following the first date on which an internally prepared, unaudited, balance sheet of Symphony Dynamo (prepared in accordance with GAAP) is delivered to Dynavax stating that the aggregate amount of (A) cash and cash equivalents held by Symphony Dynamo and (B) [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 2 --------------------------------------------------------------------------------   cash that will be received in connection with a pending Funding Notice provided by Holdings to the Investors pursuant to the Funding Agreement is less than [ * ]; and      (iv) In the event that Holdings terminates the Amended and Restated Research and Development Agreement pursuant to Section 17.2 thereof, Dynavax [ * ] to notify Holdings of its exercise of the Purchase Option under the terms of this Agreement. Such exercise of the Purchase Option by Dynavax may occur prior to the Purchase Option Commencement Date (an “Early Purchase Option Exercise”).           Section 2. Exercise of Purchase Option.           (a) Exercise Notice. Dynavax may exercise the Purchase Option only by delivery of a notice in the form attached hereto as Exhibit 1 (the “Purchase Option Exercise Notice”) during the Purchase Option Period. The Purchase Option Exercise Notice shall be delivered on a Business Day to Holdings and Symphony Dynamo and shall be irrevocable once delivered. The date on which the Purchase Option Exercise Notice is first delivered to Holdings and Symphony Dynamo is referred to as the “Purchase Option Exercise Date.” The Purchase Option Exercise Notice shall contain (1) an estimated date for the settlement of the Purchase Option (the “Purchase Option Closing”), which date shall be estimated in accordance with this Section 2(a), (2) the Purchase Price, determined in accordance with Section 2(b) hereof, and (3) if Dynavax intends to pay part of the Purchase Price in Dynavax Common Stock, notice of such intent, the number of shares to be transferred as such purchase price, the valuation thereof and the percentage such portion bears to (A) the Purchase Price, and (B) the total amount of Dynavax Common Stock then issued and outstanding (which shall be no greater percentages than are permitted under Section 2(c)). Such notice and election shall be irrevocable once given and made. If, during the period following delivery of the Purchase Option Exercise Notice, the amount of cash and cash equivalents held by Symphony Dynamo is an amount less than or equal to [ * ] then Symphony Dynamo shall cease payment of any amounts owed to Dynavax in respect of its activities pursuant to the Amended and Restated Research and Development Agreement, but shall continue to pay amounts owed to all other Persons. The date of the Purchase Option Closing (the “Purchase Option Closing Date”) shall be determined as follows:      (i) If Dynavax elects to pay the entire Purchase Price in cash, the Purchase Option Closing Date shall be the date [ * ]; and (B) if Dynavax determines that an HSR Filing is required, [ * ] following the date that Dynavax receives the necessary Government Approvals related to its HSR Filings; provided, however that Dynavax and Holdings shall make all necessary HSR Filings within [ * ] following the Purchase Option Exercise Date and shall diligently pursue the related regulatory process; and provided, further that (1) if there is no second request from the Federal Trade Commission or the Department of Justice, as applicable, with respect to Dynavax’s or Holdings’ HSR Filings, then in no event shall the Purchase Option Closing Date be more than [ * ] following the Purchase Option Exercise Date, and (2) if there is a second request from the Federal Trade Commission or the Department of Justice, as applicable, with respect to Dynavax’s or Holdings’ HSR Filings, then in no event shall the Purchase Option Closing Date be more than [ * ] days following the Purchase Option Exercise Date. If Dynavax shall fail to make such cash payment within such [ * ] day period or [ * ] day period, as applicable, then in addition to any other rights that Holdings shall have [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 3 --------------------------------------------------------------------------------   hereunder, this Agreement shall terminate and Dynavax shall relinquish all rights hereunder to purchase the Symphony Dynamo Equity Securities; or      (ii) If Dynavax elects to pay a portion of the Purchase Price in Dynavax Common Stock (subject to the limitations set forth herein and in the Registration Rights Agreement), the Purchase Option Closing Date shall be the date that is the later of:      (A) [ * ] following the Effective Registration Date of such Dynavax Common Stock; provided, that Dynavax shall file the Registration Statement contemplated by Section 3(b)(i) within (x) [ * ] Business Days after the Purchase Option Exercise Date if Dynavax is eligible to use Form S-3 under the Securities Act (or any successor form), or (y) [ * ] Business Days after the Purchase Option Exercise Date if Dynavax is not eligible to use Form S-3 under the Securities Act (or any successor form); and      (B) [ * ] following the date that Dynavax receives the necessary Government Approvals related to its HSR Filings; provided, however, that Dynavax and Holdings shall make all necessary HSR Filings within [ * ] following the Purchase Option Exercise Date and shall diligently pursue the related regulatory process; provided, further, that Dynavax shall use commercially reasonable efforts to have such Registration Statement declared effective by the United States Securities and Exchange Commission as promptly as possible. In the event that such Registration Statement is not declared effective within [ * ] days of the Purchase Option Exercise Date, Dynavax shall pay the full Purchase Price in cash within two (2) Business Days thereafter (in which event the Purchase Option Closing Date shall be the date upon which such cash payment is made by Dynavax). If Dynavax shall fail to make such cash payment within such two (2) Business Day period, then in addition to any other rights that Holdings shall have hereunder, this Agreement shall terminate and Dynavax shall relinquish all rights hereunder to purchase the Symphony Dynamo Equity Securities.           (b) Purchase Price Upon Option Exercise. Upon exercise of the Purchase Option and as complete and full consideration for the sale to Dynavax by Holdings of its Symphony Dynamo Equity Securities (and for the Symphony Dynamo Equity Securities of any other Person), Dynavax shall pay to Holdings the “Purchase Price”, as follows:      (i) If the Purchase Option is exercised on or after the Purchase Option Commencement Date and prior to the date that is the first date [ * ] (the “Purchase Option Interim Date”), then the Purchase Price shall be an amount equal to (x) the amount set forth on Schedule I applicable to [ * ] (the “Quarterly Price”), plus (y) an amount equal to the amount of the [ * ] by [ * ]; provided, that in no event shall the total Purchase Price under this Section 2(b)(i) exceed [ * ], as set forth on Schedule I hereto; or      (ii) If the Purchase Option is exercised on or after the Purchase Option Interim Date, then the Purchase Price shall be an amount equal to the applicable Quarterly Price; or [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 4 --------------------------------------------------------------------------------        (iii) In the event of an Early Purchase Option Exercise, pursuant to Section 1(c)(iv) hereof, the Purchase Price shall be an amount equal to the amount set forth on Schedule I [ * ].           (c) Form of Payment. Subject to Sections 2(a) and 2(e), the Purchase Price may be paid in cash or in a combination of cash and Dynavax Common Stock, at the sole discretion of Dynavax; provided, that in no event may the value of Dynavax Common Stock (determined in accordance with Section 2(e) hereof) delivered in connection with the exercise of the Purchase Option constitute more than either [ * ].           (d) Surrender of Symphony Dynamo Equity Securities. Subject to the terms and conditions of this Agreement, on or prior to the Purchase Option Closing Date, Holdings shall surrender to Dynavax its certificates representing its Symphony Dynamo Equity Securities, and shall convey good title to such Symphony Dynamo Equity Securities, free from any Encumbrances and from any and all restrictions that any sale, assignment or other transfer of such Symphony Dynamo Equity Securities be consented to or approved by any Person. On or prior to the Purchase Option Closing Date, Holdings shall remove all directors serving on the Symphony Dynamo Board, other than the Dynavax Director (as defined in Section 4(b)(iv) hereof) from the Symphony Dynamo Board as of the Purchase Option Closing Date.           (e) Valuation of Dynavax Stock. In the event that Dynavax elects to pay part of the Purchase Price through the delivery to Holdings of Dynavax Common Stock, the value per share thereof (the “Dynavax Common Stock Valuation”) shall equal the average closing price of Dynavax Common Stock, as reported by the NASDAQ National Market, or other national exchange that is the primary exchange on which Dynavax Common Stock is listed, for the thirty (30) trading days immediately preceding the second trading day prior to the Purchase Option Exercise Date. If Dynavax Common Stock is not traded on a national exchange or the NASDAQ National Market, then Dynavax shall be obligated to pay the Purchase Price solely in cash on the Purchase Option Closing Date. Dynavax shall calculate the Dynavax Common Stock Valuation in accordance with this Section 2(e), subject to review and confirmation by Holdings.           (f) Share Certificates. Any stock certificate(s) issued by Dynavax for Dynavax Common Stock pursuant to this Section 2 may contain a legend (the “33 Act Legend”) substantially as follows: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE, AND THE SAME HAVE BEEN ISSUED IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT AS PERMITTED UNDER SUCH SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. This legend shall be removed by Dynavax, subject to, and in accordance with, the terms of Section 3(b)(iii) hereof. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 5 --------------------------------------------------------------------------------             (g) Government Approvals. On or prior to the Purchase Option Closing Date, each of Dynavax, Symphony Dynamo and Holdings shall have taken all necessary action to cause all Governmental Approvals with respect to such Party (including, if deemed necessary and without limitation, the preparing and filing of the pre-merger notification and report forms required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Filings”)) required to be in effect in connection with the transactions contemplated by this Agreement to be in effect; provided, however, that with respect to Government Approvals required by a Governmental Authority other than the United States federal government and its various branches and agencies, the Parties’ obligations under this Section 2(g) shall be limited to causing to be in effect only those Government Approvals, the failure of which to be in effect would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on any of the Parties. Each of Symphony Dynamo and Dynavax shall pay its own costs associated with taking such action. Symphony Dynamo shall pay any costs of Holdings associated with obtaining Government Approvals required in connection with the exercise of the Purchase Option. All other costs and expenses of Holdings shall be paid by Holdings pursuant to Section 8(b) hereof, including any costs arising from any error in Holdings’ initial valuation of its investment in Symphony Dynamo.           (h) Transfer of Title. Transfer of title to Dynavax of all of the Symphony Dynamo Equity Securities shall be deemed to occur automatically on the Purchase Option Closing Date, subject to the payment by Dynavax on such date of the Purchase Price and its performance of its other obligations herein required to be performed under Sections 2(e) and (g), and under the Registration Rights Agreement, as applicable, on or prior to the Purchase Option Closing Date to the reasonable satisfaction of Holdings, and thereafter Symphony Dynamo shall treat Dynavax as the sole holder of all Symphony Dynamo Equity Securities, notwithstanding the failure of Holdings to tender certificates representing such shares to Dynavax in accordance with Section 2(d) hereof. After the Purchase Option Closing Date, Holdings shall have no rights in connection with such Symphony Dynamo Equity Securities other than the right to receive the Purchase Price; provided, however, that nothing in this Section 2(h) shall affect the survivability of any indemnification provision in this Agreement upon termination of this Agreement.           (i) Consents and Authorizations. On or prior to the Purchase Option Closing Date, Dynavax shall have obtained all consents and authorizations necessary from stockholders and/or its board of directors for the consummation of the exercise and closing of the Purchase Option, as may be required under the organizational documents of Dynavax, any prior stockholders or board resolution, any stock exchange or similar rules or any applicable law; provided, however, that with respect to consents or authorizations required by a Governmental Authority other than the United States federal government and its various branches and agencies, the Parties’ obligations under this Section 2(i) shall be limited to obtaining only those consents and authorizations, the failure of which to be obtained would, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on any of the Parties.           Section 2A. Put Option.           (a) Holdings has an exclusive put option (the “Put Option”) for 100% of the Symphony Dynamo Equity Securities which may be exercised if, [ * ] after Holdings has delivered written notice thereof to such successor entity. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 6 --------------------------------------------------------------------------------             (b) Holdings may exercise the Put Option only by delivery of written notice (the “Put Option Exercise Notice”) during the Purchase Option Period. The Put Option Exercise Notice shall be delivered on a Business Day to the successor entity to Dynavax, with a copy to Symphony Dynamo, and shall thereafter be deemed for all purposes under the terms of this Agreement to be a Purchase Option Exercise Notice by Dynavax (in accordance with the provisions of Section 2 hereof) as of the date such notice is delivered (such date to be deemed for all purposes under the terms of this Agreement as the Purchase Option Exercise Date), and all references to Dynavax and Dynavax Common Stock in Section 2 shall be deemed references to the successor entity to Dynavax and its common stock, respectively. The Purchase Price with respect to such an exercise of the Put Option shall be the Purchase Price otherwise applicable (under Section 2(b) hereof) to the Purchase Option Closing Date selected by Dynavax following Dynavax’s receipt of the Put Option Exercise Notice.           Section 3. Dynavax Representations, Warranties and Covenants.           (a) As of the date hereof, Dynavax hereby represents and warrants, and, except to the extent that any of the following representations and warranties is limited to the date of this Agreement or otherwise limited, on the Purchase Option Closing Date, shall be deemed to have represented and warranted, to Holdings and Symphony Dynamo that:      (i) Organization. Dynavax is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware.      (ii) Authority and Validity. Dynavax has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by Dynavax of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary action required on the part of Dynavax, and no other proceedings on the part of Dynavax are necessary to authorize this Agreement or for Dynavax to perform its obligations under this Agreement. This Agreement constitutes the lawful, valid and legally binding obligation of Dynavax, enforceable in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles regardless of whether such enforceability is considered in a proceeding at law or in equity.      (iii) No Violation or Conflict. The execution, delivery and performance of this Agreement and the transactions contemplated hereby do not (A) violate, conflict with or result in the breach of any provision of the Organizational Documents of Dynavax, (B) as of the date of this Agreement, and as of the Purchase Option Closing Date if Dynavax elects to pay part of the Purchase Price through the delivery of Dynavax Common Stock (a “Partial Stock Payment”), conflict with or violate any law or Governmental Order applicable to Dynavax or any of its assets, properties or businesses, or (C) conflict with, result in any breach of, constitute a default (or event that with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 7 --------------------------------------------------------------------------------   cancellation of, or result in the creation of any Encumbrance on any of the assets or properties of Dynavax, pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which Dynavax is a party except, in the case of clauses (B) and (C), to the extent that such conflicts, breaches, defaults or other matters would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Dynavax.      (iv) Governmental Consents and Approvals. The execution, delivery and performance of this Agreement by Dynavax do not, and the consummation of the transactions contemplated hereby (which transactions shall not include the exercise of the Purchase Option) do not and will not, require any Governmental Approval which has not already been obtained, effected or provided, except with respect to which the failure to so obtain, effect or provide would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Dynavax.      (v) Litigation. As of the date of this Agreement, and as of the Purchase Option Closing Date if Dynavax elects to make a Partial Stock Payment, there are no actions by or against Dynavax pending before any Governmental Authority or, to the knowledge of Dynavax, threatened to be brought by or before any Governmental Authority, that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Dynavax. There are no pending or, to the knowledge of Dynavax, threatened actions, to which Dynavax is a party (or is threatened to be named as a party) to set aside, restrain, enjoin or prevent the execution, delivery or performance of this Agreement or the Operative Documents or the consummation of the transactions contemplated hereby or thereby by any party hereto or thereto. As of the date of this Agreement, and as of the Purchase Option Closing Date if Dynavax elects to make a Partial Stock Payment, Dynavax is not subject to any Governmental Order (nor, to the knowledge of Dynavax, is there any such Governmental Order threatened to be imposed by any Governmental Authority) that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Dynavax.           (b) Dynavax hereby covenants and agrees with Holdings as follows:      (i) Immediately prior to the Purchase Option Closing Date, Dynavax shall have sufficient amounts of cash and, if applicable, authorized but unissued, freely transferable and nonassessable Dynavax Common Stock available to satisfy the portion of the Purchase Price to be paid in cash or Dynavax Common Stock pursuant to Sections 2(b) and 2(c). In the event that Dynavax elects to satisfy any portion of the Purchase Price in Dynavax Common Stock, (A) Dynavax shall have not later than the Purchase Option Closing Date, a Registration Statement declared effective by the Securities and Exchange Commission for the resale of any such shares of Dynavax Common Stock to be delivered in partial satisfaction of the Purchase Price, accompanied by evidence reasonably acceptable to Holdings that such Dynavax Common Stock has been approved for listing on the NASDAQ national market or such other national market on which the Dynavax Common Stock is then listed, and (B) Dynavax shall deliver to Holdings on or prior to the Purchase Option Closing Date, a legal opinion of Cooley Godward LLP (or such other counsel as Dynavax and Holdings shall mutually agree) on the issuance and [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 8 --------------------------------------------------------------------------------   sale of such Dynavax Common Stock, which opinion shall be, in form and substance reasonably acceptable to Holdings.      (ii) If Dynavax elects to satisfy any portion of the Purchase Price in Dynavax Common Stock, Dynavax shall convey good and marketable title to such Dynavax Common Stock, free from any Encumbrances and any and all other restrictions that any issuance, sale, assignment or other transfer of such Dynavax Common Stock be consented to or approved by any Person.      (iii) If the share certificates representing such Dynavax Common Stock include the 33 Act Legend (as set forth in Section 2(f) hereof), Dynavax shall, within two (2) Business Days of receiving a request from Holdings or any “Investor” (as defined in the Registration Rights Agreement), remove or cause to be removed the 33 Act Legend from the such share certificates as Holdings or such Investor shall designate, so long as (x) the Dynavax Common Stock represented by such share certificates has been transferred to a third party in compliance with the registration requirements of the Securities Act or an available exemption therefrom, and (y) Dynavax receives a certification from Holdings, such Investor or a securities broker designated by Holdings or such Investor to the effect that the sale of such Dynavax Common Stock was made under a Registration Statement and accompanied by the delivery of a current prospectus.      (iv) Upon the expiration of the Purchase Option or the termination of this Agreement pursuant to Section 9 hereof, or as soon thereafter as is practical, Dynavax shall (A) in accordance with Sections 2.7 and 2.8 of the Novated and Restated Technology License Agreement, deliver to Symphony Dynamo all regulatory submissions, clinical master files, development plans, consultant inputs, manufacturing reports and, to the extent requested by Symphony, other materials, documents, files and other information relating to the Programs and necessary to enable Symphony Dynamo to continue the development of the Programs (or, where necessary, copies thereof), and (B) in accordance with and pursuant to Section 2.12 of the Novated and Restated Technology License Agreement, negotiate in good faith, and on commercially reasonable terms and conditions, a supply agreement relating to materials, including compounds and Products, required by Symphony Dynamo or its partners or transferees for the continued development (including clinical development), manufacture and commercialization of Products.      (v) In the event that Dynavax exercises the Purchase Option, then Dynavax shall maintain the separate corporate existence of Symphony Dynamo for a minimum of two (2) years following such exercise, unless such maintenance would have a Material Adverse Effect on Dynavax or any of its Affiliates.           Section 4. Holdings Representations, Warranties and Covenants.           (a) As of the date hereof, Holdings hereby represents and warrants, and, except to the extent that any of the following representations and warranties is limited to the date of this Agreement or otherwise limited, on the Purchase Option Closing Date, shall be deemed to have represented and warranted, to Dynavax and Symphony Dynamo that: [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 9 --------------------------------------------------------------------------------        (i) Organization. Holdings is a limited liability company, duly formed, validly existing and in good standing under the laws of the State of Delaware.      (ii) Authority and Validity. Holdings has all requisite limited liability company power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by Holdings of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary action required on the part of Holdings, and no other proceedings on the part of Holdings are necessary to authorize this Agreement or for Holdings to perform its obligations under this Agreement. This Agreement constitutes the lawful, valid and legally binding obligation of Holdings, enforceable in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles regardless of whether such enforceability is considered in a proceeding at law or in equity.      (iii) No Violation or Conflict. The execution, delivery and performance of this Agreement and the transactions contemplated hereby do not (A) violate, conflict with or result in the breach of any provision of the Organizational Documents of Holdings, (B) as of the date of this Agreement, conflict with or violate any law or Governmental Order applicable to Holdings or any of its assets, properties or businesses, or (C) as of the date of this Agreement, conflict with, result in any breach of, constitute a default (or event that with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of any Encumbrance on any of the assets or properties of Holdings, pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which Holdings is a party except, in the case of clauses (B) and (C), to the extent that such conflicts, breaches, defaults or other matters would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Holdings.      (iv) Governmental Consents and Approvals. The execution, delivery and performance of this Agreement by Holdings do not, and the consummation of the transactions contemplated hereby do not and will not, require any Governmental Approval which has not already been obtained, effected or provided, except with respect to which the failure to so obtain, effect or provide would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Holdings.      (v) Litigation. As of the date of this Agreement, there are no actions by or against Holdings pending before any Governmental Authority or, to the knowledge of Holdings, threatened to be brought by or before any Governmental Authority, that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Holdings. There are no pending or, to the knowledge of Holdings, threatened actions to which Holdings is a party (or is threatened to be named as a party) to set aside, restrain, enjoin or prevent the execution, delivery or performance of this Agreement or [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 10 --------------------------------------------------------------------------------   the Operative Documents or the consummation of the transactions contemplated hereby or thereby by any party hereto or thereto. As of the date of this Agreement, Holdings is not subject to any Governmental Order (nor, to the knowledge of Holdings, is there any such Governmental Order threatened to be imposed by any Governmental Authority) that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Holdings.      (vi) Stock Ownership. All of Symphony Dynamo’s issued and outstanding Symphony Dynamo Equity Securities are owned beneficially and of record by Holdings, free and clear of any and all encumbrances.      (vii) Interim Operations. Holdings was formed solely for the purpose of engaging in the transactions contemplated by the Operative Documents, has engaged in no other business activities and has conducted its operations only as contemplated by the Operative Documents.      (viii) Accredited Investor.      (A) Holdings is and will remain at all relevant times an Accredited Investor.      (B) Holdings has relied completely on the advice of, or has consulted with or has had the opportunity to consult with, its own personal tax, investment, legal or other advisors and has not relied on Dynavax or any of its Affiliates for advice related to any offer and sale of Dynavax Common Stock in connection with the Purchase Option. Holdings has reviewed the Investment Overview and is aware of the risks disclosed therein. Holdings acknowledges that it has had a reasonable opportunity to conduct its own due diligence with respect to the Products, the Programs, Symphony Dynamo, Dynavax and the transactions contemplated by the Operative Documents.      (C) Holdings is able to bear the economic risk of such investment for an indefinite period and to afford a complete loss thereof      (D) Holdings agrees that the Dynavax Common Stock may not be resold (1) without registration thereof under the Securities Act (unless an exemption from such registration is available), or (2) in violation of any law.      (E) No person or entity acting on behalf of, or under the authority of, Holdings is or will be entitled to any broker’s, finder’s, or similar fees or commission payable by Dynavax or any of its Affiliates.           (b) Holdings hereby covenants and agrees with Dynavax as follows:      (i) Contribution to Symphony Dynamo. On or prior to the Stock Payment Date, Holdings shall, pursuant to the Subscription Agreement, use the Initial Funds (as defined in the Funding Agreement) to pay to Symphony Dynamo the Stock Purchase Price (in accordance with, and as defined in, the Subscription Agreement), in respect of [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 11 --------------------------------------------------------------------------------   the 50,000 shares of Common Stock delivered to Holdings by Symphony Dynamo as of the Closing Date. Additionally, (1) upon the earlier of (x) the date on which Holdings receives a request for additional funds from Symphony Dynamo, and (y) February 26, 2007, Holdings shall, promptly (but in no event later than the fifth (5th) day after the receipt of such request) and in accordance with the terms of Section 2 of the Funding Agreement, submit to Investors a Funding Notice; provided, that if Holdings has received a Purchase Option Exercise Notice, it shall not submit to Investors a Funding Notice, and (2) upon Holdings receiving any additional net proceeds from any financing received from Investors in accordance with the Funding Agreement for the purpose of the contribution of such proceeds to Symphony Dynamo, Holdings shall contribute promptly such proceeds thereof to Symphony Dynamo.      (ii) Encumbrance. Holdings will not, and will not permit any of its Subsidiaries to, create, assume or suffer to exist any Encumbrance on any of its Symphony Dynamo Equity Securities except with the prior written consent of Dynavax.      (iii) Transfer and Amendment. Commencing upon the date hereof and ending upon the earlier to occur of (x) the Purchase Option Closing Date, (y) the unexercised expiration of the Purchase Option Period, and (z) the termination of this Agreement pursuant to Section 9(b) (such period, the “Term”), the manager of Holdings shall not (A) transfer, or permit the transfer of, any Membership Interest without the prior written consent of Dynavax or (B) amend, or permit the amendment of, any provisions relating to the transfer of Membership Interests, as set forth in Section 7.02 of the Holdings LLC Agreement, to the extent such amendment would adversely affect Dynavax’s right of consent set forth in Sections 7.02(b)(i) and 7.02(c) of the Holdings LLC Agreement.      (iv) Symphony Dynamo Directors. During the Term, Holdings agrees to vote all of its Symphony Dynamo Equity Securities (or to exercise its right with respect to such Symphony Dynamo Equity Securities to consent to action in writing without a meeting) in favor of, as applicable, the election, removal and replacement of one director of the Symphony Dynamo Board, and any successor thereto, designated by Dynavax (the “Dynavax Director”) as directed by Dynavax. In furtherance and not in limitation of the foregoing, Holdings hereby grants to Dynavax an irrevocable proxy, with respect to all Symphony Dynamo Equity Securities now owned or hereafter acquired by Holdings, to vote such Symphony Dynamo Equity Securities or to exercise the right to consent to action in writing without a meeting with respect to such Symphony Dynamo Equity Securities, such irrevocable proxy to be exercised solely for the limited purpose of electing, removing and replacing the Dynavax Director in the event of the failure or refusal of Holdings to elect, remove or replace such Dynavax Director, as directed by Dynavax. Additionally, Holdings agrees, during the Term, to the selection of two (2) independent directors (of the four (4) directors of Symphony Dynamo not chosen by Holdings at the direction of Dynavax), and any successors thereto. Such independent directors shall be selected by mutual agreement of Dynavax and Holdings.      (v) Symphony Dynamo Board. During the Term, Holdings shall not vote any of its Symphony Dynamo Equity Securities (or exercise its rights with respect to such Symphony Dynamo Equity Securities by written consent without a meeting) to increase [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 12 --------------------------------------------------------------------------------   the size of the Symphony Dynamo Board to more than five (5) members without the prior written consent of Dynavax.      (vi) Symphony Dynamo Charter. During the Term, Holdings shall not approve or permit any amendment to Article IV, Paragraphs (1) and (3); Article VI; Article VII; Article X; Article XI or Article XIII of the Symphony Dynamo Charter without the prior written consent of Dynavax.           Section 5. Symphony Dynamo Representations, Warranties and Covenants.           (a) As of the date hereof, Symphony Dynamo hereby represents and warrants, and, except to the extent that any of the following representations and warranties is limited to the date of this Agreement or otherwise limited, on the Purchase Option Closing Date, shall be deemed to have represented and warranted, to Dynavax and Holdings that:      (i) Organization. Symphony Dynamo is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware.      (ii) Authority and Validity. Symphony Dynamo has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by Symphony Dynamo of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary action required on the part of Symphony Dynamo, and no other proceedings on the part of Symphony Dynamo are necessary to authorize this Agreement or for Symphony Dynamo to perform its obligations under this Agreement. This Agreement constitutes the lawful, valid and legally binding obligation of Symphony Dynamo, enforceable in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles regardless of whether such enforceability is considered in a proceeding at law or in equity.      (iii) No Violation or Conflict. The execution, delivery and performance of this Agreement and the transactions contemplated hereby do not (A) violate, conflict with or result in the breach of any provision of the Organizational Documents of Symphony Dynamo, (B) conflict with or violate any law or Governmental Order applicable to Symphony Dynamo or any of its assets, properties or businesses, or (C) conflict with, result in any breach of, constitute a default (or event that with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of any Encumbrance on any of the assets or properties of Symphony Dynamo, pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which Symphony Dynamo is a party except, in the case of clauses (B) and (C), to the extent that such conflicts, breaches, defaults or other matters would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Symphony Dynamo. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 13 --------------------------------------------------------------------------------        (iv) Governmental Consents and Approvals. The execution, delivery and performance of this Agreement by Symphony Dynamo do not, and the consummation of the transactions contemplated hereby do not and will not, require any Governmental Approval which has not already been obtained, effected or provided, except with respect to which the failure to so obtain, effect or provide would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Symphony Dynamo.      (v) Litigation. There are no actions by or against Symphony Dynamo pending before any Governmental Authority or, to the knowledge of Symphony Dynamo, threatened to be brought by or before any Governmental Authority that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Symphony Dynamo. There are no pending or, to the knowledge of Symphony Dynamo, threatened actions to which Symphony Dynamo is a party (or is threatened to be named as a party) to set aside, restrain, enjoin or prevent the execution, delivery or performance of this Agreement or the Operative Documents or the consummation of the transactions contemplated hereby or thereby by any party hereto or thereto. Symphony Dynamo is not subject to any Governmental Order (nor, to the knowledge of Symphony Dynamo, is there any such Governmental Order threatened to be imposed by any Governmental Authority) that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Symphony Dynamo.      (vi) Capitalization. Holdings is the beneficial and record owner of all issued and outstanding Symphony Dynamo Equity Securities. No shares of Symphony Dynamo capital stock are held in treasury by Symphony Dynamo or any Symphony Dynamo Subsidiary. All of the issued and outstanding Symphony Dynamo Equity Securities (A) have been duly authorized and validly issued and are fully paid and nonassessable, (B) were issued in compliance with all applicable state and federal securities laws, and (C) were not issued in violation of any preemptive rights or rights of first refusal. No preemptive rights or rights of first refusal exist with respect to any Symphony Dynamo Equity Securities and no such rights will arise by virtue of or in connection with the transactions contemplated hereby (other than for the Purchase Option). Other than the Purchase Option, there are no outstanding options, warrants, call rights, commitments or agreements of any character to acquire any Symphony Dynamo Equity Securities. There are no outstanding stock appreciation, phantom stock, profit participation or other similar rights with respect to Symphony Dynamo. Symphony Dynamo is not obligated to redeem or otherwise acquire any of its outstanding Symphony Dynamo Equity Securities.      (vii) Interim Operations. Symphony Dynamo was formed solely for the purpose of engaging in the transactions contemplated by the Operative Documents, has engaged in no other business activities and has conducted its operations only as contemplated by the Operative Documents.      (viii) Investment Company. Symphony Dynamo is not, and after giving effect to the transactions contemplated by the Operative Documents will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 14 --------------------------------------------------------------------------------             (b) Symphony Dynamo covenants and agrees that:      (i) Symphony Dynamo will comply with all laws, ordinances or governmental rules or regulations to which it is subject and will obtain and maintain in effect all licenses, certificates, permits, franchises and other Governmental Approvals necessary to the ownership of its properties or to the conduct of its business, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other Governmental Approvals would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Symphony Dynamo.      (ii) Symphony Dynamo will file (or cause to be filed) all material tax returns required to be filed by it and pay all taxes shown to be due and payable on such returns and all other taxes imposed on it or its assets to the extent such taxes have become due and payable and before they have become delinquent and shall pay all claims for which sums have become due and payable that have or might become attached to the assets of Symphony Dynamo; provided, that Symphony Dynamo need not file any such tax returns or pay any such tax or claims if (A) the amount, applicability or validity thereof is contested by Symphony Dynamo on a timely basis in good faith and in appropriate proceedings, and Symphony Dynamo has established adequate reserves therefor in accordance with GAAP on the books of Symphony Dynamo or (B) the failure to file such tax returns or the nonpayment of such taxes and assessments, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect on Symphony Dynamo.      (iii) Symphony Dynamo will at all times preserve and keep in full force and effect its corporate existence.      (iv) Symphony Dynamo will keep complete, proper and separate books of record and account, including a record of all costs and expenses incurred, all charges made, all credits made and received, and all income derived in connection with the operation of the business of Symphony Dynamo, all in accordance with GAAP, in each case to the extent necessary to enable Symphony Dynamo to comply with the periodic reporting requirements of this Agreement.      (v) Symphony Dynamo will perform and observe in all material respects all of the terms and provisions of each Operative Document to be performed or observed by it, maintain each such Operative Document to which it is a party, promptly enforce in all material respects each such Operative Document in accordance with its terms, take all such action to such end as may be from time to time reasonably requested by Holdings or Dynavax and make to each other party to each such Operative Document such demands and requests for information and reports or for action as Symphony Dynamo is entitled to make under such Operative Document.      (vi) Symphony Dynamo shall permit the representatives of Holdings (including Holdings’ members and their respective representatives), each Symphony [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 15 --------------------------------------------------------------------------------   Fund and Dynavax, at each of their own expense and upon reasonable prior notice to Symphony Dynamo, to visit the principal executive office of Symphony Dynamo, to discuss the affairs, finances and accounts of Symphony Dynamo with Symphony Dynamo’s officers and (with the consent of Symphony Dynamo, which consent will not be unreasonably withheld) the Symphony Dynamo Auditors (as defined in Section 5(d)(iii) hereof), all at such reasonable times and as often as may be reasonably requested in writing.      (vii) Symphony Dynamo shall permit each Symphony Fund, at its own expense and upon reasonable prior notice to Symphony Dynamo, to inspect and copy Symphony Dynamo’s books and records and inspect Symphony Dynamo’s properties at reasonable times.      (viii) Symphony Dynamo shall allow Dynavax or its designated representatives to have reasonable visitation and inspection rights with regard to the Programs and materials, documents and other information relating thereto.      (ix) Symphony Dynamo shall permit each Symphony Fund to consult with and advise the management of Symphony Dynamo on matters relating to the research and development of the Programs in order to develop the Product.      (x) On the Purchase Option Closing Date, or as soon thereafter as is practical, Symphony Dynamo shall deliver to Dynavax all materials, documents, files and other information relating to the Programs (or, where necessary, copies thereof).      (xi) During the Term, Dynavax shall have the right to consent to any increase in the size of the Symphony Dynamo Board to more than five (5) directors.      (xii) During the Term, Dynavax shall have the right to designate, remove and replace one (1) director of the Symphony Dynamo Board and consent to the selection of the two (2) independent directors (of the four (4) directors of Symphony Dynamo not chosen by Holdings at the direction of Dynavax), in each case including any successors thereto and in accordance with the terms of Section 4(b)(iv).      (xiii) Symphony Dynamo shall indemnify the directors and officers of Symphony Dynamo against liability incurred by reason of the fact that such Person is or was a director or officer of Symphony Dynamo, as permitted by Article VII of the Symphony Dynamo Charter and Section 9.01 of the Symphony Dynamo By-laws, as set forth in, and on the terms of, the Indemnification Agreement and the RRD Services Agreement, respectively.      (xiv) During the Term, Symphony Dynamo shall comply with, and cause any Persons acting for it to comply with, the terms of the Investment Policy with respect to the investment of any funds held by it.           (c) Symphony Dynamo covenants and agrees that, until the expiration of the Term, it shall not, and shall cause its Subsidiaries (if any) not to, without Dynavax’s prior written consent (such consent, in the case of clause (x) below, not to be unreasonably withheld): [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 16 --------------------------------------------------------------------------------        (i) issue any Symphony Dynamo Equity Securities or any Equity Securities of any Subsidiary thereof (other than any issuances of Equity Securities by Symphony Dynamo made in accordance with Section 1(b) hereof to Holdings so long as Symphony Dynamo is a wholly owned subsidiary of Holdings, or by a Subsidiary of Symphony Dynamo to Symphony Dynamo or to another wholly owned Subsidiary of Symphony Dynamo); provided, however, that in any event any such Symphony Dynamo Equity Securities or Equity Securities of such Subsidiary shall be issued subject to the Purchase Option;      (ii) redeem, repurchase or otherwise acquire, directly or indirectly, any Symphony Dynamo Equity Securities or the Equity Securities of any Subsidiary of Symphony Dynamo;      (iii) create, incur, assume or permit to exist any Debt other than any Debt incurred pursuant to the Operative Documents and the Development Budget (including payables incurred in the ordinary course of business) (“Excepted Debt”); provided, however, that the aggregate outstanding principal amount of all such Excepted Debt for borrowed money shall not exceed [ * ] at any time;      (iv) declare or pay dividends or other distributions on any Symphony Dynamo Equity Securities other than any dividend declared from the proceeds of a sale or license of a discontinued Program to a third party, in respect of which Symphony Dynamo shall be entitled to pay (subject to the existence of lawfully available funds) a dividend equal to the net amount (such net amount calculated as the gross proceeds received less amounts required to be paid in respect of any and all corporate taxes owed by Symphony Dynamo as a result of the receipt of such gross amounts) of such amounts received from such third party;      (v) enter into any transaction of merger or consolidation, or liquidate, wind up or dissolve itself, or convey, transfer, license, lease or otherwise dispose of all, or a material portion of, its properties, assets or business;      (vi) other than in respect of the Programs, engage in the development of products for any other company or engage or participate in the development of products or engage in any other material line of business;      (vii) other than entering into, and performing its obligations under, the Operative Documents and participating in the Programs, engage in any action that negates or is inconsistent with any rights of Dynavax set forth herein;      (viii) other than as contemplated by the RRD Services Agreement and Section 6.2 of the Amended and Restated Research and Development Agreement, hire, retain or contract for the services of, any employees until the termination of such agreements;      (ix) incur any financial commitments in respect of the development of the Programs other than those set forth in the Development Plan and the Development Budget, or those approved by the Development Committee and, if so required by the [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 17 --------------------------------------------------------------------------------   terms of Paragraph 11 of the Development Committee Charter, the Symphony Dynamo Board in accordance with the Operative Documents;      (x) other than any transaction contemplated by the Operative Documents, enter into or engage in any Conflict Transactions without the prior approval of a majority of the Disinterested Directors of the Symphony Dynamo Board; or      (xi) waive, alter, modify, amend or supplement in any manner whatsoever any material terms and conditions of the RRD Services Agreement, the Funding Agreement, the Subscription Agreement, or Articles 4 and 6 of the Amended and Restated Research and Development Agreement, except in compliance with the terms of the Operative Documents.           (d) Symphony Dynamo covenants and agrees to deliver, cause to be delivered, and provide access thereto, to each other Party, each Symphony Fund, and such Auditors as Dynavax may designate, so long as such Auditors shall be subject to confidentiality requirements at least as stringent as the Confidentiality Agreement:      (i) upon request, copies of the then current Development Plan for each quarter, on or before March 31, June 30, September 30, and December 31 of each year;      (ii) upon request, copies of the then current Development Budget for each quarter, including a report setting forth in reasonable detail the projected expenditures by Symphony Dynamo pursuant to the Development Budget, on or before March 31, June 30, September 30, and December 31 of each year;      (iii) prior to the close of each fiscal year, Symphony Dynamo shall cause the Manager to seek to obtain from the Symphony Dynamo Auditors the Client Schedules to be provided to Dynavax’s Auditors in connection with the Symphony Dynamo Auditors’ audit of Symphony Dynamo. Within [ * ] Business Days after the close of each fiscal year, Symphony Dynamo (or the Manager acting on its behalf) will provide Dynavax’s Auditors with the requested Client Schedules. If the Symphony Dynamo Auditors deliver the Client Schedules after the end of the fiscal year, Symphony Dynamo (or the Manager acting on its behalf) will provide the completed Client Schedules to Dynavax’s Auditors within [ * ] Business Days of such receipt;      (iv) prior to the close of each fiscal year, Dynavax’ Vice President of Finance, the Symphony Dynamo Auditors, Dynavax’s Auditors and Symphony Dynamo (or the Manager acting on its behalf) shall agree to a completion schedule that will include (A) the provision by Symphony Dynamo to Dynavax of the financial information reasonably necessary for Dynavax to consolidate and audit the financial results of Symphony Dynamo and (B) the following financial statements, including the related notes thereto, audited and certified by the Symphony Dynamo Auditors: (1) a balance sheet of Symphony Dynamo as of the close of such fiscal year, (2) a statement of net income for such fiscal year, and (3) a statement of cash flows for such fiscal year. Such audited annual financial statements shall set forth in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 18 --------------------------------------------------------------------------------   Symphony Dynamo (or the Manager acting on its behalf) shall, to the extent that Symphony Dynamo (or the Manager acting on its behalf), using commercially reasonable means, can procure such an opinion, be accompanied by an opinion thereon of the Symphony Dynamo Auditors to the effect that such financial statements present fairly, in all material respects, the financial position of Symphony Dynamo and its results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances;      (v) within [ * ] Business Days following each calendar month and upon receipt from Dynavax of its monthly invoice to Symphony Dynamo, current accrued monthly vendor expenses and prepaid expenses: (A) the unaudited balance sheet of Symphony Dynamo for the previous calendar month; (B) the unaudited statement of net income for such previous calendar month; (C) the unaudited statement of cash flows for such previous calendar month; (D) the trial balance schedule for such previous calendar month; and (E) related account reconciliations for such previous calendar month;      (vi) any other documents, materials or other information, including information and documentation of internal controls and reporting as may be required by applicable law, rule or regulation (including information prepared in support of Symphony Dynamo’s efforts pursuant to Section 5(e)) pertaining to Holdings, the Programs or Symphony Dynamo as Dynavax may reasonably request, including preliminary financial information;      (vii) within [ * ] Business Days following its receipt thereof from Symphony Dynamo’s tax return preparer, a copy of each income tax return to be filed by Symphony Dynamo with any foreign, federal, state or local taxing authority (including all supporting schedules thereto);      (viii) promptly, and in any event within [ * ] Business Days of receipt thereof, copies of any notice to Symphony Dynamo from any federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that would reasonably be expected to have a Material Adverse Effect on Symphony Dynamo;      (ix) promptly upon receipt thereof, notice of all actions, suits, investigations, litigation and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting Symphony Dynamo;      (x) promptly upon receipt thereof, copies of any other notices, requests, reports, financial statements and other information and documents received by Symphony Dynamo under or pursuant to any other Operative Document, including, without limitation, any notices of breach or termination of any subcontracts or licenses entered into or permitted pursuant to the Operative Documents; and [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 19 --------------------------------------------------------------------------------        (xi) with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of Symphony Dynamo or relating to the ability of Symphony Dynamo to perform its obligations hereunder and under the Operative Documents as from time to time may be reasonably requested by Dynavax and/or Holdings; provided, that neither Symphony Dynamo, nor the Manager acting on behalf of Symphony Dynamo, shall have any liability to Dynavax for the failure to deliver financial documents or other materials hereunder, if such failure was caused by a failure of Dynavax to provide, in a timely manner, data required to prepare such financial documents or other materials to Symphony Dynavax in a timely manner.           (e) Symphony Dynamo will use commercially reasonable efforts, at its own expense (as set forth in the Management Budget), to cooperate with Dynavax in meeting Dynavax’s government compliance, disclosure, and financial reporting obligations, including without limitation under the Sarbanes-Oxley Act of 2002 and any rules and regulations promulgated thereunder, and under FASB Interpretation No. 46. Without limiting the foregoing, Symphony Dynamo further covenants, until the expiration of the Term, that (w) the principal executive officer and the principal financial officer of Symphony Dynamo, or persons performing similar functions, shall provide certifications to Dynavax corresponding to those required with respect to public companies for which a class of securities is registered under the Exchange Act (“Public Companies”) under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002; (x) Symphony Dynamo shall maintain a system of disclosure controls and internal controls (as defined under the Exchange Act) and conduct quarterly and annual evaluations of the effectiveness of such controls as required under the Exchange Act for Public Companies; (y) Symphony Dynamo shall provide to Dynavax an attestation report of the Symphony Dynamo Auditors with respect to Symphony Dynamo management’s assessment of Symphony Dynamo’s internal controls as required under the Exchange Act for Public Companies; and (z) Symphony Dynamo will maintain, or cause to have maintained, such sufficient evidentiary support for management’s assessment of the effectiveness of Symphony Dynamo’s internal controls as required for Public Companies.           (f) Dynavax agrees to provide reasonable assistance and support for the financial operations of Symphony Dynamo as may be reasonably requested by Symphony Dynamo from time to time during the Term; provided that any such services shall be pursuant to a separate agreement specifying the nature and amount of assistance and support to be provided and the reimbursement to Dynavax of costs plus a reasonable profit in the provision of such assistance and support. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 20 --------------------------------------------------------------------------------             Section 6. Notice of Material Event. Each Party agrees that, upon it receiving knowledge of a material event or development with respect to any of the transactions contemplated hereby that, to the knowledge of its executive officers, is not known to the other Parties, such Party shall notify the other Parties in writing within three (3) Business Days of the receipt of such knowledge by any executive officer of such Party; provided, that the failure to provide such notice shall not impair or otherwise be deemed a waiver of any rights any Party may have arising from such material event or development and that notice under this Section 6 shall not in itself constitute notice of any breach of any of the Operative Documents.           Section 7. Assignment; Transfers; Legend.           (a) Assignment by Dynavax and Symphony Dynamo. Neither Dynavax nor Symphony Dynamo may assign, delegate, transfer, sell or otherwise dispose of (collectively, “Transfer”), in whole or in part, any or all of their rights or obligations hereunder to any Person (a “Transferee”) without the prior written approval of each of the other Parties; provided, however, that Dynavax, without the prior approval of each of the other Parties, acting in accordance with Article 14 of the Amended and Restated Research and Development Agreement, may make such Transfer to any Person which acquires all or substantially all of Dynavax’s assets or business (or assets or business related to the Programs) or which is the surviving or resulting Person in a merger or consolidation with Dynavax; provided, further, that in the event of any Transfer, Dynavax or Symphony Dynamo, as applicable, shall provide written notice to the other Parties of any such Transfer not later than thirty (30) days after such Transfer setting forth the identity and address of the Transferee and summarizing the terms of the Transfer. In no event shall such assignment alter the definition of “Dynavax Common Stock” except as a result of the surviving or resulting “parent” entity in a merger being other than Dynavax, in which case any reference to Dynavax Common Stock shall be deemed to instead reference the common stock, if any, of the surviving or resulting entity.           (b) Assignment and Transfers by Holdings. Prior to the expiration of the Purchase Option, Holdings may not Transfer, in whole or in part, any or all of its Symphony Dynamo Equity Securities or any or all of its rights or obligations hereunder to any Person (other than Dynavax) without the prior written consent of Dynavax. In addition, any Transfer of Symphony Dynamo Equity Securities by Holdings or any other Person to any Person other than Dynavax shall be conditioned upon, and no effect shall be given to any such Transfer unless such transferee shall agree in writing in form and substance satisfactory to Dynavax to be bound by all of the terms and conditions hereunder, including the Purchase Option, as if such transferee were originally designated as “Holdings” hereunder.           (c) Legend. Any certificates evidencing Symphony Dynamo Equity Securities shall bear a legend in substantially the following form: THE SECURITIES OF SYMPHONY DYNAMO, INC., EVIDENCED HEREBY ARE SUBJECT TO AN OPTION, HELD BY DYNAVAX, AS DESCRIBED IN A PURCHASE OPTION AGREEMENT (THE “PURCHASE OPTION AGREEMENT”) DATED AS OF APRIL 18, 2006, BY AND AMONG DYNAVAX TECHNOLOGIES CORPORATION, AND THE OTHER PARTIES THERETO, TO PURCHASE SUCH SECURITIES AT A [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 21 --------------------------------------------------------------------------------   PURCHASE PRICE DETERMINED PURSUANT TO SECTION 2 OF THE PURCHASE OPTION AGREEMENT, EXERCISABLE BY WRITTEN NOTICE AT ANY TIME DURING THE PERIOD SET FORTH THEREIN. COPIES OF THE PURCHASE OPTION AGREEMENT ARE AVAILABLE AT THE PRINCIPAL PLACE OF BUSINESS OF SYMPHONY DYNAMO, INC. AT 7361 CALHOUN PLACE, SUITE 325, ROCKVILLE, MARYLAND 20855, AND WILL BE FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST WITHOUT COST.           Section 8. Costs and Expenses; Payments.           (a) Symphony Dynamo Costs and Expenses. Symphony Dynamo shall pay any of its ongoing legal expenses with respect to the transactions described in the Operative Documents from the funds allocated for such purpose in the Management Budget.           (b) Costs and Expenses of the Purchase Option. Except as otherwise specified in Section 2(g) hereof, each Party shall pay its own costs and expenses incurred in connection with the exercise of the Purchase Option.           (c) Payments to Holdings. Payment of the Purchase Price, plus any costs and expenses payable by Symphony Dynamo under Section 2(g) hereof, shall be made to the account of Holdings contemporaneously with or prior to the payout of the Purchase Price on the Purchase Option Closing Date no later than 1:00 pm (New York time).           Section 9. Expiration; Termination of Agreement           (a) Unexercised Expiration or Termination. If the Purchase Option granted hereunder shall terminate or expire unexercised, and the Program Option shall have previously been exercised, then Dynavax shall make a cash payment to Holdings in an amount equal to [ * ] in accordance with Section 11.1(c) of the Amended and Restated Research Agreement.           (b) Termination.      (i) This Agreement shall terminate upon the mutual written consent of all of the Parties.      (ii) Subject to Section 1(c)(iv) hereof, each of Holdings and Symphony Dynamo may terminate this Agreement in the event that Symphony Dynamo terminates the Amended and Restated Research and Development Agreement in accordance with its terms.           Section 10. Survival; Indemnification.           (a) Survival of Representations and Warranties; Expiration of Certain Covenants.      (i) The representations and warranties of the Parties contained in this Agreement shall survive for a period of one year from the making of such representations. The liability of the Parties related to their respective representations and [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 22 --------------------------------------------------------------------------------   warranties hereunder shall not be reduced by any investigation made at any time by or on behalf of Holdings, Symphony Dynamo or Dynavax, as applicable.      (ii) For the avoidance of doubt, the covenants and agreements set forth in Sections 4(b), 5(b)(i), 5(b)(v)-(ix), 5(b)(xi)-(xiv), 5(c), 5(d)(i), 5(d)(ii) and 5(d)(viii)-(xi) shall, upon the expiration of the Term, expire and end without any further obligation by Symphony Dynamo or Holdings thereunder.      (iii) For the avoidance of doubt, the covenants and agreements set forth in Sections 5(b)(ii)-(iii), 5(b)(x), 5(d)(iii)-(v), 5(d)(vii), and 5(e) shall, upon the completion of all the reporting, accounting and other obligations set forth therein with respect to the fiscal year in which this Agreement shall terminate, expire and end without any further obligation by Symphony Dynamo or Holdings thereunder.           (b) Indemnification. To the greatest extent permitted by applicable law, Dynavax shall indemnify and hold harmless Holdings and Symphony Dynamo and Holdings shall indemnify and hold harmless Dynavax, and each of their respective Affiliates, officers, directors, employees, agents, partners, members, successors, assigns, representatives of, and each Person, if any (including any officers, directors, employees, agents, partners, members of such Person) who controls Holdings, Symphony Dynamo and Dynavax, as applicable, within the meaning of the Securities Act or the Exchange Act, (each, an “Indemnified Party”), from and against any and all actions, causes of action, suits, claims, losses, costs, interest, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (hereinafter, a “Loss”), incurred by any Indemnified Party as a result of, or arising out of, or relating to: (i) in the case of Dynavax being the Indemnifying Party, (A) any breach of any representation or warranty made by Dynavax herein or in any certificate, instrument or document delivered in connection and contemporaneously herewith, or (B) any breach of any covenant, agreement or obligation of Dynavax contained herein or in any certificate, instrument or document delivered hereunder, and (ii) in the case of Holdings being the Indemnifying Party, (A) any breach of any representation or warranty made by Holdings or Symphony Dynamo herein or in any certificate, instrument or document delivered in connection and contemporaneously herewith, or (B) any breach of any covenant, agreement or obligation of Holdings or Symphony Dynamo contained herein or in any certificate, instrument or document delivered hereunder. To the extent that the foregoing undertaking by Dynavax or Holdings may be unenforceable for any reason, such Party shall make the maximum contribution to the payment and satisfaction of any Loss that is permissible under applicable law.           (c) Notice of Claims. Any Indemnified Party that proposes to assert a right to be indemnified under this Section 10 shall notify Dynavax or Holdings, as applicable (the “Indemnifying Party”), promptly after receipt of notice of commencement of any action, suit or proceeding against such Indemnified Party (an “Indemnified Proceeding”) in respect of which a claim is to be made under this Section 10, or the incurrence or realization of any Loss in respect of which a claim is to be made under this Section 10, of the commencement of such Indemnified Proceeding or of such incurrence or realization, enclosing a copy of all relevant documents, including all papers served and claims made, but the omission to so notify the applicable [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 23 --------------------------------------------------------------------------------   Indemnifying Party promptly of any such Indemnified Proceeding or incurrence or realization shall not relieve (x) such Indemnifying Party from any liability that it may have to such Indemnified Party under this Section 10 or otherwise, except, as to such Indemnifying Party’s liability under this Section 10, to the extent, but only to the extent, that such Indemnifying Party shall have been prejudiced by such omission, or (y) any other indemnitor from liability that it may have to any Indemnified Party under the Operative Documents.           (d) Defense of Proceedings. In case any Indemnified Proceeding shall be brought against any Indemnified Party, it shall notify the applicable Indemnifying Party of the commencement thereof as provided in Section 10(c), and such Indemnifying Party shall be entitled to participate in, and provided such Indemnified Proceeding involves a claim solely for money damages and does not seek an injunction or other equitable relief against the Indemnified Party and is not a criminal or regulatory action, to assume the defense of, such Indemnified Proceeding with counsel reasonably satisfactory to such Indemnified Party. After notice from such Indemnifying Party to such Indemnified Party of such Indemnifying Party’s election so to assume the defense thereof and the failure by such Indemnified Party to object to such counsel within ten (10) Business Days following its receipt of such notice, such Indemnifying Party shall not be liable to such Indemnified Party for legal or other expenses related to such Indemnified Proceedings incurred after such notice of election to assume such defense except as provided below and except for the reasonable costs of investigating, monitoring or cooperating in such defense subsequently incurred by such Indemnified Party reasonably necessary in connection with the defense thereof. Such Indemnified Party shall have the right to employ its counsel in any such Indemnified Proceeding, but the reasonable fees and expenses of such counsel shall be at the expense of such Indemnified Party unless:      (i) the employment of counsel by such Indemnified Party at the expense of the applicable Indemnifying Party has been authorized in writing by such Indemnifying Party;      (ii) such Indemnified Party shall have reasonably concluded in its good faith (which conclusion shall be determinative unless a court determines that such conclusion was not reached reasonably and in good faith) that there is or may be a conflict of interest between the applicable Indemnifying Party and such Indemnified Party in the conduct of the defense of such Indemnified Proceeding or that there are or may be one or more different or additional defenses, claims, counterclaims, or causes of action available to such Indemnified Party (it being agreed that in any case referred to in this clause (ii) such Indemnifying Party shall not have the right to direct the defense of such Indemnified Proceeding on behalf of the Indemnified Party);      (iii) the applicable Indemnifying Party shall not have employed counsel reasonably acceptable to the Indemnified Party, to assume the defense of such Indemnified Proceeding within a reasonable time after notice of the commencement thereof (provided, however, that this clause (iii) shall not be deemed to constitute a waiver of any conflict of interest that may arise with respect to any such counsel); or      (iv) any counsel employed by the applicable Indemnifying Party shall fail to timely commence or diligently conduct the defense of such Indemnified Proceeding and [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 24 --------------------------------------------------------------------------------   such failure has materially prejudiced (or, in the reasonable judgment of the Indemnified Party, is in danger of materially prejudicing) the outcome of such Indemnified Proceeding; in each of which cases the reasonable fees and expenses of counsel for such Indemnified Party shall be at the expense of such Indemnifying Party. Only one counsel shall be retained by all Indemnified Parties with respect to any Indemnified Proceeding, unless counsel for any Indemnified Party reasonably concludes in good faith (which conclusion shall be determinative unless a court determines that such conclusion was not reached reasonably and in good faith) that there is or may be a conflict of interest between such Indemnified Party and one or more other Indemnified Parties in the conduct of the defense of such Indemnified Proceeding or that there are or may be one or more different or additional defenses, claims, counterclaims, or causes or action available to such Indemnified Party.           (e) Settlement. Without the prior written consent of such Indemnified Party, such Indemnifying Party shall not settle or compromise, or consent to the entry of any judgment in, any pending or threatened Indemnified Proceeding, unless such settlement, compromise, consent or related judgment (i) includes an unconditional release of such Indemnified Party from all liability for Losses arising out of such claim, action, investigation, suit or other legal proceeding, (ii) provides for the payment of money damages as the sole relief for the claimant (whether at law or in equity), (iii) involves no finding or admission of any violation of law or the rights of any Person by the Indemnified Party, and (iv) is not in the nature of a criminal or regulatory action. No Indemnified Party shall settle or compromise, or consent to the entry of any judgment in, any pending or threatened Indemnified Proceeding in respect of which any payment would result hereunder or under the Operative Documents without the prior written consent of the Indemnifying Party, such consent not to be unreasonably conditioned, withheld or delayed.           Section 11. No Petition. Each of Dynavax and Holdings covenants and agrees that, prior to the date which is one year and one day after the expiration of the Purchase Option Period, it will not institute or join in the institution of any bankruptcy, insolvency, reorganization or similar proceeding against Symphony Dynamo. The provisions of this Section 11 shall survive the termination of this Agreement.           Section 12. Third-Party Beneficiary. Each of the Parties agrees that each Symphony Fund shall be a third-party beneficiary of this Agreement.           Section 13. Notices. Any notice, request, demand, waiver, consent, approval or other communication which is required or permitted to be given to any Party shall be in writing and shall be deemed given only if delivered to the Party personally or sent to the Party by facsimile transmission (promptly followed by a hard-copy delivered in accordance with this Section 13), by next Business Day delivery by a nationally recognized courier service, or by registered or certified mail (return receipt requested), with postage and registration or certification fees thereon prepaid, addressed to the Party at its address set forth below: [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 25 --------------------------------------------------------------------------------   Dynavax: Dynavax Technologies Corporation 2929 Seventh Street, Suite 100 Berkeley, CA 94710 Attn: Deborah Smeltzer, VP, Operations & CFO Facsimile: (510) 848-1327 Symphony Dynamo: Symphony Dynamo, Inc. 7361 Calhoun Place, Suite 325 Rockville, MD 20850 Attn: Charles W. Finn, Ph.D. Facsimile: (301) 762-6154 Holdings: Symphony Dynamo Holdings LLC 7361 Calhoun Place, Suite 325 Rockville, MD 20850 Attn: Joseph P. Clancy Facsimile: (301) 762-6154    with copies to: Symphony Capital Partners, L.P. 875 Third Avenue 18th Floor New York, NY 10022 Attn: Mark Kessel Facsimile: (212) 632-5401    and Symphony Strategic Partners, LLC 875 Third Avenue 18th Floor New York, NY 10022 Attn: Mark Kessel Facsimile: (212) 632-5401 or to such other address as such Party may from time to time specify by notice given in the manner provided herein to each other Party entitled to receive notice hereunder. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 26 --------------------------------------------------------------------------------             Section 14. Governing Law; Consent to Jurisdiction and Service of Process.           (a) This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York; except to the extent that this Agreement pertains to the internal governance of Symphony Dynamo or Holdings, and to such extent this Agreement shall be governed and construed in accordance with the laws of the State of Delaware.           (b) Each of the Parties hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court and Delaware State court or federal court of the United States of America sitting in The City of New York, Borough of Manhattan or Wilmington, Delaware, and any appellate court from any jurisdiction thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the Parties hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court, any such Delaware State court or, to the fullest extent permitted by law, in such federal court. Each of the Parties 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 Party may otherwise have to bring any action or proceeding relating to this Agreement.           (c) Each of the Parties irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any New York State or federal court, or any Delaware State or federal court. Each of the Parties 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. Each of the parties hereby consents to service of process by mail.           SECTION 15. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT.           Section 16. Entire Agreement. This Agreement (including any Annexes, Schedules, Exhibits or other attachments hereto) constitutes the entire agreement between the Parties with respect to the matters covered hereby and supersedes all prior agreements and understanding with respect to such matters between the Parties.           Section 17. Amendment; Successors; Counterparts.           (a) The terms of this Agreement shall not be altered, modified, amended, waived or supplemented in any manner whatsoever except by a written instrument signed by each of the Parties.           (b) Except as set forth in Section 12, nothing expressed or implied herein is intended or shall be construed to confer upon or to give to any Person, other than the Parties, any [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 27 --------------------------------------------------------------------------------   right, remedy or claim under or by reason of this Agreement or of any term, covenant or condition hereof, and all the terms, covenants, conditions, promises and agreements contained herein shall be for the sole and exclusive benefit of the Parties and their successors and permitted assigns.           (c) This Agreement may be executed in one or more counterparts, each of which, when executed, shall be deemed an original but all of which, taken together, shall constitute one and the same Agreement.           Section 18. Specific Performance. The Parties acknowledge that irreparable damage would result if this Agreement were not specifically enforced, and they therefore agree that the rights and obligations of the Parties under this Agreement may be enforced by a decree of specific performance issued by a court of competent jurisdiction. Such a remedy shall, however, not be exclusive, and shall be in addition to any other remedies which any Party may have under this Agreement or otherwise. The Parties further acknowledge and agree that a decree of specific performance may not be an available remedy in all circumstances.           Section 19. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in a manner materially adverse to either party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.           Section 20. Tax Reporting . The Parties acknowledge and agree that, for all federal and state income tax purposes:           (a) (i) Holdings shall be treated as the owner of all the Equity Securities of Symphony Dynamo; (ii) the Purchase Option shall be treated as an option to acquire all the Equity Securities of Symphony Dynamo; (iii) the Warrant shall be treated as option premium payable in respect of the grant of the Purchase Option; and (iv) Symphony Dynamo shall be treated as the owner of all the Licensed Intellectual Property and shall be entitled to all deductions claimed under Section 174 of the Code in respect of the Licensed Intellectual Property to the extent of the amounts funded by Symphony Dynamo; and           (b) no Party shall take any tax position inconsistent with any position described in Section 20(a) above, except (i) in the event of a “determination” (as defined in Section 1313 of the Code) to the contrary, or (ii) in the event either of the Parties receives an opinion of counsel to the effect that there is no reasonable basis in law for such a position or that a tax return cannot be prepared based on such a position without being subject to substantial understatement penalties; provided, however, that in the case of Dynavax, such counsel shall be reasonably satisfactory to Holdings. {SIGNATURES FOLLOW ON NEXT PAGE} [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement 28 --------------------------------------------------------------------------------             IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the day and year first above written.             DYNAVAX TECHNOLOGIES CORPORATION       By:   /s/ Dino Dina         Name:   Dino Dina, M.D.        Title:   President & Chief Executive Officer        SYMPHONY DYNAMO HOLDINGS LLC       By:   Symphony Capital Partners, L.P.,         its Manager            By:   Symphony Capital GP, L.P.,         its general partner            By:   Symphony GP, LLC,         its general partner            By:   /s/ Mark Kessel         Name:   Mark Kessel        Title:   Managing Member        SYMPHONY DYNAMO, INC.       By:   /s/ Harri V. Taranto         Name:   Harri V. Taranto        Title:   Chairman of the Board      [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Purchase Option Agreement   --------------------------------------------------------------------------------   SCHEDULE I PURCHASE PRICE TABLE [ * ] [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------   ANNEX A CERTAIN DEFINITIONS           “$” means United States dollars.           “Accredited Investor” has the meaning set forth in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended.           “Act” means the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq.           “Ad Hoc Meeting” has the meaning set forth in Paragraph 6 of Annex B of the Amended and Restated Research and Development Agreement.           “Additional Funds” has the meaning set forth in Section 2(b) of the Funding Agreement.           “Additional Funding Date” has the meaning set forth in Section 3 of the Funding Agreement.           “Additional Party” has the meaning set forth in Section 13 of the Confidentiality Agreement.           “Additional Regulatory Filings” means such Governmental Approvals as required to be made under any law applicable to the purchase of the Symphony Dynamo Equity Securities under the Purchase Option Agreement.           “Adjusted Capital Account Deficit” has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.           “Affected Member” has the meaning set forth in Section 27 of the Investors LLC Agreement.           “Affiliate” means, with respect to any Person (i) any Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any officer, director, general partner, member or trustee of such Person, or (iii) any Person who is an officer, director, general partner, member or trustee of any Person described in clauses (i) or (ii) of this sentence. For purposes of this definition, the terms “controlling,” “controlled by” or “under common control with” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person or entity, whether through the ownership of voting securities, by contract or otherwise, or the power to elect at least 50% of the directors, managers, general partners, or persons exercising similar authority with respect to such Person or entities. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------             “Amended and Restated Research and Development Agreement” means the Amended and Restated Research and Development Agreement dated as of the Closing Date, among Dynavax, Holdings and Symphony Dynamo.           “Asset Value” has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.           “Auditors” means an independent certified public accounting firm of recognized national standing.           [ * ]           “Bankruptcy Code” means the United States Bankruptcy Code.           “Berna” has the meaning set forth in Section 11.1(a) of the Amended and Restated Research and Development Agreement.           “Business Day” means any day other than Saturday, Sunday or any other day on which commercial banks in The City of New York or the City of San Francisco are authorized or required by law to remain closed.           “Cancer Products” mean [ * ].           “Cancer Program” means the identification, development, manufacture and/or use of any Cancer Products in accordance with the Development Plan.           “Capital Contributions” has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.           “Capitalized Leases” means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases.           “Cash Available for Distribution” has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.           “Chair” has the meaning set forth in Paragraph 4 of Annex B to the Amended and Restated Research and Development Agreement.           “Change of Control” means and includes the occurrence of any of the following events, but specifically excludes (i) acquisitions of capital stock directly from Dynavax for cash, whether in a public or private offering, (ii) sales of capital stock by stockholders of Dynavax, and (iii) acquisitions of capital stock by or from any employee benefit plan or related trust:      (a) the merger, reorganization or consolidation of Dynavax into or with another corporation or legal entity in which Dynavax’s stockholders holding the right to vote with respect to matters generally immediately preceding such merger, reorganization or consolidation, own less than fifty percent (50%) of the voting securities of the surviving entity; or [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------        (b) the sale of all or substantially all of Dynavax’s assets or business.           “Class A Member” means a holder of a Class A Membership Interest.           “Class A Membership Interest” means a Class A Membership Interest in Holdings.           “Class B Member” means a holder of a Class B Membership Interest.           “Class B Membership Interest” means a Class B Membership Interest in Holdings.           “Class C Member” means a holder of a Class C Membership Interest.           “Class C Membership Interest” means a Class C Membership Interest in Holdings.           “Closing Certificate for Section 5.1(e)” means the written certificate, pertaining to the representations made by Dynavax under Section 5.1(e) of the Novated and Restated Technology License Agreement, provided by Dynavax to Symphony Dynamo Holdings LLC and Symphony Dynamo on the Closing Date.           “Closing Certificate for Section 5.1(f)” means the written certificate, pertaining to the representations made by Dynavax under Section 5.1(f) of the Novated and Restated Technology License Agreement, provided by Dynavax to Symphony Dynamo Holdings LLC and Symphony Dynamo on the Closing Date.           “Client Schedules” has the meaning set forth in Section 5(b)(i) of the RRD Services Agreement.           “Clinical Budget Component” has the meaning set forth in Section 4.1 of the Amended and Restated Research and Development Agreement.           “Closing Date” means April 18, 2006.           “CMC” means the chemistry, manufacturing and controls documentation as required for filings with Regulatory Authority relating to the manufacturing, production and testing of drug products.           “Code” means the Internal Revenue Code of 1986, as amended from time to time.           “Committed Capital” means $50,000,000.00.           “Common Stock” means the common stock, par value $0.01 per share, of Symphony Dynamo.           “Company Expenses” has the meaning set forth in Section 5.09 of the Holdings LLC Agreement. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------             “Company Property” has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.           “Confidential Information” has the meaning set forth in Section 2 of the Confidentiality Agreement.           “Confidentiality Agreement” means the Confidentiality Agreement, dated as of the Closing Date, among Symphony Dynamo, Holdings, Dynavax, each Symphony Fund, SCP, SSP, Investors, Symphony Capital, RRD and Ann M. Arvin, M.D.           “Conflict Transaction” has the meaning set forth in Article X of the Symphony Dynamo Charter.           “Control” means, with respect to any material, information or intellectual property right, that a Party owns or has a license to such item or right, and has the ability to grant the other Party access, a license or a sublicense (as applicable) in or to such item or right as provided in the Operative Documents without violating the terms of any agreement or other arrangement with any third party.           “Debt” of any Person means, 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 any portion of any trade payable obligation that shall not have remained unpaid for 91 days or more from the later of (A) the original due date of such portion and (B) the customary payment date in the industry and relevant market for such portion),      (c) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments,      (d) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (whether or not the rights and remedies of the seller or lender under such agreement in an event of default are limited to repossession or sale of such property),      (e) all Capitalized Leases to which such Person is a party,      (f) all obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities,      (g) all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any Equity Securities of such Person,      (h) the net amount of all financial obligations of such Person in respect of Hedge Agreements, [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------        (i) the net amount of all other financial obligations of such Person under any contract or other agreement to which such Person is a party,      (j) all Debt of other Persons of the type described in clauses (a) through (i) above guaranteed, directly or indirectly, in any manner by such Person, or in effect guaranteed, directly or indirectly, by such Person through an agreement (A) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (B) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (C) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (D) otherwise to assure a creditor against loss, and      (k) all Debt of the type described in clauses (a) through (i) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Encumbrance on property (including accounts and contract rights) owned or held or used under lease or license by such Person, even though such Person has not assumed or become liable for payment of such Debt.           “Development Budget” means the budget (comprised of the Management Budget Component and the Clinical Budget Component) for the implementation of the Development Plan (the initial form of which was agreed upon by Dynavax and Symphony Dynamo as of the Closing Date and attached to the Amended and Restated Research and Development Agreement as Annex D thereto), as may be further developed and revised from time to time in accordance with the Development Committee Charter and the Amended and Restated Research and Development Agreement.           “Development Committee” has the meaning set forth in Article 3 of the Amended and Restated Research and Development Agreement.           “Development Committee Charter” has the meaning set forth in Article 3 of the Amended and Restated Research and Development Agreement.           “Development Committee Member” has the meaning set forth in Paragraph 1 of Annex B to the Amended and Restated Research and Development Agreement.           “Development Plan” means the development plan covering all the Programs (the initial form of which was agreed upon by Dynavax and Symphony Dynamo as of the Closing Date and attached to the Amended and Restated Research and Development Agreement as Annex C thereto), as may be further developed and revised from time to time in accordance with the Development Committee Charter and the Amended and Restated Research and Development Agreement.           “Development Services” has the meaning set forth in Section 1(b) of the RRD Services Agreement. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------             “Director(s)” has the meaning set forth in the Preliminary Statement of the Indemnification Agreement.           “Disclosing Party” has the meaning set forth in Section 3 of the Confidentiality Agreement.           “Discontinuation Closing Date” has the meaning set forth in Section 11.3 of the Amended and Restated Research and Development Agreement.           “Discontinuation Date” means any date designated by Symphony Dynamo which shall occur on or after the 90th day following the receipt by Dynavax of notice from Symphony Dynamo of Symphony Dynamo’s intent to discontinue a Program in accordance with the terms of the Amended and Restated Research and Development Agreement.           “Discontinuation Option” has the meaning set forth in Section 11.3 of the Amended and Restated Research and Development Agreement.           “Discontinuation Price” has the meaning set forth in Section 11.3 of the Amended and Restated Research and Development Agreement.           “Discontinuation Price Dispute Notice” has the meaning set forth in Section 11.3(b) of the Amended and Restated Research and Development Agreement.           “Discontinued Program” has the meaning set forth in Section 2.11 of the Novated and Restated Technology License Agreement.           “Discontinuation Program Funding” has the meaning set forth in Section 11.3(b) of the Amended and Restated Research and Development Agreement.           “Disinterested Directors” has the meaning set forth in Article X of the Symphony Dynamo Charter.           “Distribution” has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.           “Dynavax” means Dynavax Technologies Corporation, a Delaware corporation.           “Dynavax Common Stock” means the common stock, par value $0.001 per share, of Dynavax.           “Dynavax Common Stock Valuation” has the meaning set forth in Section 2(e) of the Purchase Option Agreement.           “Dynavax Obligations” has the meaning set forth in Section 6.1 of the Amended and Restated Research and Development Agreement.           “Dynavax Personnel” has the meaning set forth in Section 8.4 of the Amended and Restated Research and Development Agreement. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------             “Dynavax Subcontractor” has the meaning set forth in Section 6.2 of the Amended and Restated Research and Development Agreement.           “Early Purchase Option Exercise” has the meaning set forth in Section 1(c)(iv) of the Purchase Option Agreement.           “Effective Registration Date” has the meaning set forth in Section 1(b) of the Registration Rights Agreement           “Encumbrance” means (i) any security interest, pledge, mortgage, lien (statutory or other), charge or option to purchase, lease or otherwise acquire any interest, (ii) any adverse claim, restriction, covenant, title defect, hypothecation, assignment, deposit arrangement, license or other encumbrance of any kind, preference or priority, or (iii) any other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement).           “Enhancements” means findings, improvements, discoveries, inventions, additions, modifications, enhancements, derivative works, clinical development data, or changes to the Licensed Intellectual Property and/or Regulatory Files, in each case whether or not patentable.           “Equity Securities” means, with respect to any Person, shares of capital stock of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination.           “ERISA” means the United States Employee Retirement Income Security Act of 1974, as amended.           “Excepted Debt” has the meaning set forth in Section 5(c)(iii) of the Purchase Option Agreement.           “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.           “Excluded ISS” means [ * ].           “Existing NDA” has the meaning set forth in Section 2 of the Confidentiality Agreement. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------             “External Directors” has the meaning set forth in the preamble of the Confidentiality Agreement.           “FDA” means the United States Food and Drug Administration or its successor agency in the United States.           “FDA Sponsor” has the meaning set forth in Section 5.1 of the Amended and Restated Research and Development Agreement.           “Final Discontinuation Price” has the meaning set forth in Section 11.3(c) of the Amended and Restated Research and Development Agreement.           “Financial Audits” has the meaning set forth in Section 6.6 of the Amended and Restated Research and Development Agreement.           “Financing” has the meaning set forth in the Preliminary Statement of the Purchase Option Agreement.           “Fiscal Year” has the meaning set forth in each Operative Document in which it appears.           “Form S-3” means the Registration Statement on Form S-3 as defined under the Securities Act.           “FTE” has the meaning set forth in Section 4.1 of the Amended and Restated Research and Development Agreement.           “Funding Agreement” means the Funding Agreement, dated as of the Closing Date, among Dynavax, SCP and Investors.           “Funding Notice” has the meaning set forth in Section 2(b) of the Funding Agreement.           “GAAP” means generally accepted accounting principles in effect in the United States of America from time to time.           “Governmental Approvals” means authorizations, consents, orders, declarations or approvals of, or filings with, or terminations or expirations of waiting periods imposed by any Governmental Authority.           “Governmental Authority” means any United States or non-United States federal, national, supranational, state, provincial, local, or similar government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body.           “Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------             “Hedge Agreement” means any interest rate swap, cap or collar agreement, interest rate future or option contract, currency swap agreement, currency future or option contract or other similar hedging agreement.           “Hepatitis B Products” mean [ * ].           “Hepatitis B Program” means the identification, development, manufacture and/or use of any Hepatitis B Products in Accordance with the Development Plan.           “Hepatitis C Products” mean [ * ].           “Hepatitis C Program” means the identification, development, manufacture and/or use of any Hepatitis C Products in Accordance with the Development Plan.           “Holdings” means Symphony Dynamo Holdings LLC, a Delaware limited liability company.           “Holdings Claims” has the meaning set forth in Section 5.01 of the Warrant Purchase Agreement.           “Holdings LLC Agreement” means the Amended and Restated Limited Liability Company Agreement of Holdings, dated as of the Closing Date.           “HSR Act Filings” means the premerger notification and report forms required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.           “IND” means an Investigational New Drug Application, as described in 21 U.S.C. § 355(i)(1) and 21 C.F.R. § 312 in the regulations promulgated by the United States Food and Drug Administration, or any foreign equivalent thereof.           “Indemnification Agreement” means the Indemnification Agreement among Symphony Dynamo and the Directors named therein, dated as of the Closing Date.           “Indemnified Party” has the meaning set forth in each Operative Document in which it appears.           “Indemnified Proceeding” has the meaning set forth in each Operative Document in which it appears.           “Indemnifying Party” has the meaning set forth in each Operative Document in which it appears.           “Independent Accountant” has the meaning set forth in Section 11.3(c) of the Amended and Restated Research and Development Agreement.           “Initial Development Budget” means the initial development budget prepared by representatives of Symphony Dynamo and Dynavax prior to the Closing Date, and attached to the Amended and Restated Research and Development Agreement as Annex D thereto. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------             “Initial Development Plan” means the initial development plan prepared by representatives of Symphony Dynamo and Dynavax prior to the Closing Date, and attached to the Amended and Restated Research and Development Agreement as Annex C thereto.           “Initial Funds” has the meaning set forth in Section 2(a) of the Funding Agreement.           “Initial Holdings LLC Agreement” means the Agreement of Limited Liability Company of Holdings, dated January 10, 2006.           “Initial Investors LLC Agreement” means the Agreement of Limited Liability Company of Investors, dated January 10, 2006.           “Initial LLC Member” has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.           “Interest Certificate” has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.           Investment Company Act” means the Investment Company Act of 1940, as amended.           “Investment Overview” means the investment overview describing the transactions entered into pursuant to the Operative Documents.           “Investment Policy” has the meaning set forth in Section 1(a)(vi) of the RRD Services Agreement.           “Investors” means Symphony Dynamo Investors LLC.           “Investors LLC Agreement” means the Amended and Restated Agreement of Limited Liability Company of Investors dated as of the Closing Date           “IRS” means the U.S. Internal Revenue Service.           “ISS” means any synthetic oligonucleotide sequence or chimeric oligonucleotide sequence that modulates an immune response, including, but not limited to, such sequences referred to by Dynavax as immunostimulatory sequences, chimeric immunomodulatory compounds and branched immunomodulatory compounds.           “Knowledge” means the actual (and not imputed) knowledge of the executive officers of Dynavax, without the duty of inquiry or investigation.           “Law” means any law, statute, treaty, constitution, regulation, rule, ordinance, order or Governmental Approval, or other governmental restriction, requirement or determination, of or by any Governmental Authority. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------             “License” has the meaning set forth in the Preliminary Statement of the Purchase Option Agreement.           “Licensed Intellectual Property” means the Licensed Patent Rights, Symphony Dynamo Enhancements, Licensor Enhancements and the Licensed Know-How.           “Licensed Know-How” means [ * ].      (a) “Licensed Patent Rights” means:[ * ].           “Licensor” means Dynavax.           “Licensor Enhancements” means [ * ].           “Lien” has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.           “Liquidating Event” has the meaning set forth in Section 8.01 of the Holdings LLC Agreement.           “LLC Agreements” means the Initial Holdings LLC Agreement, the Holdings LLC Agreement, the Initial Investors LLC Agreement and the Investors LLC Agreement.           “Loss” has the meaning set forth in each Operative Document in which it appears.           “Management Budget Component” has the meaning set forth in Section 4.1 of the Amended and Restated Research and Development Agreement.           “Management Fee” has the meaning set forth in Section 6(a) of the RRD Services Agreement.           “Manager” means (i) for each LLC Agreement in which it appears, the meaning set forth in such LLC Agreement, and (ii) for each other Operative Document in which it appears, RRD.           “Management Services” has the meaning set forth in Section 1(a) of the RRD Services Agreement.           “Manager Event” has the meaning set forth in Section 3.01(g) of the Holdings LLC Agreement.           “Material Adverse Effect” means, with respect to any Person, a material adverse effect on (i) the business, assets, property or condition (financial or otherwise) of such Person or, (ii) its ability to comply with and satisfy its respective agreements and obligations under the Operative Documents or, (iii) the enforceability of the obligations of such Person of any of the Operative Documents to which it is a party.           “Material Subsidiary” means, at any time, a Subsidiary of Dynavax having assets in an amount equal to at least 5% of the amount of total consolidated assets of Dynavax and its [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------   Subsidiaries (determined as of the last day of the most recent reported fiscal quarter of Dynavax) or revenues or net income in an amount equal to at least 5% of the amount of total consolidated revenues or net income of Dynavax and its Subsidiaries for the 12-month period ending on the last day of the most recent reported fiscal quarter of Dynavax.           “Medical Discontinuation Event” means [ * ].           “Membership Interest” means (i) for each LLC Agreement in which it appears, the meaning set forth in such LLC Agreement, and (ii) for each other Operative Document in which it appears, the meaning set forth in the Holdings LLC Agreement.           “NASDAQ” means the National Association of Securities Dealers Automated Quotation System.           “NDA” means a New Drug Application, as defined in the regulations promulgated by the United States Food and Drug Administration, or any foreign equivalent thereof.           “Non-Dynavax Capital Transaction” means any (i) sale or other disposition of all or part of the Symphony Dynamo Shares or all or substantially all of the operating assets of Symphony Dynamo, to a Person other than Dynavax or an Affiliate of Dynavax or (ii) distribution in kind of the Symphony Dynamo Shares following the expiration of the Purchase Option.           “Non-Symphony Dynamo ISS” means [ * ].           “Novated and Restated Technology License Agreement” means the Novated and Restated Technology License Agreement, dated as of the Closing Date, among Dynavax, Symphony Dynamo and Holdings.           “Operative Documents” means, collectively, the Indemnification Agreement, the Holdings LLC Agreement, the Purchase Option Agreement, the Warrant Purchase Agreement, the Registration Rights Agreement, the Subscription Agreement, the Technology License Agreement, the Novated and Restated Technology License Agreement, the RRD Services Agreement, the Research and Development Agreement, the Amended and Restated Research and Development Agreement, the Confidentiality Agreement, the Funding Agreement and each other certificate and agreement executed in connection with any of the foregoing documents.           “Organizational Documents” means any certificates or articles of incorporation or formation, partnership agreements, trust instruments, bylaws or other governing documents.           “Partial Stock Payment” has the meaning set forth in Section 3(a)(iii) of the Purchase Option Agreement.           “Party(ies)” means, for each Operative Document or other agreement in which it appears, the parties to such Operative Document or other agreement, as set forth therein. With respect to any agreement in which a provision is included therein by reference to a provision in [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------   another agreement, the term “Party” shall be read to refer to the parties to the document at hand, not the agreement that is referenced.           “Payment Terms” has the meaning set forth in Section 8.2 of the Amended and Restated Research and Development Agreement.           “Percentage” has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.           “Permitted Investments” has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.           “Permitted Lien” has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.           “Person” means any individual, partnership (whether general or limited), limited liability company, corporation, trust, estate, association, nominee or other entity.           “Personnel” of a Party means such Party, its employees, subcontractors, consultants, representatives and agents.           “Prime Rate” means the quoted “Prime Rate” at JPMorgan Chase Bank or, if such bank ceases to exist or is not quoting a base rate, prime rate reference rate or similar rate for United States dollar loans, such other major money center commercial bank in New York City selected by the Manager.           “Products” means Cancer Products, Hepatitis B Products and Hepatitis C Products.           “Profit” has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.           “Program Option” has the meaning set forth in Section 11.1(a) of the Amended and Restated Research and Development Agreement.           “Program Option Closing Date” has the meaning set forth in Section 11.1(b) of the Amended and Restated Research and Development Agreement.           “Program Option Exercise Date” has the meaning set forth in Section 11.1(b) of the Amended and Restated Research and Development Agreement.           “Program Option Exercise Notice” has the meaning set forth in Section 11.1(b) of the Amended and Restated Research and Development Agreement.           “Program Option Period” has the meaning set forth in Section 11.1(a) of the Amended and Restated Research and Development Agreement. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------             “Programs” means Cancer Program, Hepatitis B Program and Hepatitis C Program.           “Protocol” means a written protocol that meets the substantive requirements of Section 6 of the ICH Guideline for Good Clinical Practice as adopted by the FDA, effective May 9, 1997 and is included within the Development Plan or later modified or added to the Development Plan pursuant to the Amended and Restated Research and Development Agreement.           “Public Companies” has the meaning set forth in Section 5(e) of the Purchase Option Agreement.           “Purchase Option” has the meaning set forth in Section 1(a) of the Purchase Option Agreement.           “Purchase Option Agreement” means this Purchase Option Agreement dated as of the Closing Date, among Dynavax, Holdings and Symphony Dynamo.           “Purchase Option Closing” has the meaning set forth in Section 2(a) of the Purchase Option Agreement.           “Purchase Option Closing Date” has the meaning set forth in Section 2(a) of the Purchase Option Agreement.           “Purchase Option Commencement Date” has the meaning set forth in Section 1(c)(iii) of the Purchase Option Agreement.           “Purchase Option Exercise Date” has the meaning set forth in Section 2(a) of the Purchase Option Agreement.           “Purchase Option Exercise Notice” has the meaning set forth in Section 2(a) of the Purchase Option Agreement.           “Purchase Option Interim Date” has the meaning set forth in Section 2(b)(i) of the Purchase Option Agreement.           “Purchase Option Period” has the meaning set forth in Section 1(c)(iii) of the Purchase Option Agreement.           “Purchase Price” has the meaning set forth in Section 2(b) of the Purchase Option Agreement.           “Put Option” has the meaning set forth in Section 2A of the Purchase Option Agreement.           “Put Option Exercise Notice” has the meaning set forth in Section 2A of the Purchase Option Agreement. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------             “QA Audits” has the meaning set forth in Section 6.5 of the Amended and Restated Research and Development Agreement.           “Quarterly Price” has the meaning set forth in Section 2(b)(i) of the Purchase Option Agreement.           “Regents” has the meaning set forth in Section 3.1 of the Novated and Restated Technology License Agreement.           “Regents Agreement” has the meaning set forth in Section 3.1 of the Novated and Restated Technology License Agreement.           “Registration Rights Agreement” means the Registration Rights Agreement dated as of the Closing Date, between Dynavax and Holdings.           “Registration Statement” has the meaning set forth in Section 1(b) of the Registration Rights Agreement.           “Regulatory Authority” means the United States Food and Drug Administration, or any successor agency in the United States, or any health regulatory authority(ies) in any other country that is a counterpart to the FDA and has responsibility for granting registrations or other regulatory approval for the marketing, manufacture, storage, sale or use of drugs in such other country.           “Regulatory Allocation” has the meaning set forth in Section 3.06 of the Holdings LLC Agreement.           “Regulatory Files” means any IND, NDA or any other filings filed with any Regulatory Authority with respect to the Programs.           “Related Oncology Products Agreement” has the meaning set forth in Section 11.4 of the Amended and Restated Research and Development Agreement.           “Replacement Warrant(s)” has the meaning set forth in Section 7.08 of the Warrant Purchase Agreement.           “Representative” of any Person means such Person’s shareholders, principals, directors, officers, employees, members, managers and/or partners.           “Research and Development Agreement” means the Research and Development Agreement dated as of the Closing Date, between Dynavax and Holdings.           “Rhein” has the meaning set forth in Section 11.1(a) of the Amended and Restated Research and Development Agreement.           “Rhein Sale Agreement” has the meaning set forth in Section 11.2(a) of the Amended and Restated Research and Development Agreement. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------             “RRD” means RRD International, LLC, a Delaware limited liability company.           “RRD Indemnified Party” has the meaning set forth in Section 10(a) of the RRD Services Agreement.           “RRD Loss” has the meaning set forth in Section 10(a) of the RRD Services Agreement.           “RRD Parties” has the meaning set forth in Section 9(e) of the RRD Services Agreement.           “RRD Personnel” has the meaning set forth in Section 1(a)(ii) of the RRD Services Agreement.           “RRD Services Agreement” means the RRD Services Agreement between Symphony Dynamo and RRD, dated as the Closing Date, 2006.           “Schedule K-1” has the meaning set forth in Section 9.02(a) of the Holdings LLC Agreement.           “Scheduled Meeting” has the meaning set forth in Paragraph 6 of Annex B of the Amended and Restated Research and Development Agreement.           “Scientific Discontinuation Event” has the meaning set forth in Section 4.2(c) of the Amended and Restated Research and Development Agreement.           “SCP” means Symphony Capital Partners, L.P., a Delaware limited partnership.           “SD Program Option” has the meaning set forth in Section 11.2(b) of the Amended and Restated Research and Development Agreement.           “SD Program Option Exercise Notice” has the meaning set forth in Section 11.2(b) of the Amended and Restated Research and Development Agreement.           “SEC” means the United States Securities and Exchange Commission.           “Securities Act” means the Securities Act of 1933, as amended.           “Selected ISS” means [ * ].           “Shareholder” means any Person who owns any Symphony Dynamo Shares.           “Solvent” has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.           “SSP” means Symphony Strategic Partners, LLC, a Delaware limited liability company. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------             “Stock Payment Date” has the meaning set forth in Section 2 of the Subscription Agreement.           “Stock Purchase Price” has the meaning set forth in Section 2 of the Subscription Agreement.           “Subcontracting Agreement” has the meaning set forth in Section 6.2 of the Amended and Restated Research and Development Agreement.           “Subscription Agreement” means the Subscription Agreement between Symphony Dynamo and Holdings, dated as the Closing Date.           “Subsidiary” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency); (b) the interest in the capital or profits of such partnership, joint venture or limited liability company; or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.           “Surviving Entity” means the surviving or resulting “parent” legal entity which is surviving entity to Dynavax after giving effect to a Change of Control.           “Symphony Capital” means Symphony Capital LLC, a Delaware limited liability company.           “Symphony Dynamo” means Symphony Dynamo, Inc., a Delaware corporation.           “Symphony Dynamo Auditors” has the meaning set forth in Section 5(b) of the RRD Services Agreement.           “Symphony Dynamo Board” means the board of directors of Symphony Dynamo.           “Symphony Dynamo By-laws” means the By-laws of Symphony Dynamo, as adopted by resolution of the Symphony Dynamo Board on the Closing Date.           “Symphony Dynamo Charter” means the Amended and Restated Certificate of Incorporation of Symphony Dynamo, dated as of the Closing Date.           “Symphony Dynamo Director Event” has the meaning set forth in Section 3.01(h)(i) of the Holdings LLC Agreement.           “Symphony Dynamo Enhancements” means [ * ]. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------             “Symphony Dynamo Equity Securities” means the Common Stock and any other stock or shares issued by Symphony Dynamo.           “Symphony Dynamo Loss” has the meaning set forth in Section 10(b) of the RRD Services Agreement.           “Symphony Dynamo Shares” has the meaning set forth in Section 2.02 of the Holdings LLC Agreement.           “Symphony Fund(s)” means Symphony Capital Partners, L.P., a Delaware limited partnership, and Symphony Strategic Partners, LLC, a Delaware limited liability company.           “Tangible Materials” means [ * ].           “Tax Amount” has the meaning set forth in Section 4.02 of the Holdings LLC Agreement.           “Technology License Agreement” means the Technology License Agreement, dated as of the Closing Date, between Dynavax and Holdings.           “Term” has the meaning set forth in Section 4(b)(iii) of the Purchase Option Agreement, unless otherwise stated in any Operative Document.           “Territory” means the world.           “Third Party IP” has the meaning set forth in Section 2.11 of the Novated and Restated Technology License Agreement.           “Third Party Licensor” means a third party from which Dynavax has received a license or sublicense to Licensed Intellectual Property.           “Transfer” has for each Operative Document in which it appears the meaning set forth in such Operative Document.           “Transferee” has, for each Operative Document in which it appears, the meaning set forth in such Operative Document.           “Voluntary Bankruptcy” has the meaning set forth in Section 1.01 of the Holdings LLC Agreement.           “Warrant(s)” means the “Warrant” as defined in Section 2.01 of the Warrant Purchase Agreement, and/or any successor certificates exercisable for Warrant Shares issued by Dynavax.           “Warrant Closing” has the meaning set forth in Section 2.03 of the Warrant Purchase Agreement. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------             “Warrant Date” has the meaning set forth in Section 2.02 of the Warrant Purchase Agreement.           “Warrant Purchase Agreement” means the Warrant Purchase Agreement, dated as of the Closing Date, between Dynavax and Holdings.           “Warrant Shares” has the meaning set forth in Section 2.01 of the Warrant Purchase Agreement.           “Warrant Surrender Price” has the meaning set forth in Section 7.08 of the Warrant Purchase Agreement. [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------   EXHIBIT 1 PURCHASE OPTION EXERCISE NOTICE [ * ] [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------   EXHIBIT 2 FORM OF OPINION COOLEY GODWARD LLP [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------   (COOLEY GODWARD LLP) [f22482f2248201.gif]               ATTORNEYS AT LAW   Broomfield, CO         720 566-4000     Five Palo Alto Square   Reston, VA     3000 El Camino Real   703 456-8000     Palo Alto, CA   San Diego, CA     94306-2155   858 550-6000     Main 650 843-5000   San Francisco, CA     Fax 650 849-7400   415 693-2000               www.cooley.com     April 18, 2006 Symphony Dynamo Holdings LLC 7361 Calhoun Place, Suite 325 Rockville, MD 20850 Dear Ladies and Gentlemen: We have acted as counsel for Dynavax Technologies Corporation, a Delaware corporation (the “Company”), in connection with the financing of certain of the Company’s research and development programs (the “Financing”). In connection with the Financing, the Company is entering into the agreements listed on Schedule I hereto (collectively, the “Transaction Agreements”). We are rendering this opinion pursuant to Section 3.02(d) of the Warrant Purchase Agreement. In connection with this opinion, we have examined and relied upon the representations and warranties as to factual matters contained in and made pursuant to the Transaction Agreements by the various parties and originals, or copies certified to our satisfaction, of such records, documents, certificates, opinions, memoranda and other instruments as in our judgment are necessary or appropriate to enable us to render the opinion expressed below. As to certain factual matters, we have relied upon certificates of officers of the Company and have not sought to independently verify such matters. Where we render an opinion “to our knowledge” or concerning an item “known to us” or our opinion otherwise refers to our knowledge, it is based solely upon (i) an inquiry of attorneys within this firm who have represented the Company in this transaction, (ii) receipt of a certificate executed by an officer of the Company covering such matters and (iii) such other investigation, if any, that we specifically set forth herein. In rendering this opinion, we have assumed: the authenticity of all documents submitted to us as originals; the conformity to originals of all documents submitted to us as copies; the accuracy, completeness and authenticity of certificates of public officials; the due authorization, execution and delivery of all documents (except the due authorization, execution and delivery by the Company of the Transaction Agreements), where authorization, execution and delivery are prerequisites to the effectiveness of such documents; and the genuineness and authenticity of all signatures on original documents (except the signatures on behalf of the Company on the Transaction Agreements). We have also assumed: that all individuals executing and delivering documents had the legal capacity to so execute and deliver; that the Transaction Agreements are [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------   Symphony Dynamo Holdings LLC Page 4 obligations binding upon the parties thereto other than the Company; that the parties to the Transaction Agreements other than the Company have filed any required California franchise or income tax returns and have paid any required California franchise or income taxes; and that there are no extrinsic agreements or understandings among the parties to the Transaction Agreements or to the Material Agreements (as defined below) that would modify or interpret the terms of any such agreements or the respective rights or obligations of the parties thereunder. Our opinion is expressed only with respect to the federal laws of the United States of America and the laws of the State of California and the General Corporation Law of the State of Delaware. We note that the parties to the Transaction Agreements have designated the laws of the State of New York as the laws governing the Transaction Agreements. Our opinion in paragraph 6 below as to the validity, binding effect and enforceability of the Transaction Agreements is premised upon the result that would obtain if a California court were to apply the internal laws of the State of California (notwithstanding the designation of the laws of the State of New York) to the interpretation and enforcement of the Transaction Agreements. We express no opinion as to whether the laws of any particular jurisdiction apply, and no opinion to the extent that the laws of any jurisdiction other than those identified above are applicable to the subject matter hereof, and we have not obtained any opinion of counsel under the laws of the State of New York. We are not rendering any opinion as to any statute, rule, regulation, ordinance, decree or decisional law relating to antitrust, banking, land use, environmental, pension, employee benefit, tax, fraudulent conveyance, usury, laws governing the legality of investments for regulated entities, regulations T, U or X of the Board of Governors of the Federal Reserve System or local law. Furthermore, we express no opinion with respect to compliance with antifraud laws, rules or regulations relating to securities or the offer and sale thereof; compliance with fiduciary duties by the Company’s Board of Directors or stockholders; compliance with safe harbors for disinterested Board of Director or stockholder approvals; compliance with state securities or blue sky laws except as specifically set forth below; or compliance with laws that place limitations on corporate distributions. With regard to our opinion in paragraph 1 below, we have relied solely upon a certificate of the Secretary of State of the State of Delaware as of a recent date. With regard to our opinion in paragraph 3 below, with respect to the due and valid authorization of each of the Transaction Documents, we have relied solely upon (i) a certificate of an officer of the Company, (ii) a review of the certificate of incorporation and bylaws of the Company, (iii) a review of the resolutions certified by an officer of the Company, (iv) and a review of the Delaware General Corporation Law. With regard to our opinion paragraph 4 below concerning material defaults under and any material breaches of any agreement identified on Schedule II hereto, we have relied solely upon [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------   Symphony Dynamo Holdings LLC Page 5 (i) a certificate of an officer of the Company, (ii) a list supplied to us by the Company of material agreements to which the Company is a party, or by which it is bound, a copy of which is attached hereto as Schedule II (the “Material Agreements”) and (iii) an examination of the Material Agreements in the form provided to us by the Company. We have made no further investigation. Further, with regard to our opinion in paragraph 4 below concerning Material Agreements, we express no opinion as to (i) financial covenants or similar provisions therein requiring financial calculations or determinations to ascertain compliance, (ii) provisions therein relating to the occurrence of a “material adverse event” or words of similar import or (iii) any statement or writing that may constitute parol evidence bearing on interpretation or construction. With regard to our opinion in paragraph 7 below, we express no opinion to the extent that, notwithstanding its current reservation of shares of Common Stock, future issuances of securities of the Company and/or antidilution adjustments to outstanding securities of the Company may cause the Warrant Shares or the Dynavax Common Stock to exceed the number of shares of Common Stock that then remain authorized but unissued. With regard to our opinion in paragraph 8 concerning exemption from registration, our opinion is expressed only with respect to the offer and sale of the Warrant or the Warrant Shares without regard to any offers or sales of securities occurring prior to or subsequent to the date hereof. With regard to our opinion in paragraph 9 below, we have based our opinion, to the extent we consider appropriate, on Rule 3a-8 under the Investment Company Act of 1940, as amended, and a certificate of an officer of the Company as to compliance with each of the requirements necessary to comply with Rule 3a-8. We have conducted no further investigation. On the basis of the foregoing, in reliance thereon and with the foregoing qualifications, we are of the opinion that: 1.   The Company has been duly incorporated and is a validly existing corporation in good standing under the laws of the State of Delaware. 2.   The Company has the corporate power to execute, deliver and perform its obligations under the Transaction Agreements. 3.   Each of the Transaction Agreements has been duly and validly authorized, executed and delivered by the Company. The offer and sale of the Warrant (as defined in the Warrant Purchase Agreement) has been duly authorized by the Company. 4.   The execution and delivery of the Transaction Agreements by the Company and the issuance of the Warrant pursuant thereto and the Warrant Shares assuming the exercise of the Warrant on the date hereof, will not, (a) violate any provision of the Company’s certificate of incorporation or by-laws, (b) violate any governmental statute, rule or [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------   Symphony Dynamo Holdings LLC Page 6     regulation which in our experience is typically applicable to transactions of the nature contemplated by the Transaction Agreements, (c) violate any order, writ, judgment, injunction, decree, determination or award which has been entered against the Company and of which we are aware or (d) constitute a material default under or a material breach of any Material Agreement, in the case of clauses (c) and (d) to the extent such default or breach would materially and adversely affect the Company.   5.   All consents, approvals, authorizations or orders of, and filings, registrations and qualifications with any U.S. Federal or California regulatory authority or governmental body required for the due execution or delivery by the Company of any Transaction Agreement and the sale and issuance of the Warrant have been made or obtained, except (a) for the filing of a Form D pursuant to Securities and Exchange Commission Regulation D and (b) for the filing of the notice to be filed under California Corporations Code Section 25102.1(d).   6.   Each of the Transaction Agreements constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its respective terms, except as rights to indemnity and contribution under Sections 6 and 7 of the Registration Rights Agreement, Section 10 of the Purchase Option Agreement, Article V of the Warrant Purchase Agreement, Section 15 of the Research and Development Agreement, Section 15 of the Amended and Restated Research and Development Agreement, Section 6 of the Technology License Agreement and Section 6 of the Novated and Restated Technology License Agreement may be limited by applicable laws and except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, arrangement, suretyship, dissolution, moratorium, receivership or other similar laws affecting creditors’ rights and the law of fraudulent transfer, and subject to state law, federal law, or general equity principles and to limitations on availability of equitable relief, including specific performance, regardless of whether enforcement is considered in a proceeding in equity or at law.   7.   The Warrant Shares (as defined in the Warrant Purchase Agreement) and, the Dynavax Common Stock (as defined in the Purchase Option Agreement), when sold and issued in accordance with the terms of the Warrant or the Purchase Option Agreement, as applicable, will be validly issued, fully paid and non-assessable, and the issuance of the Warrant Shares is not be subject to preemptive rights pursuant to the General Corporation Law of the State of Delaware, the certificate of incorporation or by-laws of the Company or similar rights to subscribe pursuant to any Material Agreement.   8.   The offer and sale of the Warrant and Warrant Shares (assuming exercise of the Warrant on the date hereof) are exempt from the registration requirements of the Securities Act of [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------   Symphony Dynamo Holdings LLC Page 7     1933, as amended, subject to the timely filing of a Form D pursuant to Securities and Exchange Commission Regulation D.   9.   The Company is not an “investment company” as defined in the Investment Company Act of 1940, as amended. [ * ] This opinion is intended solely for your benefit and is not to be made available to or be relied upon by any other person, firm, or entity without our prior written consent. Very truly yours, Cooley Godward LLP           By:   /s/ Robert L. Jones                   Robert L. Jones     [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------   Schedule I List of Transaction Agreements i.   Warrant Purchase Agreement, dated as of April 18, 2006 between the Company and Symphony Dynamo Holdings LLC (the “Warrant Purchase Agreement”).   ii.   Warrant to purchase 2,000,000 shares of common stock of the Company, dated as of April 18, 2006 (the “Warrant”).   iii.   Purchase Option Agreement, dated as of April 18, 2006, among the Company, Symphony Dynamo Holdings LLC and Symphony Dynamo, Inc. (the “Purchase Option Agreement”).   iv.   Research and Development Agreement, dated as of April 18, 2006, between the Company and Symphony Dynamo Holdings LLC (the “Research and Development Agreement”).   v.   Amended & Restated Research and Development Agreement, dated as of April 18, 2006 among the Company, Symphony Dynamo, Inc. and Symphony Dynamo Holdings LLC (the “Amended & Restated Research and Development Agreement”).   vi.   Technology License Agreement, dated as of April 18, 2006 between the Company and Symphony Dynamo Holdings LLC (the “Technology License Agreement”). vii. Novated and Restated Technology License Agreement, dated as of April 18, 2006, among the Company, Symphony Dynamo, Inc. and Symphony Dynamo Holdings LLC (the “Novated and Restated Technology License Agreement”).   viii.   Confidentiality Agreement, dated as of April 18, 2006, among the Company, Symphony Dynamo, Inc., Symphony Dynamo Holdings LLC, Symphony Capital Partners, L.P., Symphony Strategic Partners, LLC, Symphony Dynamo Investors LLC, Symphony Capital LLC, RRD International, LLC, and Ann M. Arvin, M.D. (the “Confidentiality Agreement”).   ix.   Funding Agreement, dated as of April 18, 2006, among the Company, Symphony Capital Partners, L.P., Symphony Dynamo Holdings LLC and Symphony Dynamo Investors, LLC (the “Funding Agreement”).   x.   Registration Rights Agreement, dated as of April 18, 2006, between the Company and Symphony Dynamo Holdings LLC (the “Registration Rights Agreement”). [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.   --------------------------------------------------------------------------------   Schedule II List of Material Agreements [ * ] [ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.  

Exhibit 10.1   Pathmark Stores, Inc. 200 Milik Street Carteret, New Jersey 07008 May 1, 2006 Mr. Kevin Darrington 1507 Stardance Circle Longmont, CO 80501 Employment Agreement Dear Mr. Darrington: The following sets forth the agreement (“Agreement”) between Pathmark Stores, Inc. (the ”Company” or “Pathmark”) and you regarding the terms and provisions of your employment with the Company. Capitalized words not otherwise defined herein shall have the meanings set forth in Section 7 below. 1.            Term of Employment. The term of your employment under this Agreement, including extensions hereof (the ”Term”), shall commence on May 1, 2006 (the ”Effective Date”) and shall continue until April 30, 2008. The Term shall automatically renew for successive one-year periods, subject to written notice of non-renewal by either party at least 90 days prior to expiration of the then Term. Subject to the provisions of Section 4 below, either party may terminate your employment under this Agreement at any time. 2.            Title and Duties. During the Term, you shall be employed as a Senior Vice President of the Company. Your duties and responsibilities to the Company shall be consistent in all respects with the position of Senior Vice President. You shall devote substantially all of your business time, attention, skills and efforts exclusively to the business and affairs of the Company, other than de minimis amounts of time devoted by you to engage in charitable or community services. Your principal place of employment shall be the executive offices of the Company in the Carteret, New Jersey area, although you understand and agree that you will be required to travel from time to time for business purposes. 3. Compensation and Benefits. (a)           Annual Salary. As compensation to you for all services rendered to the Company, the Company will pay you an annual base salary ( ”Annual Salary”) during the Term at the rate of $230,000 per annum, increasing to $240,000 per annum on October 1, 2006. Your Annual Salary shall be reviewed annually, beginning May 1, 2007, by the Chief Financial Officer and may be increased but not decreased on the basis of such review. Your Annual Salary will be Paid to you in accordance with the Company’s regular payroll practices applicable to its exempt workforce. (b)           Annual Bonus. During the Term, you shall be eligible to earn an annual bonus (“Annual Bonus”) pursuant to the Company’s Executive Incentive Plan. For each full fiscal year of the Company during the Term your target Annual Bonus shall equal 45% of your actual Annual Salary during the applicable fiscal year. Annual Bonus targets and adjustments for performance above and below the target will be reasonably set by the Compensation Committee (the “Committee”) of the Board. Your target Annual Bonus for each partial fiscal year during the Term shall be prorated based on the number of days in such fiscal year occurring during the Term (including any partial fiscal year ending at the expiration of the Term due to a non-renewal by either party, in which case the Annual Bonus shall be calculated based on performance through the Date of Termination). The Annual Bonus for each year, if earned, shall be paid to you in cash within 120 days of the end of the applicable fiscal year. (c)           Equity Awards. The Company shall grant you the following equity awards (“Equity Awards”) pursuant to its 2000 Employee Equity Plan (the “Plan”): (i)  On the Effective Date (the “Grant Date”), an award of stock options to purchase 42,000 shares of the Company’s common stock (“Common Stock”), at an exercise price equal to the Fair Market Value (as defined in the Plan) of such Common Stock on the Grant Date, pursuant to the terms of an award agreement in the form of Attachment A. (ii)  On the Grant Date, a Restricted Stock Unit representing 9,000 shares of Common Stock, pursuant to the terms of an award agreement in the form of Attachment B. (d)           Benefits. During the Term, you shall be eligible to participate in all of the pension, welfare and fringe benefit programs and any other employee benefit plan made available generally to executives of the Company, in accordance with the terms and provisions thereof provided, however, that the Company shall not be obligated to provide you any supplemental retirement plan. You shall participate in the Company’s car program on the same basis as other Company executives. You shall receive life insurance and disability coverage in accordance with the Company’s policies on the same basis as other executives. You shall be entitled to four weeks’ vacation per each twelve-month period during the Term and otherwise in accordance with the Company’s policies on the same basis as other executives. (e)           Relocation. The Company shall provide you with the following relocation benefits; provided that the Company shall not be required to pay to you or reimburse you the following amounts in excess, in the aggregate, of $80,000 (provided, however, that the Company will reimburse you for up to three house-hunting trips with your spouse above and beyond the $80,000 (after such amount is exhausted): (i)  The Company shall pay or promptly reimburse the cost of moving your personal belongings from your current primary residence in Colorado to a new residence within commuting distance of the Company’s executive offices in New Jersey. (ii)  The Company shall pay or promptly reimburse the reasonable cost for you and the members of your family of a reasonable number of house-hunting trips to New Jersey. (iii)  The Company shall pay or promptly reimburse the reasonable cost of temporary housing for you and your family within commuting distance of the Company’s executive offices in New Jersey for a period not to exceed four months. (iv)  The Company shall pay or promptly reimburse your reasonable commuting costs from your current primary residence in Colorado to the housing in New Jersey and to the Company’s executive offices in New Jersey. (v)  The Company shall pay or promptly reimburse the other direct costs incurred by you in connection with your relocation, such as brokerage commissions and buying and selling costs and, in addition, the carrying costs of your home in Colorado. All payments and reimbursements under this Section 3(e) shall be subject to presentation to the Company of appropriate documentation of the costs incurred. (f)           Business Expenses. The Company shall reimburse you upon presentation by you of appropriate documentation, in accordance with the Company’s regular practice, for business expenses reasonably incurred by you in connection with the performance of your duties under this Agreement. 4. Effect of Termination of Employment. (a)           Involuntary Termination. In the event of your Involuntary Termination during the Term, the Company shall pay you in cash:   2 (i)  the full amount of the accrued but unpaid Annual Salary you have earned through and including the Date of Termination, plus a cash payment for all unused vacation time which you may have accrued through and including the Date of Termination, on or as soon as practicable after the Date of Termination or as otherwise required by applicable law; (ii)  the amount of any earned but unpaid Annual Bonus for any fiscal year of the Company ended on or prior to the Date of Termination, on or as soon as practicable after the Date of Termination or as otherwise required by applicable law; (iii)  any unpaid reimbursement for business or relocation expenses you are entitled to receive under Section(s) 3(e) and/or 3(f) above, in accordance with the Company’s expense reimbursement policies; (iv)   subject to your execution of a general release of claims against the Company in the form of Attachment C, an amount (the ”Severance Amount”) equal to two times the sum of your Annual Salary, plus in the event of your Involuntary Termination during the first two years of your employment with the Company and after a Change in Control, a lump sum payment of $45,000 (the “Supplemental Amount”). The Severance Amount shall be payable in cash in 24 equal monthly installments commencing on the date 30 days after the Date of Termination (such 24-month period being referred to as the ”Severance Period”) and the Supplemental Amount shall be payable within 30 days after the Date of Termination; provided that, to the extent required under Section 409A to avoid the imposition of additional tax under that section to you, any payment of the Severance Amount and/or Supplemental Amount shall commence on the six-month anniversary of your separation from service with the Company (or, if earlier, the date of your death) and, in the case of the Severance Amount, continue in equal monthly installments over the remainder of the Severance Period. In the event of your Involuntary Termination during the Term, you and your eligible dependents shall continue to be eligible to participate during the Benefit Continuation Period (as hereinafter defined) in the welfare benefit plans, including medical, dental, health, life and similar insurance plans applicable to you immediately prior to your Involuntary Termination on the same terms and conditions in effect for you and your dependents immediately prior to such Involuntary Termination. For purposes of this Agreement, “Benefit Continuation Period” shall mean, in connection with your Involuntary Termination, the period beginning on the Date of Termination and ending on the earliest to occur of (A) the end of the Severance Period, (B) the date you are eligible to be covered under the benefit plans of a subsequent employer, and (C) the date of your breach of any provision of Section 6 hereof. (b)           Termination Event. In the event your employment ends at any time during the Term as a result of a Termination Event, the Company shall pay you in the same applicable manner described in Section 4(a) above: (i)  the full amount of the accrued but unpaid Annual Salary you have earned through and including the Date of Termination, plus a cash payment for all unused vacation time which you may have accrued through and including the Date of Termination; (ii)  the amount of any earned but unpaid Annual Bonus for any fiscal year of the Company ended on or prior to the Date of Termination and, if the Termination Event is death or Disability, a portion of your Annual Bonus, if any, that you would have been entitled to receive, based upon the number of days you were employed in such year; (iii)  any unpaid reimbursement for business expenses you are entitled to receive under Section(s) 3(e) and/or 3(f) above; and Except as otherwise provided by the provisions of any pension, welfare or fringe benefit program and any other employee benefit plan in which you are a participant or this Agreement, in the event of a Termination Event, as of the Date of Termination, you shall not have any right to any additional payments or benefits from the Company under this Agreement or otherwise.   3 (c)           Treatment of Equity Awards. The treatment of your Equity Awards in connection with the termination of your employment with the Company shall be as set forth in the award agreements described in Section 3(c) above. (d)           Date and Notice of Termination. Any termination of your employment by the Company or by you during the Term shall be communicated by a notice of termination to the other party hereto (the “Notice of Termination”). The Notice of Termination shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. The date of your termination of employment with the Company (the “Date of Termination”) shall be determined as follows: (i) if your employment is terminated for Disability, 30 days after a Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such 30-day period); (ii) if your employment is terminated by the Company in an Involuntary Termination, the date specified in the Notice of Termination (or if no date is specified in the Notice of Termination, the date the Notice of Termination is delivered to you); (iii) if your employment is terminated by the Company for Cause, the later of (A) the date specified in the Notice of Termination and (B) the expiration of the applicable period set forth in the definition of Cause during which you may effect a cure or meet with the Company if such period expires without such cure being effected by you and without a reversal on the part of the Company regarding its decision to terminate you for Cause; (iv) if your employment is terminated by a non-renewal notice by either you or the Company, the last day of the then Term; (v) if the basis for your Involuntary Termination is your resignation for Good Reason, the Date of Termination shall be the later of (A) the date specified in the Notice of Termination and (B) the expiration of the applicable cure period set forth in the definition of Good Reason if such period expires without such cure being effected by the Company; (vi) if your employment is terminated by your resignation other than for Good Reason, the Date of Termination shall be the date set forth in the applicable notice, which shall be 30 days after the date such notice is received by the Company; and (vii) if your employment is terminated as a result of your death, the Date of Termination shall be the date of your death. (e)           Other Positions. You agree that, if requested in connection with any termination of your employment with the Company, you shall resign from any or all positions with the Company, including, if applicable, as a member of the Board, or with any subsidiary of the Company. (f)           Mitigation. You shall not be required to mitigate the Severance Amount or other payments hereunder by seeking other employment or otherwise, and the Severance Amount and such other amounts will not be reduced if such other employment is obtained. (g)           Breach of Restrictive Covenants. If, following the Effective Date, you breach any of the provisions of Section 6 below without curing said breach, you shall not be eligible, as of the date of such breach, for any Severance Amount thereafter, and all obligations of the Company hereunder to pay any Severance Amount for any period thereafter shall thereupon cease. 5.            Reduction Of Payments If Reduction Would Result In Greater After-Tax Amount. Notwithstanding anything herein to the contrary, if the payment of the Severance Amount and any other payments made to you in connection with this Agreement or otherwise (together, the “Payments”) constitute a “parachute payment or payments” (as defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the “Code”)), and the net after-tax amount of the parachute payment or payments payable to you is less than the net after-tax amount if the aggregate Payments to be made to you were three times your “base amount” (as defined in Section 280G(b)(3) of the Code), less $1.00, then the aggregate of the amounts of parachute payment or payments payable to you (as determined in accordance with Section 280G of the Code and the regulations) shall be reduced to an amount that will equal three times your base amount, less $1.00.   4 6.        Restrictive Covenants. (a)           No Competing Employment. During the period beginning on the Effective Date and ending on the later of (i) the last day of the Term; or (ii) to the extent that you are being paid Severance Amounts, the last day of the Severance Period (the ”Restricted Period”), you shall not, without the prior written consent of the Company, directly or indirectly, whether as owner, consultant, employee, partner, venturer, or agent, through stock ownership, investment of capital, lending of money or property, rendering of services, or otherwise (except ownership of less than 5% of the number of shares outstanding of any securities which are publicly traded), (i) compete in any Excluded Location with the Business or (ii) provide services to, whether as an employee or consultant, own, manage, operate, control, participate in or be connected with (as a stockholder, partner, or any similar ownership interest) any corporation, firm, partnership, joint venture, sole proprietorship or other entity that competes with the Business in any Excluded Location, except for the aforementioned 5% ownership of publicly traded securities. Notwithstanding the foregoing provisions of this Section 6(a), (i) an entity will be treated as competing with the Business in an Excluded Location only if such entity operates (A) a store that is typically considered to be a “supermarket” or “supercenter” or (B) a “wholesale grocery business” (as such terms are reasonably and customarily understood in the Business) in such Excluded Location; and (ii) you will not be in violation of this Section 6(a) if you are employed by or providing services to a regional chain of stores that is affiliated with another entity that competes with the Business in an Excluded Location, so long as (A) such regional chain does not compete with the Business in any Excluded Location and (B) you do not render services in any capacity to such other entity other than the services rendered to such regional chain. (b)           No Solicitation of Employees and Certain Other Persons. During the period beginning on the Effective Date and ending on the later of (i) the last day of the Term; or (ii) to the extent that you are being paid Severance Amounts, the last day of the Severance Period (the “Non-Solicitation Period”), you shall not, without the prior written consent of the Company, other than in furtherance of the business of the Company, directly or indirectly (i) solicit or recruit, directly or indirectly, any Key Employee (as defined below) or any independent contractor of the Company or any of its subsidiaries for the purpose of being employed or retained by you, directly or indirectly, or by any person on behalf of which you are acting as an agent, representative or employee; (ii) solicit, influence, or attempt to influence, for a purpose or in a manner that would likely be detrimental in any material respect to the business of the Company, any provider of services or products to the Company with respect to its relationship therewith, including, without limitation, any person or entity which has been a provider of services or products to the Company and its subsidiaries during your employment with the Company, or take any action detrimental in any material respect to the existing relationships between the Company and any provider of services or products; or (iii) assist or encourage any other person in carrying out, directly or indirectly, any activity that would be prohibited by the provisions of this Section 6(b) if such activity were carried out by you. In particular, you agree that, other than in furtherance of the business of the Company, you will not, directly or indirectly, during the Non-Solicitation Period carry out any activity or take any action, or induce any employee of the Company and its subsidiaries to carry out any activity or take any action, that would be reasonably likely to result in any employee or independent contractor of the Company ceasing to perform services for the Company or any subsidiary thereof. Notwithstanding the foregoing provisions of this Section 6(b), you will not have violated this Section 6(b) if the person or entity with which you are then employed or to which you are otherwise providing services solicits or recruits employees, independent contractors or providers of services or products through the placing of advertisements in a newspaper, on the internet or similar searches for employees not targeted specifically at employees, independent contractors or other providers of services or products to the Company or its subsidiaries. For purposes of this Section 6(b), “Key Employee” means any employee of the Company or its subsidiaries with the title of category manager or above. The Company agrees to give you prompt written notice if it becomes aware that you violated the provisions of this Section 6(b) with respect to a Key Employee whose base salary is less than $100,000 per annum and that the first such violation shall not be considered to be a violation if the act in question was not directly undertaken by you.   5 (c)           Confidentiality. You recognize that the services you perform for the Company are special, unique and extraordinary in that you may acquire confidential information and trade secrets concerning the operations of the Company and its subsidiaries, the use or disclosure of which could cause the Company and its subsidiaries substantial loss and damages which could not be readily calculated, and for which no remedy at law would be adequate. Accordingly, you covenant and agree with the Company that you will not at any time, except in performance of your obligations to the Company hereunder or with the prior written consent of the Company, directly or indirectly, disclose any secret or confidential information that you may learn by reason of your association with the Company, except as required by law, regulation, legal process or the rules of any self-regulatory organization. The term “confidential information” means confidential and proprietary information of the Company or its subsidiaries not previously disclosed or known to the public or to the trade (other than through a disclosure by you in breach of this Section 6(c)) with respect to business plans, prospects and opportunities, the identity of any suppliers, proprietary information regarding customers, operational strengths and weaknesses, trade secrets, know-how and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, marketing plans or strategies, and financial information of the Company and its subsidiaries. You understand and agree that the rights and obligations set forth in this Section 6(c) are perpetual and, in any case, shall extend beyond the Restricted Period. (d)           Injunctive Relief. Without limiting the remedies available to the Company, you acknowledge that a breach of any of the covenants contained in this Section 6 may result in material irreparable injury to the Company for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company, in addition to any remedies it may have at law, shall be entitled to obtain a temporary restraining order or a preliminary or permanent injunction restraining you from engaging in activities prohibited by this Section 6 or such other relief as may be required to specifically enforce any of the covenants in this Section 6. 7.            Definitions. For purposes of this Agreement, the following capitalized words shall have the meanings set forth below: (a)           “Board” means the Board of Directors of the Company. (b)           “Business” shall mean the retail or wholesale grocery business. (c)           “Cause” shall mean (i) your continuing, willful failure to perform your lawful and proper duties hereunder (other than as a result of total or partial incapacity due to physical or mental illness) after written notice from the Company of such failure to perform such duties of your employment, (ii) your conviction of or plea of nolo contendere to any felony (other than a felony involving a traffic infraction), or (iii) an act or acts on your part constituting fraud, theft or embezzlement or that otherwise constitutes a felony under the laws of the United States or any state thereof which results or was intended to result directly or indirectly in gain or personal enrichment by you at the expense of the Company. In the case of any item described in the previous sentence, you shall be given written notice of the alleged act or omission constituting Cause, which notice shall set forth in reasonable detail the reason or reasons that the Company believes you are to be terminated for Cause, including any act or omission that is the basis for the decision to terminate you. In the case of an act or omission described in clause (i) or (iii) of this definition of Cause, (A) you shall be given 30 days from the date of such written notice to effect a cure of such alleged act or omission constituting “Cause” which, upon such cure to the reasonable satisfaction of the Company, shall no longer constitute a basis for Cause, and (B) an opportunity to make a presentation to the Chief Executive Officer of the Company (accompanied by counsel or other representative, if you so desire) at a meeting held promptly following such 30-day cure period. At or following such meeting, the Chief Executive Officer of the Company shall determine in good faith whether or not to terminate you for “Cause” and shall notify you in writing of its determination and the effective date of such termination (which date may be no earlier than the date of the aforementioned Board meeting).   6 (d)      “Change in Control” shall mean any of the following: the acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the Common Stock then outstanding, but shall not include any such acquisition by any employee benefit plan of the Company, any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such employee benefit plan; any Person (other than any of Fidelity Management & Research Company or Fidelity Management Trust Company or by any fund or account associated with either Fidelity Management & Research Company or Fidelity Management Trust Company) who as of September 19, 2000 was the beneficial owner of 15% or more of the shares of Common Stock outstanding on such date unless and until such Person, together with all Affiliates of such Person, becomes the beneficial owner of 35% or more of the shares of Common Stock then outstanding whereupon a Change in Control shall be deemed to have occurred;consummation after approval by the shareholders of Pathmark of either (A) a plan of complete liquidation or dissolution of Pathmark or (B) a merger, amalgamation or consolidation of Pathmark with any other corporation, the issuance of voting securities of Pathmark in connection with a merger or consolidation of Pathmark or sale or other disposition of all or substantially all of the assets of Pathmark or the acquisition of assets of another corporation, other than, for purposes of Section 4(a)(iv) hereof, a merger, amalgamation or consolidation with, or sale or other disposition of assets to or acquisition of assets of Yucaipa (each, a “Business Combination”), unless, in each case of a Business Combination, immediately following such Business Combination, all or substantially all of the individuals and entities who were the beneficial owners of the Common Stock outstanding immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then outstanding shares of common stock and 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of Pathmark’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 Common Stock; or the individuals who, as of December 1, 2005, constitute the Board, and subsequently elected members of the Board whose election is approved or recommended by at least a majority of such current members or their successors whose election was so approved or recommended (other than any subsequently elected members 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), cease for any reason to constitute at least a majority of such Board. For purposes of the above definition of Change in Control only, the following defined terms shall apply: “Affiliate” means, with respect to any Person, any other entity which (i) is a Subsidiary of such Person, (ii) is, directly or indirectly, under common control with such Person, or (iii) is, directly or indirectly, controlling such Person.   7 “Person” means any person, entity or “group” within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) an entity owned, directly or indirectly, by the shareholders of Pathmark in substantially the same proportions as their ownership of stock of Pathmark, or, for purposes of Section 4(a)(iv) hereof, (v) Yucaipa. “Subsidiary” means with respect to any Person, any entity of which: if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, collectively or individually, by such Person or by one or more Affiliates of such Person, and if a partnership, association, limited liability company or other entity, a majority of the partnership, membership or other similar ownership interest thereof is at the time of determination owned or controlled, directly or indirectly, collectively or individually, by such Person or by one or more Affiliates of such Person. (e)           “Code” shall mean the Internal Revenue Code of 1986, as amended. (f)           “Disability” shall mean your absence from full-time employment with the Company for a period of at least 180 consecutive days by reason of a mental or physical illness. (g)          “Excluded Location” means a 25-mile radius of any location where the Company operates its business. (h)          “Good Reason” shall mean (i) the failure of the Company to pay any material amount of compensation to you when due; (ii) any material and adverse change in your title, duties or responsibilities; (iii) any failure by the Company to maintain your principal place of employment within 50 miles of Carteret, New Jersey , or (iv) any material breach by the Company of the Agreement; provided, however, that, for any of the foregoing to constitute Good Reason, you must provide written notification of your intention to resign within 30 days after you know of the occurrence of any such event, and the Company shall have 60 days (20 days in the case of a material breach related to payment of any amounts due hereunder) from the date of receipt of such notice to effect a cure of the condition constituting Good Reason, and, upon cure thereof by the Company, such event shall no longer constitute Good Reason. (i)           “Involuntary Termination” shall mean (i) your termination of employment by the Company other than for Cause, death or Disability (including the Company’s notice of non-renewal of the Term) or (ii) your resignation of employment with the Company for Good Reason. (j)           “Section 409A” shall mean Section 409A of the Code. (k)          “Termination Event” shall mean your resignation without Good Reason or a termination by the Company for Cause or Disability or by reason of your death. (l)           “Yucaipa” shall mean the Yucaipa Companies LLC and its affiliates.   8 8.            Notice. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or mailed by United States registered mail, return receipt requested, postage prepaid, or sent by facsimile transmission, upon confirmation of receipt by the sender of such transmission, addressed to Corporate Secretary, Pathmark Stores, Inc., 200 Milik Street, Carteret, New Jersey 07008, facsimile (732) 499-3460, with a copy to the General Counsel of the Company (if different from the Secretary), or to you at the 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 herewith, except that notice of change of address shall be effective only upon receipt. 9. Miscellaneous. (a)           No Rights to Continued Employment. Neither this Agreement nor any of the rights or benefits evidenced hereby shall confer upon you any right to continuance of employment by the Company or interfere in any way with the right of the Company to terminate your employment, subject to the provisions of Section 4 above, for any reason, with or without Cause or for you to terminate your employment, subject to the provisions of Section 4, for any reason, with or without Good Reason. (b)           Entire Agreement. The parties to this Agreement represent, acknowledge and agree that this Agreement, together with the award agreements described in Section 3(c) above, sets forth the full and complete understanding and entire agreement regarding the subject matter hereof and shall supersede all other agreements with respect thereto. (c)           Amendments, Waivers, Etc. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing by the parties hereto. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 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 expressly set forth in this Agreement, and this Agreement shall supersede all prior agreements, negotiations, correspondence, undertakings and communications of the parties, oral or written, with respect to the subject matter hereof, including, without limitation, any term sheets or document other than this Agreement setting forth the proposed terms hereof. (d)           Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. (e)           Successors; Binding Agreement. This Agreement shall be binding upon and inure to the benefit of you (and your personal representatives and heirs) and the Company and any organization which succeeds to all or substantially all of the business or assets of the Company, whether by means of merger, consolidation, acquisition of all or substantially all of the assets of the Company or otherwise, including, without limitation, as a result of a change in control or by operation of law. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to expressly assume and to agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken plan; provided, however, that no such assumption shall relieve the Company of its obligations hereunder.   9 (f)           Representations. You hereby represent and warrant to the Company that the execution and delivery by you of this Agreement to the Company and your performance of your obligations hereunder will not breach the terms of any contract, agreement or understanding to which you are a party, including any covenant not to compete against any prior employer, and you acknowledge and agree that a breach of this representation by you shall render this Agreement void ab initio and without force and effect. The Company represents and warrants to you that the execution and delivery by it of this Agreement and the Company’s performance of its obligations hereunder have been approved by all necessary parties and all necessary actions and will not breach or conflict with the terms of any contract, agreement or understanding, including, without limitation, those contemplated by the last sentence of Section 2 above. (g)           Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. (h)           Withholding. Amounts paid to you hereunder shall be subject to all required federal, state and local income tax and wage withholdings. (i)            Source of Payments. All payments provided for under this Agreement (other than payments made pursuant to a plan which provides otherwise or as otherwise expressly provided hereunder) shall be paid in cash from the general funds of the Company, no special or separate fund shall be established, and no other segregation of assets made, to assure payment and you will have no right, title or interest whatsoever in or to any investments which the Company may make to aid it in meeting its obligations hereunder. To the extent that any person acquires a right to receive payments from the Company hereunder, such right shall be no greater than the right of an unsecured creditor of the Company. (j)            Headings. The headings contained in this Agreement are intended solely for convenience of reference and shall not affect the rights of the parties to this Agreement. (k)          Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New Jersey applicable to contracts entered into and performed in such state. (l)            Section 409A. The provisions of this Agreement are intended to satisfy the applicable requirements of Section 409A and shall be performed and interpreted consistent with such intent. If any provision of this Agreement does not satisfy such requirements or could otherwise cause you to be subject to the interest and penalties under Section 409A, you and the Company agree to negotiate in good faith an appropriate modification to maintain, to the maximum extent practicable, the original intent of the applicable provision without violating the requirements of Section 409A (or causing the imposition of additional tax on you under Section 409A). If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter, which will then constitute our agreement on this subject. Sincerely, /s/ John T. Standley        John T. Standley Chief Executive Officer Acknowledged and Agreed as of this 4th day of May, 2006.   /s/ Kevin Darrington      Kevin Darrington 10 Release I, the undersigned, Kevin Darrington, in consideration of the payments and benefits provided to me under the Employment Agreement dated May 1, 2006, between Pathmark Stores, Inc. (the ”Company”) and me (the ”Agreement”), including the Severance Amount and Supplemental Amount (as defined in the Agreement)(the ”Payments”), and after consultation with counsel, I, for myself and on behalf of each of my heirs, executors, administrators, representatives, agents, successors and assigns (collectively, the ”Releasors”), hereby irrevocably and unconditionally release and forever discharge the Company and its subsidiaries and affiliates (the ”Company Group”) and each of their respective officers, employees, directors, shareholders and agents from any and all claims, actions, causes of action, rights, judgments, obligations, damages, demands, accountings or liabilities of whatever kind or character (collectively, “Claims”), including, without limitation, any Claims under any federal, state, local or foreign law, that the Releasors may have, or in the future may possess, arising out of (i) my employment relationship with and service as an employee, officer or director of the Company Group, and the termination of such relationship or service, (ii) the Agreement, or (iii) any event, condition, circumstance or obligation that occurred, existed or arose on or prior to the date hereof; provided, however, that this Release shall not apply to (i) the obligations of the Company under the Agreement (including, without limitation, as to Annual Salary, Annual Bonus, reimbursements, Severance Amount, Equity Awards and continuing medical benefits) and (ii) any indemnification rights I may have in accordance with the Company’s governance instruments or the Agreement or under any director and officer liability insurance maintained by the Company. Other than as contemplated above, the Releasors further agree that the payments and benefits described in this Release shall be in full satisfaction of any and all Claims for payments or benefits, whether express or implied, that the Releasors may have against the Company Group arising out of my employment relationship or my service as an employee, officer and director of the Company Group and the termination thereof. In further consideration of the Payments, the Releasors hereby unconditionally release and forever discharge the Company Group, and each of their respective officers, employees, directors, shareholders and agents from any and all Claims that the Releasors may have as of the date hereof arising under the Federal Age Discrimination in Employment Act of 1967, as amended, and the applicable rules and regulations promulgated thereunder (“ADEA”). By signing this Release, I hereby acknowledge and confirm the following: (i) I was advised by the Company in connection with my termination of employment to consult with an attorney of my choice prior to signing this Release and to have such attorney explain to me the terms of this Release, including, without limitation, the terms relating to my release of claims arising under ADEA and, I have in fact consulted with an attorney; (ii) I was given a period of not fewer than 21 days to consider signing this Release and to consult with an attorney of my choosing with respect thereto; (iii) I am providing this Release only in exchange for consideration in addition to anything of value to which I am already entitled; and (iv) I knowingly and voluntarily am providing this Release. /s/ Kevin Darrington Kevin Darrington Date: May 4, 2006

EXHIBIT 10.6   -------------------------------------------------------------------------------- AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF US ENERGY OVERSEAS INVESTMENTS LLC a Delaware limited liability company Dated as of May 22, 2006   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- TABLE OF CONTENTS            Page SECTION 1.   Amendment and Restatement    1 SECTION 2.   Limited Liability Company    1 SECTION 3.   Name    2 SECTION 4.   Definitions    2 SECTION 5.   Purpose of the Company    7 SECTION 6.   Powers    7 SECTION 7.   Term    8 SECTION 8.   Principal Place of Business    8 SECTION 9.   Registered Agent; Registered Office    8 SECTION 10.   Capital Contributions; Membership Units    9 SECTION 11.   Distributions    11 SECTION 12.   Allocation of Income and Losses    12 SECTION 13.   Withholding    15 SECTION 14.   Books, Records and Accounting    16 SECTION 15.   Company Funds    16 SECTION 16.   Board of Managers    16 SECTION 17.   Meetings of Class A Members    17 SECTION 18.   Representations and Warranties    19 SECTION 19.   Officers    20 SECTION 20.   Limitation of Liability, Indemnification and Exculpation    21 SECTION 21.   New Members; Transfer and Issuance of Membership Units    23 SECTION 22.   Conversion of Class B Membership Units    24 SECTION 23.   Dissolution    26 SECTION 24.   Winding Up and Distribution of Assets    27 SECTION 25.   Conflict of Interest    27 SECTION 26.   Taxation    28 SECTION 27.   Miscellaneous    29   -i- -------------------------------------------------------------------------------- AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF US ENERGY OVERSEAS INVESTMENTS LLC This Amended and Restated Limited Liability Company Agreement (as amended, modified or supplemented from time to time, including the Schedules and Exhibits hereto, this “Agreement”) is made and entered into as of the 22nd day of May, 2006 by and among the Members listed on Schedule I attached hereto. W I T N E S S E T H: WHEREAS, US Energy Overseas Investments LLC (the “Company”) was formed on October 28, 2005; WHEREAS, US Energy Systems Inc., as the Company’s sole member, entered into that certain Limited Liability Company Agreement of the Company, dated as of October 28, 2005 (the “Original Agreement”); and WHEREAS, on the date hereof, VTEX Energy Inc. is being admitted as a Member of the Company and the Members desire to amend and restate the Original Agreement to provide for such admission and for the terms governing the Company; NOW THEREFORE, in consideration of the foregoing and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows. A G R E E M E N T: SECTION 1. Amendment and Restatement. The Original Agreement is hereby amended and restated in its entirety by this Agreement. SECTION 2. Limited Liability Company. The rights and duties of the Members shall be as provided in the Act (as herein defined), except as modified by this Agreement. To the extent any provision of this Agreement is prohibited or ineffective under the Act, this Agreement shall be considered amended to the smallest degree possible in order to make this Agreement effective under the Act. In the event the Act is subsequently amended or interpreted in such a way as to make any provision of this Agreement that was formerly invalid valid, such provision shall be considered to be valid from the effective date of such interpretation or amendment.   -------------------------------------------------------------------------------- SECTION 3. Name. The name of the Company is “US Energy Overseas Investments LLC.” The business of the Company may be conducted, upon compliance with all applicable laws, under any name designated by the Board of Managers. SECTION 4. Definitions. In addition to the terms defined elsewhere in this Agreement, unless the context clearly indicates otherwise, the following terms shall have the following meanings: (a) “Act” means the Delaware Limited Liability Company Act, Delaware Code Title 6, Sections 18-101 et seq., as amended from time to time. (b) “Affiliate” of any particular Person means any other Person controlling, controlled by or under common control with such particular Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, by contract or otherwise. (c) “Agreement” has the meaning set forth in the first paragraph hereof. (d) “Board of Managers” has the meaning set forth in Section 16(a) hereof. (e) “Capital Account” means the account established on the books and records of the Company for each Member. Each Member’s Capital Account shall initially equal the value of the Capital Contribution to the Company, if any, made by the Member. The Members acknowledge and agree that the initial Capital Account of each Member on the date hereof shall be as follows: $0 for VTEX; and $350,000 for USEY. During the term of the Company, each Member’s Capital Account shall be (i) increased by the amount of (w) income and gain allocated to the Member and (x) any cash or property subsequently contributed by the Member to the Company, and (ii) decreased by the amount of (y) loss and deduction allocated to the Member and (z) all cash and property distributed to the Member, and shall otherwise be kept in accordance with applicable Treasury Regulations promulgated under Section 704(b) of the Code. In the event that the Gross Asset Values of assets of the Company are adjusted pursuant to clause (iii) of the definition of “Gross Asset Value,” the Capital Accounts of the Members shall be adjusted for the hypothetical “book” gain or loss that would have been realized by the Members if the Company had sold all the assets of the Company for their Gross Asset Values in a cash sale with the net amount of any gain or loss being treated as actually recognized for purposes of this Section 4(e) and of Section 11 hereof, Schedule I shall be amended by the Managers to reflect the restated capital of the Members as a result of any such adjustment to the Gross Asset Values of the Company’s assets. (f) “Capital Contribution” means the total amount of cash or other property contributed to the Company by a Member. Contributed property shall be valued at the Gross Asset Value of such contributed property, net of any liabilities assumed to which the contributed property is subject. (g) “Class A Member” means a Member who holds Class A Membership Units, as set forth on Schedule I hereto, as it may be amended, modified or supplemented from time to time in accordance with the terms of this Agreement.   -2- -------------------------------------------------------------------------------- (h) “Class A Membership Unit” means a Membership Unit having the rights, preferences and obligations specified in this Agreement with respect to Class A Membership Units. (i) “Class B Liquidation Allocation Amount” shall mean US$20,900,000 (Twenty Million Nine Hundred Thousand 00/100 United States dollars). (j) “Class B Member” means a Member who holds Class B Membership Units, as set forth on Schedule I hereto, as it may be amended, modified or supplemented from time to time in accordance with the terms of this Agreement. (k) “Class B Membership Unit” means a Membership Unit having the rights, preferences and obligations specified in this Agreement with respect to Class B Membership Units. (l) “Closing Date” means the date on which the Senior Debt Documents are executed and the transactions contemplated thereby are completed. The Company shall give each Member at least two calendar days prior written notice of when the Closing Date will occur, provided that the making of the capital contribution required to be made by Section 10 hereto by a Member shall be deemed to constitute a waiver of such notice requirement by such Member. (m) “Code” means the United States Internal Revenue Code of 1986, as amended, modified or rescinded from time to time, or any similar provision of succeeding law. (n) “Common Stock” means common stock, $0.01 par value, of USEY. (o) “Company” has the meaning set forth in the first “whereas” clause hereof. (p) “Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows: (i) The Gross Asset Value of any asset contributed by a Member to the Company is the fair market value of such asset at the time of contribution as determined in good faith by the Managers. (ii) The Gross Asset Value of any Company asset distributed to a Member shall be adjusted to equal the fair market value of such asset on the date of distribution as determined in good faith by the Managers. (iii) The Gross Asset Value of all Company assets shall be adjusted to equal their respective fair market values, as determined in good faith by the Managers, as of the following times: (1) immediately prior to the acquisition of an additional Membership Unit in the Company by a new or existing Member in exchange for more than a de minimis Capital Contribution (including any acquisition of a profits interest); (2) immediately prior to the distribution by the Company to a Member of more than a de minimis amount of money or other Company property as consideration for an interest in the Company; and (3) immediately prior to the liquidation of the Company within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g).   -3- -------------------------------------------------------------------------------- (iv) If the Gross Asset Value of a Company asset has been determined or adjusted pursuant to clause (i) or (iii) above, such Gross Asset Value shall thereafter be adjusted by the depreciation, amortization or cost recovery deductions, if any, taken into account with respect to such asset for purposes of computing Income and Loss. (v) The term “fair market value” shall mean the amount which, in the good faith judgment of the Managers, would be paid for a particular asset by a willing buyer to a willing seller (neither under any compulsion to buy or sell), unreduced by any liabilities secured by the asset or assumed by any party in connection therewith. (q) “Income” and “Loss” mean, for each fiscal year or other period, an amount equal to the Company’s taxable income or loss for such year or period, determined in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments: (i) Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Income or Loss pursuant to this definition shall be added to such income or loss. (ii) Any expenditures of the Company described in Section 705(a)(2)(B) of the Code or treated as Section 705(a)(2)(b) of the Code expenditures pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Income or Loss pursuant to this definition, shall be subtracted from such taxable income or loss. (iii) In lieu of depreciation, amortization and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account depreciation for such fiscal year or other period, computed in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(g). (iv) Any items which are specially allocated pursuant to the provisions of Section 12 hereof shall not be taken into account in computing Income or Loss. (r) “IRS” means the United States Internal Revenue Service or any successor entity. (s) “Lien” means any security interest, pledge, hypothecation, mortgage, lien, charge, lease, license, encumbrance, adverse claim, restrictive covenant or restriction of any kind, including any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of free and clear ownership. (t) “Majority Interest” means one or more Members who in the aggregate hold more than 50% of all Class A Membership Units. (u) “Manager” means any individual who is elected from time to time to the Board of Managers in accordance with the terms of this Agreement.   -4- -------------------------------------------------------------------------------- (v) “Member” means any Person whose name is set forth on Schedule I attached hereto, as amended, modified or supplemented from time to time in accordance with the terms of this Agreement. (w) “Membership Units” means the interests in the Company held by the Members, expressed as a number of Class A Membership Units and/or Class B Membership Units held by each Member and set forth opposite such Member’s name on Schedule I attached hereto, as amended, modified or supplemented from time to time in accordance with the terms of this Agreement. (x) “Minimum Gain Chargeback” shall have the meaning ascribed thereto in Section 1.704-2(b)(2) of the Treasury Regulations, as it applies to the Company. (y) “Net Cash Flow” means for any period the amount, computed on a cash basis, equal to: (i) the sum of (A) gross receipts from business operations, all investment income and investment gain of the Company and all other cash received by the Company, all without double counting, and (B) any amounts released from Reserves; decreased by (ii) the sum of (A) disbursements of the Company for operating expenses, contributions to Subsidiaries of the Company, expenditures for capital investments and reinvestments, principal payments on indebtedness, interest and other expenses, including any repayment of indebtedness required or elected to be made in connection with any refinancing, sale or other event, and (B) any increase in Reserves. (z) “Nonrecourse Deductions” shall have the meaning ascribed thereto in Section 1.704-2(b)(1) of the Treasury Regulations, as it applies to the Company. (aa) “Partnership Minimum Gain” shall have the meaning ascribed thereto in Section 1.704-2(b)(2) of the Treasury Regulations, as it applies to the Company. (bb) “Person” means a natural person, partnership (whether general or limited), limited liability company, trust, estate, association, corporation, custodian, nominee or any other individual or entity in its own or any representative capacity. (cc) “Qualified Income Offset” shall have the meaning ascribed thereto in Section 1.704-2(b)(2)(ii)(d) of the Treasury Regulations, as it applies to the Company. (dd) “Registration Rights Agreement” means the Registration Rights Agreement between USEY and VTEX dated as of the date hereof. (ee) “Reserves” means the reasonable reserves established and maintained from time to time in amounts reasonably determined by the Board of Managers to be adequate and sufficient for costs, expenses and other amounts payable in the Company’s business or otherwise for the long-term goals of the Company, including reserves for unforeseen or contingent liabilities, debts or obligations.   -5- -------------------------------------------------------------------------------- (ff) “Sale” means a sale, transfer, assignment or other disposition of all or substantially all of the assets of the Company or the liquidation, dissolution or winding up of the Company, whether voluntary or involuntary. (gg) “Secretary of State” means the Secretary of State of the State of Delaware. (hh) “Securities Act” means the Securities Act of 1933, as amended, and the regulations promulgated thereunder. (ii) “Senior Debt Documents” means (i) that certain First Lien Credit Agreement to be entered into by and among GBGH, LLC (an affiliate of the Company), as borrower, the initial lenders named therein, Credit Suisse or an affiliate thereof, as first lien administrative agent and as first lien collateral agent and Credit Suisse Securities (USA) LLC, as sole lead arranger and sole bookrunner and the Loan Documents as defined therein and (ii) that certain Second Lien Credit Agreement to be entered into by and among GBGH, LLC, as borrower, Credit Suisse Securities (USA) LLC, as sole lead arranger and sole bookrunner and the other parties thereto and the Loan Documents as defined therein. (jj) “Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity, a majority of the membership, partnership or other similar ownership interests thereof or the power to elect a majority of the members of the governing body thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control any managing director, general partner or managing member of such limited liability company, partnership, association or other business entity. (kk) “Tax Matters Member” has the meaning set forth in Section 26(c) hereof. (ll) “Transfer” means any direct or indirect sale, transfer, assignment, gift or other disposition of, or the creation of any Lien on, any legal or beneficial interest in the Membership Units of the Company, including as a result of a merger or consolidation involving a Member or a sale of all or substantially all of a Member’s assets or securities. (mm) “Treasury Regulations” means the income tax regulations, including any temporary regulations, from time to time promulgated under the Code.   -6- -------------------------------------------------------------------------------- (nn) “Unrecovered Capital” means, with respect to any Member, (i) the aggregate amount of Capital Contributions made by such Member to the Company, minus (ii) the aggregate amount of prior distributions made by the Company to such Member pursuant to Section 11(a)(i)(A)(1) or Section 11(b). (oo) “USEY” means US Energy Systems Inc., a Delaware corporation. (pp) “VIP” means Viking International Petroleum Limited, a company organized under the laws of England and Wales. (qq) “VTEX” means VTEX Energy Inc., a Nevada corporation. SECTION 5. Purpose of the Company. The purpose of the Company is to carry on any lawful business, purpose or activity for which limited liability companies may be formed in accordance with the Act. SECTION 6. Powers. Subject to the provisions of this Agreement, the Company shall have the power and authority to take any and all actions necessary, appropriate, proper, advisable, convenient or incidental to or for the furtherance of the purposes set forth in Section 5, including the power: (a) to conduct its business, carry on its operations and have and exercise the powers granted to a limited liability company by the Act in any state, territory, district or possession of the United States, or in any foreign country that may be necessary, convenient or incidental to the accomplishment of the purposes of the Company; (b) to acquire by purchase, lease, contribution of property or otherwise, own, hold, operate, maintain, finance, refinance, improve, lease, sell, convey, mortgage, transfer, demolish or dispose of any real or personal property that may be necessary, convenient or incidental to the accomplishment of the purposes of the Company; (c) to enter into, perform and carry out contracts of any kind, including subordination agreements and contracts with a Member or any Affiliate thereof, or any agent of the Company necessary to, in connection with, convenient to or incidental to the accomplishment of the purposes of the Company; (d) to purchase, take, receive, subscribe for or otherwise acquire, own, hold, vote, use, employ, sell, create a Lien on or otherwise dispose of, and otherwise use and deal in and with, shares or other interests in or obligations of domestic or foreign corporations, associations, general or limited partnerships (including the power to be admitted as a partner thereof and to exercise the rights and perform the duties created thereby), trusts, limited liability companies (including the power to be admitted as a member or appointed as a manager thereof and to exercise the rights and to perform the duties created thereby) or individuals or direct or indirect obligations of the United States or of any government, state, territory, governmental district or municipality or of any instrumentality of any of them; (e) to lend money, to invest and reinvest its funds and to take and hold real and personal property for the payment of funds so loaned or invested;   -7- -------------------------------------------------------------------------------- (f) to sue and be sued, complain and defend, and participate in administrative or other proceedings, in its name; (g) to appoint employees and agents of the Company and define their duties and fix their compensation; (h) to indemnify any Person in accordance with the Act and to obtain any and all types of insurance; (i) to dissolve, wind up and cancel its certificate of formation (the “Certificate of Formation”); (j) to negotiate, enter into, renegotiate, extend, renew, terminate, modify, amend, waive, execute, acknowledge or take any other action with respect to any lease, contract or security agreement in respect of any assets of the Company; (k) to borrow money and issue evidences of indebtedness and guaranty indebtedness (whether of the Company or any of its Subsidiaries), and to secure the same by a Lien on the assets of the Company; (l) to pay, collect, compromise, litigate, arbitrate or otherwise adjust or settle any and all other claims or demands of or against the Company or to hold such proceeds against the payment of contingent liabilities; (m) to establish, create or acquire Subsidiaries and to contribute properties to such Subsidiaries; and (n) to make, execute, acknowledge and file any and all documents or instruments necessary, convenient or incidental to the accomplishment of the purposes of the Company. SECTION 7. Term. The term of the Company began upon the filing of the Certificate of Formation with the office of the Secretary of State and shall continue until the Company is dissolved and wound up and its Certificate of Formation has been cancelled in accordance with this Agreement and the Act. SECTION 8. Principal Place of Business. The principal place of business of the Company shall be located at such place, within or without the State of Delaware, as the Managers may determine from time to time. The Company may have such other offices as the Managers may determine from time to time. SECTION 9. Registered Agent; Registered Office. The registered office of the Company required by the Act to be maintained in the State of Delaware shall be the office of the initial registered agent named in the Certificate of Formation or such other office (which need not be a place of business of the Company) as the Managers may designate from time to time in the manner provided by law. The registered agent of the Company in the State of Delaware shall be the initial registered agent named in the Certificate of Formation or such other Person(s) as the Managers may designate from time to time in the manner provided by law.   -8- -------------------------------------------------------------------------------- SECTION 10. Capital Contributions; Membership Units. (a) Initial Capital Contributions. As of the date hereof, each Member has made the Capital Contribution, if any, set forth opposite such Member’s name in the column captioned “Initial Capital Contribution” on Schedule I attached hereto, and has received the number and class of Membership Units, if any, set forth opposite such Member’s name in the column captioned “Initial Membership Units” on Schedule I. (b) Additional Capital Contributions; Tax Treatment of Additional Capital Contributions. Each Member hereby agrees to make on the Closing Date the additional Capital Contribution to the Company set forth opposite such Member’s name in the column captioned “Additional Capital Contribution” on Schedule I attached hereto. Upon the making of the additional Capital Contributions set forth on Schedule I on the Closing Date, and, in the case of VTEX only, full compliance with the obligations set forth in Section 27(r) of this Agreement, each Member shall receive the number and class of Membership Units set forth opposite such Member’s name in the column captioned “Additional Membership Units” on Schedule I. VTEX agrees that it will take all necessary actions to cause the outstanding US$367,500 intercompany loan from VTEX to VIP to be converted into equity of VIP prior to the Closing Date and that such additional equity of VIP will be included in the share capital of VIP required to be contributed by VTEX to the Company on the Closing Date. In addition, VTEX agrees that it will cause the share certificates, stock powers and other instruments required to effect its additional Capital Contribution set forth on Schedule I to be placed in escrow (together with all share certificates of Viking Petroleum UK Limited held by VIP), with an escrow agent (it being agreed that counsel to the Company may act as escrow agent) and on terms mutually agreed by VTEX and the Company no later than two weeks following the date hereof, in order to facilitate the making of such additional Capital Contribution to the Company on the Closing Date. The Members acknowledge and agree that upon the contribution of VTEX’s additional Capital Contribution required to be made on the Closing Date and compliance in full by VTEX with its obligations set forth in Section 27 (r) of this Agreement, the Capital Account of VTEX shall be equal to US$350,000. VTEX’s additional Capital Contribution required to be made on the Closing Date shall be made pursuant to the contribution agreement in the form attached as Exhibit A hereto, which shall be executed and delivered by the Company and VTEX effective as of the Closing Date. The Members acknowledge that VTEX is required to contribute to the capital of the Company on the Closing Date an equity interest in VIP and that VIP will own at the time of that contribution an equity interest in Viking Petroleum UK Limited (“Viking”). The Members further acknowledge that Viking will own at the time of that contribution 100% of Viking UK Gas Limited (“Viking Gas”) and 100% of Viking Petroleum BV (“Viking BV”). The Members intend that (i) VIP will be a disregarded entity for United States federal income tax purposes at the time VTEX contributes to the capital of the Company the equity interest in VIP and VTEX hereby covenants and agrees that it will cause VIP to be a disregarded entity for United States federal income tax purposes prior to making its additional capital contribution required pursuant to this Section 10(b), (ii) Viking Gas and Viking BV will be deemed to be liquidated for United States federal income tax purposes through check-the-box elections to be treated as disregarded entities that are effective before the effectiveness of the check-the-box election referred to in the immediately succeeding clause, (iii) Viking will be deemed to be liquidated for United States   -9- -------------------------------------------------------------------------------- federal income tax purposes through a check-the-box election to be treated as a disregarded entity that is effective no later than the day following the date on which VTEX contributes to the capital of the Company the equity interest in VIP, (iv) any income or gain associated with the deemed liquidation referred to in the immediately preceding clause (iii) will be allocated to VTEX pursuant to Section 704(c) of the Code, (v) the Company (and its members other than VTEX) will not be required to include in its income for United States federal income tax purposes any income or gain associated with the deemed liquidations of Viking Gas and Viking BV, and (vi) the Company (and its Members other than VTEX) will not be required to include in its income for United States federal income tax purposes pursuant to Subpart F of the Code any income of Viking, Viking Gas, or Viking BV. VTEX shall indemnify, defend, and hold the Company and USEY harmless on an after-tax basis from any loss, liability, cost and expense, including reasonable attorneys’ fees, arising out of or related, directly or indirectly, to any income or gain required to be included in income for United States federal income tax purposes by the Company (and its Members other than VTEX) to the extent that such income and gain is attributable to any unrealized gain with respect to VIP (and VIP’s interest in Viking and its Subsidiaries) that exists immediately prior to VTEX contributing its equity interest in VIP to the capital of the Company on the Closing Date. VTEX agrees to promptly provide the Company with copies of all forms submitted to and received from the Internal Revenue Service in connection with causing VIP to become a disregarded entity for United States federal income tax purposes. (c) Default. In the event that any Member defaults (such Member being referred to as a “Defaulting Member”) with respect to such Member’s obligation to make an additional Capital Contribution to the Company on the Closing Date in accordance with Section 10(b) above and Schedule I, then the Company may, in the discretion of the Board of Managers, redeem the Defaulting Member’s entire interest in the Company, including any Membership Units then held by the Defaulting Member or any right to receive Membership Units, for an amount equal to the Defaulting Member’s Capital Account. Such redemption shall occur automatically and without any further action by the parties hereto upon the Company’s delivery of written notice of such redemption to the Defaulting Member and payment in full of the amount of the Defaulting Member’s Capital Account, upon which the Defaulting Member shall be deemed to have withdrawn and shall no longer be a Member of the Company. The Company may also, in the discretion of the Board of Managers, institute a lawsuit against any Defaulting Member for specific performance of its obligation to make an additional Capital Contribution to the Company, and the Defaulting Member shall bear the Company’s costs and expenses (including reasonable attorneys’ fees) incurred in prosecuting such lawsuit. (d) Additional Capital Contributions;. Except as set forth in Section 10(b) above and Schedule I, no Member shall be obligated to make any additional Capital Contribution. Except as set forth in this Agreement, no Member shall be paid interest on any Capital Contribution. (e) Withdrawal and Resignation; Return of Capital Contribution. Except in connection with a Defaulting Member pursuant to Section 10(c), a Transfer pursuant to Section 21 or a conversion pursuant to Section 22, no Member shall be entitled to withdraw or resign as a Member of the Company. Except as provided in Section 11 and Section 24 hereof, no Member shall be entitled to receive any distribution from the Company with respect to its Capital Contributions or Capital Account.   -10- -------------------------------------------------------------------------------- (f) Membership Units. Membership Units of the Company shall be either Class A Membership Units or Class B Membership Units. Class B Membership Interests shall have no voting rights with respect to any matter upon which Members of the Company may vote pursuant to this Agreement or the Act and shall have only the right to receive distributive shares of profits, losses, items of income, gain, loss, deduction and credit and distributions of the Company, all in accordance with the terms of this Agreement. Class A Membership Interests shall have full voting rights with respect to any matter upon which Members of the Company may vote pursuant to this Agreement or the Act and shall have the right to receive distributive shares of profits, losses, items of income, gain, loss, deduction and credit and distributions of the Company, all in accordance with the terms of this Agreement. SECTION 11. Distributions. (a) General. The Company shall distribute Net Cash Flow periodically as determined by the Board of Managers. (i) Net Cash Flow distributed at any time shall be distributed: (A) first, to the Members, pro rata in accordance with their Capital Contributions, if any, as set forth on Schedule I hereto, until each Member has received cumulative distributions of Net Cash Flow equal to (1) the aggregate amount of such Member’s Capital Contributions, if any, as set forth on Schedule I hereto and (2) a preferred return on such Capital Contributions of 12% per annum, compounded annually, from the date each such Capital Contribution was made to the Company to the date each such Capital Contribution was returned to such Member (the “Preferred Return”); and (B) second, 50% to the Class A Members (pro rata in accordance with their respective Class A Membership Units) and 50% to the Class B Members (pro rata in accordance with their respective Class B Membership Units), until (1) the Class A Members have received aggregate cumulative distributions of Net Cash Flow equal to $350,000 plus an additional amount equal to 12% per annum thereon, compounded annually, from the date hereof until the date such amount is distributed and (2) the Class B Members have received aggregate cumulative distributions of Net Cash Flow equal to $350,000 plus an additional amount equal to 12% per annum thereon, compounded annually, from the date hereof until the date such amount is distributed; and (C) thereafter, 90% to the Class A Members (pro rata in accordance with their respective Class A Membership Units) and 10% to the Class B Members (pro rata in accordance with their respective Class B Membership Units). (ii) In the event the Company is subject to any tax or other obligation which is attributable to the interest of one or more Members in the Company, but fewer than all the Members, such tax or other obligation shall be specially allocated to, and charged against the Capital Account of, such Member or Members, and the amounts otherwise distributable to such Member or Members pursuant to this Agreement shall be reduced by such amount.   -11- -------------------------------------------------------------------------------- (iii) Notwithstanding anything herein to the contrary, the Members understand and agree that distributions of Net Cash Flow or other amounts to the Class B Members are predicated on the continuing existence of an aggregate of 100 Class B Membership Units outstanding and that, to the extent Class B Membership Units are converted into Common Stock, distributions to the Class B Members made after the effective date of such conversion shall be proportionately reduced to reflect the percentage of Class B Membership Units (out of the initial 100 Class B Membership Units outstanding) that were converted. By way of illustration, if 25 Class B Membership Units have been converted into Common Stock and a distribution of Net Cash Flow made after the effective date of such conversion would, without the application of the preceding sentence, result in the distribution of an aggregate of $100 to the Class B Members, such distribution shall be reduced to $75 [$100-(25/100) = $75]. (b) Tax Distributions. To the extent that the Company has sufficient Net Cash Flow, the Company shall use commercially reasonable efforts to make cash distributions to each Member within 90 days of the end of each fiscal year in an aggregate amount equal to the product of (i) the total amount of taxable income allocated to such Member for such fiscal year and (ii) a tax rate reasonably selected by the Managers (“Tax Distributions”). Any Tax Distribution will reduce the amount a Member would otherwise receive pursuant to Section 11(a). SECTION 12. Allocation of Income and Losses. (a) Allocations. Subject to clause (b) below, (i) Income shall be allocated: (A) first, to each Member until such Member has been allocated Income pursuant to this Section 12(a)(i)(A) equal to the aggregate Net Cash Flow distributed to such Member pursuant to Section 11(a)(i)(A), increased by any Loss allocated to such Member pursuant to Section 12(a)(ii)(A); (B) second, to each Member until such Member has been allocated Income pursuant to this Section 12(a)(i)(B) equal to the Net Cash Flow distributed to such Member pursuant to Section 11(a)(i)(B), increased by any Loss allocated to such Member pursuant to Section 12(a)(ii)(B); and (C) thereafter, 90% to the Class A Members (pro rata in accordance with their respective Class A Membership Units) and 10% to the Class B Members (pro rata in accordance with their respective Class B Membership Units).   -12- -------------------------------------------------------------------------------- (ii) Loss shall be allocated: (A) first, to each Member in an amount equal to the Income previously allocated to such Member pursuant to Section 12(a)(i)(A), reduced by any Loss allocated pursuant to this Section 12(a)(ii)(A); (B) second, to each Member in an amount equal to the Income previously allocated to such Member pursuant to Section 12(a)(i)(B), reduced by any Loss allocated pursuant to this Section 12(a)(ii)(B); and (C) thereafter, 90% to the Class A Members (pro rata in accordance with their respective Class A Membership Units) and 10% to the Class B Members (pro rata in accordance with their respective Class B Membership Units). (iii) Gain on a Sale shall be allocated: (A) first, to the Members until each Member’s Capital Account is equal to such Member’s Unrecovered Capital plus the Preferred Return thereon; (B) second, 99% to the Class B Members (pro rata in accordance with their respective Class B Membership Units) and 1% to the Class A Members (pro rata in accordance with their respective Class A Membership Units) until an aggregate amount of gain equal to the Class B Liquidation Allocation Amount is allocated to the Class B Members; and (C) thereafter, to the Class A Members (pro rata in accordance with their respective Class A Membership Units). (iv) Loss on a Sale shall be allocated: (A) first, to the Members until each Member’s Capital Account is equal to such Member’s Unrecovered Capital plus the Preferred Return thereon; and (B) thereafter, 90% to the Class A Members (pro rata in accordance with their respective Class A Membership Units) and 10% to the Class B Members (pro rata in accordance with their respective Class B Membership Units). (v) Notwithstanding anything herein to the contrary, the Members understand and agree that allocations of items of Income, Loss, Gain on a Sale, Loss on a Sale or other allocations to the Class B Members are predicated on the continuing existence of an aggregate of 100 Class B Membership Units outstanding and that, to the extent Class B Membership Units are converted into Common Stock, allocations to the Class B Members made after the effective date of such conversion shall be proportionately reduced to reflect the percentage of Class B Membership Units (out of the initial 100 Class B Membership Units outstanding) that were converted. By way of illustration, if 25 Class B Membership Units have been converted into Common Stock and an allocation of Gain on Sale made after the effective date of such conversion would, without the application of the preceding sentence, result in the allocation of an aggregate of $100 of Gain on Sale to the Class B Members, such allocation shall be reduced to $75 [$100—(25/100) = $75].   -13- -------------------------------------------------------------------------------- (b) Special Allocations. Notwithstanding anything to the contrary contained herein, (i) Revaluation of Property. In addition to the adjustments to the Capital Accounts set forth in the second paragraph of the definition of “Capital Account” regarding adjustments to Gross Asset Values of assets of the Company, the Members may, in accordance with Section l.704-1(b)(2)(iv)(f) of the Treasury Regulations and upon the occurrence of any of the events specified therein, adjust the Members’ respective Capital Accounts to reflect a revaluation of Company property. In the event of any such adjustment, the Members’ respective distributive shares of depreciation, amortization and gain or loss with respect to such revalued property shall be determined so as to take account of the variation between the adjusted tax basis and the book value of such property in the same manner as required by Section 704(c) of the Code. (ii) Code Section 754 Election. To the extent an adjustment to the tax basis of Company property pursuant to Section 734(b) or Section 743(b) of the Code is required, pursuant to Section l.704-1(b)(2)(iv)(m) of the Treasury Regulations, to be taken into account in determining Capital Accounts, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the tax basis of the asset) or loss (if the adjustment decreases such tax basis), and such gain or loss shall be specially allocated among the Members in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to Section l.704-1(b)(2)(iv)(m) of the Treasury Regulations. (iii) Modifications. Notwithstanding anything to the contrary contained in this Section 12, Income and Loss of the Company shall at all times be allocated in a manner which is not inconsistent with the applicable provisions of the Code and the Treasury Regulations promulgated thereunder, and the Board of Managers may modify the allocations set forth herein to comply with this requirement. (iv) Qualified Income Offset. If an allocation of losses would create a Capital Account deficit (or increase a Capital Account deficit) for any Member, such Member shall be allocated profits as a Qualified Income Offset in an amount and manner sufficient to eliminate such Capital Account deficit as quickly as possible, in a manner consistent with Section l.704-1(b)(2)(ii)(d) of the Treasury Regulations. (v) Contributed Property. Gain, loss and deductions with respect to property contributed to the Company shall be allocated among the Members’ respective Capital Accounts so as to take account of the variation between the tax basis of such property to the Company and its fair market value at the time of its contribution in accordance with Section 704(c) of the Code and the Treasury Regulations promulgated thereunder.   -14- -------------------------------------------------------------------------------- (vi) Nonrecourse Liabilities. (A) Nonrecourse Deductions shall be allocated in accordance with the requirements of Section 1.704-2(e)(2) of the Treasury Regulations. (B) Any item of Company Loss or deduction that is attributable to “partner nonrecourse debt” (as defined in Treasury Regulations Section 1.704-2(b)(4)) shall be specially allocated to the Members in the manner in which they share the economic risk of loss (as defined in Treasury Regulations Section 1.752-2) for such “partner nonrecourse debt.” (C) In the event that there is a net decrease during a fiscal year in either Company “minimum gain” (as defined in Treasury Regulations Sections 1.704-2(b)(2) and 1.704-2(d)) or Member “nonrecourse debt minimum gain” (as defined in Treasury Regulations Section 1.704-2(i)(2)), then, notwithstanding any other provision of this Section 12, each Member shall receive such special allocation of items of Company Income and gain as are required in order to conform to Treasury Regulations Sections 1.704-2(f) and (i). (vii) Certain Prevented or Required Allocations. In the event that an allocation is or has been prevented or required pursuant to clauses (iv) or (vi) of this Section 12(b), the Members subsequently may make special allocations of Income or Loss (or individual items thereof) to the extent that, in their judgment, such allocations would (A) be respected under applicable federal income tax law and (B) reduce the difference between the actual Capital Account of each Member and the Capital Account such Member would have had in the absence of Sections 12(b)(iv) or (vi). (viii) Tax Allocations. Each item of Income, gain, Loss, deduction or credit for federal, state and local income tax purposes shall be allocated among the Members in the same proportions as the corresponding “book” items are allocated pursuant to Sections 12(a) and (b), except as otherwise provided herein. The tax allocations made pursuant to this Section 12(b)(viii) shall be solely for tax purposes and shall not affect any Member’s Capital Account or share of non-tax allocations or distributions under this Agreement. (c) Change in Membership Units. If there is a change in the number of Membership Units held by any Member during any fiscal year, allocations of Income and Loss among the Members shall be made pro rata in accordance with the number and class of Membership Units held by each Member from time to time during such year in accordance with Section 706 of the Code using the closing-of-the-books method, except that depreciation, amortization and similar items shall be deemed to accrue ratably on a daily basis over the entire fiscal year if the corresponding asset is owned by the Company for the entire fiscal year, and over the portion of a year after such asset is acquired by the Company if such asset is acquired during the fiscal year. SECTION 13. Withholding. The Company is authorized to withhold from distributions to be made to a Member, or with respect to allocations to a Member, and to pay over to a federal, foreign, state or local government, any amounts required to be withheld pursuant to the Code or any provisions of any other federal, foreign, state or local law. Any amounts so withheld shall be treated as distributed to such Member for all purposes of this Agreement and shall be offset against the net amounts otherwise distributable to such Member. The Company may also withhold from distributions that would otherwise be made to a Member, and   -15- -------------------------------------------------------------------------------- apply to the obligations of such Member, any amounts that such Member owes to the Company. In addition, any tax imposed upon the Company resulting from any Member’s ownership of Membership Units shall be treated as a distribution to such Member and shall reduce future distributions to such Member. SECTION 14. Books, Records and Accounting. (a) Books and Records. The Company shall maintain complete and accurate books and records of the Company’s business and affairs in accordance with generally accepted accounting principles, consistently applied. The books and records shall be maintained at the principal place of business of the Company and shall be accessible to the Members in accordance with the Act. (b) Fiscal Year; Accounting. The Company’s fiscal year shall begin on the first day in January each year and end on the last day of the next following December. The accounting methods and principles to be followed by the Company shall be selected from time to time by the Board of Managers. (c) Reports. The Company shall provide to the Members and the Board of Managers (i) audited financial statements concerning the financial condition and results of operations of the Company and the changes in Members’ Capital Accounts, if any, within 90 days after the end of each fiscal year and (ii) unaudited financial statements concerning the financial condition and results of operations of the Company and the changes in Members’ Capital Accounts, if any, within 30 days after the end of each of the first three quarters of each fiscal year. SECTION 15. Company Funds. The funds of the Company shall be deposited in such bank or other financial institution account or accounts, or invested in such interest-bearing or non-interest-bearing investments, as shall be designated by the Board of Managers. All withdrawals from any such accounts shall be made only by individuals duly appointed by the Board of Managers. SECTION 16. Board of Managers. (a) Board of Managers. The business and affairs of the Company shall be managed and controlled by and under the direction of a Board of Managers (the “Board of Managers”), which may exercise all such powers of the Company and do all such lawful acts and things as are not by law or by this Agreement directed or required to be exercised or done by the Members. Unless authorized by the Board of Managers, no Member and no individual Manager, in his or her capacity as such, shall have the authority to act on behalf of or bind the Company. (b) Number, Qualification and Tenure. The Board of Managers shall consist of three members. The Managers shall be elected by a plurality vote of the Class A Membership Units, and each Manager elected shall hold office until his or her successor is elected and qualified or until his or her earlier death, resignation or removal.   -16- -------------------------------------------------------------------------------- (c) Initial Members of the Board of Managers. USEY, as the sole Member holding Class A Membership Units on the date hereof, hereby elects the following persons as the initial Board of Managers, to serve until their respective successors are duly elected and qualified: Asher Fogel Henry Schneider Adam Greene (d) Resignation. A Manager may resign at any time by giving written notice to the Members and the other Managers. (e) Place of Meetings. The Board of Managers may hold meetings, both regular and special, either within or without the State of Delaware. (f) Regular Meetings. The Board of Managers may hold a regular meeting, to be known as the annual meeting, immediately following any annual meeting of the Class A Members. Other regular meetings of the Board of Managers shall be held at such time and at such place as shall from time to time be determined by the Board of Managers on notice of not less than three days to each Manager, either personally or by mail, fax, telephone or electronic transmission. (g) Special Meetings. Special meetings of the Board of Managers may be called by any two Managers on notice of not less than three days to each other Manager, either personally or by mail, fax, telephone or electronic transmission. (h) Quorum. At all meetings of the Board of Managers a majority of the total number of Managers shall constitute a quorum for the transaction of business and the act of a majority of the Managers present at any meeting at which there is a quorum shall be the act of the Board of Managers, except as may be otherwise specifically provided by this Agreement or by law. If a quorum shall not be present at any meeting of the Board of Managers, the Managers present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. (i) Organization. The Chief Executive Officer of the Company, if elected, shall act as chairman at all meetings of the Board of Managers. If a Chief Executive Officer is not elected or, if elected, is not present, a Manager chosen by a majority of the Managers present at any meeting of the Board of Managers shall act as chairman at such meeting. (j) Action Without Meeting. Any action required or permitted to be taken at any meeting of the Board of Managers may be taken without a meeting, if the number of Managers that would be necessary to authorize or take such action at a meeting at which all Managers were present and voted consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Managers. Prompt notice of each action taken by the Managers by written consent shall be given to each Manager who did not execute such consent. (k) Attendance by Telephone. Members of the Board of Managers may participate in a duly noticed meeting of the Board of Managers by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at a meeting.   -17- -------------------------------------------------------------------------------- (l) Compensation. Managers shall not receive compensation for their service on the Board of Managers, but the Company shall reimburse the reasonable expenses, if any, of each Manager’s attendance at meetings of the Board of Managers. (m) Location of Records. The Managers may keep the books of the Company, except such as are required by law to be kept within the state, outside the State of Delaware, at such place or places as they may from time to time determine. SECTION 17. Meetings of Class A Members. (a) Time and Place of Meetings. All meetings of the Class A Members, for the election of Managers or for any other purpose, shall be held at such time and place, within or without the State of Delaware, as shall be designated by the Board of Managers. In the absence of any such designation by the Board of Managers, each such meeting shall be held at the principal office of the Company. (b) Annual Meetings. An annual meeting of the Class A Members may be held for the purpose of electing Managers and transacting such other business as may be properly brought before the meeting. The date of the annual meeting, if any, shall be determined by the Board of Managers. (c) Special Meetings. Special meetings of the Class A Members, for any purpose or purposes, unless otherwise prescribed by law, may be called at the direction of a majority of the Board of Managers or at the request in writing of a Majority Interest. (d) Notice of Meetings. Notice of each meeting of the Class A Members stating the place, date and time of the meeting, shall be given, not less than three nor more than ten days before the date of the meeting, to each Class A Member. Notices may be given personally or by mail, fax, telephone or electronic transmission. The notice of any special meeting shall state the purpose or purposes for which the meeting is called. (e) Quorum. The Majority Interest, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the Class A Members, except as otherwise required by law or this Agreement. If a quorum is not present or represented, the Class A Members present in person or represented by proxy at the meeting shall have power, by the affirmative vote of the holders of a majority of the Class A Membership Units held by such Members, to adjourn the meeting to another time and/or place, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting, at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Class A Member. (f) Voting. At all meetings, each Class A Member shall be entitled to cast one vote, in person or by proxy, for each Class A Membership Unit held by such Member on the record date for the meeting. When a quorum is present or represented at any meeting,   -18- -------------------------------------------------------------------------------- the vote of the holders of a majority of the Class A Membership Units present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, by express provision of law or this Agreement, a different vote is required, in which case such express provision shall govern and control. (g) Informal Action. Any action required or permitted to be taken at a meeting of the Class A Members may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by a Majority Interest. Prompt notice of any action taken without a meeting shall be given to each Class A Member who did not consent in writing to such action. (h) Actions Requiring Member Approval. Notwithstanding any other provision of this Agreement, the affirmative vote or written consent of the Majority Interest shall be required to approve the following matters: (i) A Sale; (ii) The merger or consolidation of the Company; (iii) The creation, grant or assumption of any Lien on all or substantially all of the assets of the Company (other than securities of the Company’s Subsidiaries held by the Company); (iv) A public offering of securities of the Company; and (v) Changing the number of Managers on the Board of Managers. (i) Attendance by Telephone. Class A Members may participate in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at a meeting. (j) Class B Members. Notwithstanding anything in this Agreement to the contrary, Class B Members shall not be entitled to attend or receive notices of the meetings of Members, and, except as provided in Section 21(a) and Section 27(h), Class B Members shall not be allowed or required to consent to, approve or vote on any matter affecting the Company or its affairs. Class B Members shall receive prompt written notice of any action taken (whether at a meeting or by written consent) by the Class A Members. SECTION 18. Representations and Warranties. Each Member, severally and not jointly, represents and warrants to the Company that: (a) Such Member is authorized and otherwise fully qualified to purchase or receive and hold Membership Units in the Company and, with respect to Class B Membership Units, shares of Common Stock issuable upon conversion thereof (such shares of Common Stock, together with Membership Units, are referred to collectively as “Securities”). Such Member has full right, power and authority to execute this Agreement and to perform its obligations hereunder.   -19- -------------------------------------------------------------------------------- (b) This Agreement has been duly and validly executed by such Member, and constitutes a valid and binding agreement of such Member, enforceable against such Member in accordance with its terms, subject to applicable bankruptcy, moratorium, insolvency and similar laws affecting creditors’ rights generally and to general principles of equity. The execution and delivery of this Agreement by such Member and the performance by such Member of its obligations hereunder does not and will not violate or conflict with (i) any provision of the organizational and governing documents of such Member, (ii) any law, statute, regulation, rule, order or decree applicable to such Member or its properties or (iii) any agreement or instrument by which such Member or its properties is bound. (c) Such Member is acquiring the Securities for its own account for investment and not with a view to resale or further distribution in whole or part. Such Member is an “accredited investor” as defined in Rule 501 promulgated under the Securities Act. (d) Such Member understands and acknowledges that the Securities have not been registered for sale under the Securities Act in reliance on the private offering exemption in Section 4(2) thereof. SECTION 19. Officers. (a) Designation and Appointment. The Board of Managers may, from time to time, employ and retain persons as may be necessary or appropriate for the conduct of the Company’s business (subject to the supervision and control of the Board of Managers), including employees, agents and other persons who may be designated as officers of the Company, with titles including but not limited to “Chief Executive Officer,” “President,” “Treasurer,” and “Secretary,” as and to the extent authorized by the Board of Managers. Any number of offices may be held by the same person. The Board of Managers may, in its discretion, choose not to fill any office for any period as it may deem advisable. Officers need not be residents of the State of Delaware. Any officers so designated shall have such authority and perform such duties as the Board of Managers may, from time to time, delegate to them. Each officer shall hold office until his or her successor shall be duly designated and shall qualify or until his or her death or until he or she shall resign or shall have been removed in the manner hereinafter provided. The salaries or other compensation, if any, of the officers of the Company shall be fixed from time to time by the Board of Managers. The initial officers of the Company shall be as follows:   Name    Title Asher Fogel    Chief Executive Officer Henry Schneider    President Adam Greene    Secretary and Treasurer   -20- -------------------------------------------------------------------------------- (b) Chief Executive Officer. The Chief Executive Officer shall preside at meetings of the Class A Members and at meetings of the Managers. The Chief Executive Officer shall be the chief executive officer of the Company and shall have general supervision, direction and control of the business and affairs of the Company, subject to the control of the Board of Managers. The Chief Executive Officer may sign all certificates, contracts and other instruments of the Company which may be authorized by the Board of Managers and shall have such other functions, authority and duties as are incident to his office or are properly prescribed by the Board of Managers. (c) President. The President shall perform such duties and have such other powers as may from time to time be prescribed by the Chief Executive Officer or the Board of Managers. (d) Secretary. The Secretary shall keep a record of all proceedings of the Class A Members and of the Board of Managers. The Secretary shall give, or cause to be given, notice, if any, of all meetings of the Class A Members and shall perform such other duties and have such other powers as may be prescribed by the Board of Managers. (e) Treasurer. The Treasurer shall have the custody of the funds and securities of the Company and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Board of Managers. The Treasurer shall disburse the funds of the Company as may be ordered by the Board of Managers, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer and the Board of Managers, at its regular meetings or when the Board of Managers so requires, an account of all transactions as Treasurer and of the financial condition of the Company. The Treasurer shall perform such other duties and have such other powers as may from time to time be prescribed by the Board of Managers. (f) Other Officers. The Board of Managers may appoint such other officers and agents as it shall deem necessary, and any such officer who is elected or appointed from time to time by the Board of Managers whose duties are not specified in this Agreement shall perform such duties and have such powers as may be prescribed from time to time by the Board of Managers. SECTION 20. Limitation of Liability, Indemnification and Exculpation. (a) Limitation of Liability. The debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Member or Manager shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member or Manager. (b) Indemnification and Exculpation. (i) No Member, Manager or officer of the Company, nor any of their respective directors, officers, stockholders, agents and employees (collectively, the “Indemnified Persons”), shall be liable, in damages or otherwise, to the Company or any other Person, for any act or omission performed or omitted by any of them with respect to this Agreement or the Company’s business   -21- -------------------------------------------------------------------------------- and affairs, unless such act or omission constituted gross negligence, willful misconduct or the willful and material breach of an express term of this Agreement on the part of the Indemnified Person. The provisions of this Agreement, to the extent that they expand, restrict or eliminate the duties and liabilities of any Person otherwise existing at law or in equity, are agreed pursuant hereto to replace to that extent such duties and liabilities. (ii) The Company, to the fullest extent permitted by law, shall indemnify and hold harmless all Indemnified Persons from and against any and all losses, claims, damages, liabilities, expenses (including reasonable legal fees and expenses), judgments, fines, settlements, claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, arising out of or in connection with, any action taken or omitted by any Indemnified Person with respect to this Agreement or the Company’s business and affairs (“Losses”). An Indemnified Person’s expenses paid or incurred in defending against any Losses shall be reimbursed as paid or incurred; provided, however, that any such reimbursement of expenses shall be conditioned upon the Company’s receipt of an undertaking by or on behalf of the Indemnified Person to repay promptly such reimbursed amount if it should ultimately be determined that such Indemnified Person was not entitled to be indemnified by the Company hereunder. This Section 20(b)(ii) shall not apply with respect to any Indemnified Person for that portion of any Loss that results from the gross negligence or willful misconduct of such Indemnified Person or the willful and material breach of an express term of this Agreement by such Indemnified Person. Any payments made to or on behalf of an Indemnified Person who is later determined not to be entitled to such payments shall be refunded to the Company promptly following such determination. A determination as to whether any Person is entitled to be indemnified by the Company hereunder shall be made (unless determined by a court) (A) by a majority vote of disinterested Managers, even though less than a quorum, (B) if there are no disinterested Managers, or the disinterested Managers so direct, by independent legal counsel in a written opinion to the Company or (C) by the Class A Members. (iii) Indemnification under this Section 20(b) shall continue as to a Person who has ceased to serve in the capacity which initially entitled such Person to indemnity hereunder and shall inure to the benefit of the heirs, successors, assigns and administrators of any Person entitled to indemnification hereunder. In the event that the indemnification provided for in this Section 20(b) is unavailable to a Person described herein for any reason whatsoever, the Company, in lieu of indemnifying such Person, shall contribute to the Loss incurred by such Person in such proportion as is deemed fair and reasonable in light of all the circumstances in order to reflect (A) the relative benefits received by the Company and such Person as a result of the event(s) and/or transaction(s) giving rise to such Loss and/or (B) the relative faults of the Company and the Person to be indemnified in connection with such event(s) and/or transaction(s). The rights granted pursuant to this Section 20(b) shall be deemed contract rights, and no amendment, modification or deletion of this Section 20(b) shall have the effect of limiting or denying any such rights with respect to actions taken or proceedings, appeals, inquiries or investigations arising prior to any amendment, modification or deletion. Any indemnification or right to contribution under this Section 20(b) shall be satisfied solely   -22- -------------------------------------------------------------------------------- out of the assets of the Company and, to the extent the Company lacks sufficient funds or is otherwise unable to fully indemnify or make the contribution described herein to all Persons making claims pursuant to this Section 20(b), then any indemnification and contribution payments shall be made on a pro rata basis based on the amount of the Loss incurred by such Persons. The Members shall not be subject to personal liability by reason of these indemnification and contribution provisions. (iv) The rights to indemnification and contribution and the advancement and payment of expenses conferred in this Section 20(b) shall not be exclusive of any other right that a Person entitled thereto pursuant to this Section 20(b) may have or hereafter acquire under any law (common or statutory), contract or provision of this Agreement. (v) The Company may purchase and maintain insurance, to the extent and in such amounts as the Board of Managers shall deem reasonable, on behalf of the Indemnified Persons and such other Persons as the Board of Managers shall determine, against any liability that may be asserted against or expenses that may be incurred by such Indemnified Persons or other Persons in connection with the activities of the Company, regardless of whether the Company would have the power to protect such Indemnified Persons or other Persons against such liability under the provisions of this Section 20(b). (vi) If this Section 20(b) or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless hold harmless each Person provided for pursuant to this Section 20(b) as to costs, charges and expenses (including reasonable attorneys’ fees), judgments, fines and amounts paid in settlement with respect to any such proceeding, appeal, inquiry or investigation to the fullest extent permitted by the provisions of this Section 20(b) that shall not have been invalidated and by applicable law. SECTION 21. New Members; Transfer and Issuance of Membership Units. (a) Issuance of Additional Membership Units. The Company may issue additional Membership Units other than Class B Membership Units to a Person upon (i) the making of a Capital Contribution by such Person, (ii) the approval of the Board of Managers, (iii) the approval of the Majority Interest, (iv) if the Person is not already a Member, the execution by such Person of this Agreement, and (v) the demonstration by such Person to the reasonable satisfaction of the Board of Managers that such issuance will not require the Company to register under or otherwise be subject to the provisions of the Investment Company Act of 1940, as amended, or any other similar legislation or regulatory scheme. In addition, if required by the Board of Managers, such Person shall deliver an opinion of counsel reasonably acceptable to the Board of Managers that such issuance (A) will not violate the Securities Act or any state blue sky laws (including any investor suitability standards) and (B) will not result in the Company ceasing to be treated as a partnership for federal income tax purposes. Following the issuance of Class B Membership Units as contemplated by Section 10(b) and Schedule I, without the written consent of the holders of a majority of the outstanding Class B Membership Units (which consent shall not be unreasonably withheld or delayed), the Company shall not have the authority to issue additional Membership Units that are senior to or pari passu with the Class B Membership Units; provided, that the Company may issue additional Membership Units with voting rights.   -23- -------------------------------------------------------------------------------- (b) Transfer of Membership Units. Membership Units may be Transferred, in whole or in part, only upon (i) the approval of the Board of Managers (which approval shall not be unreasonably withheld or delayed), (ii) the approval of the Majority Interest (which approval shall not be unreasonably withheld or delayed), (iii) if the Transferee is not already a Member, the execution by such Person of this Agreement, and (iv) the demonstration by the Transferee to the reasonable satisfaction of the Board of Managers that such Transfer will not require the Company to register under or otherwise be subject to the provisions of the Investment Company Act of 1940, as amended, or any other similar legislation or regulatory scheme. In addition, if required by the Board of Managers, the Transferee shall deliver an opinion of counsel reasonably acceptable to the Board of Managers that such Transfer (A) will not violate the Securities Act or any state blue sky laws (including any investor suitability standards) and (B) will not result in the Company ceasing to be treated as a partnership for federal income tax purposes. The Company shall receive such additional documentation as it may reasonably request in connection with any such Transfer, including an assignment and assumption agreement, and the Transferee shall bear all of the Company’s expenses and costs incurred in connection with such Transfer, including legal fees and expenses and filing fees. Any attempted Transfer in contravention of this Section 21(b) shall be null and void and shall not be recognized by the Company or the other Members for any purpose whatsoever. (c) Amendment of Schedule. Upon any issuance of additional Membership Units or any Transfer of Membership Units in accordance with the provisions of this Section 21, the Board of Managers shall amend, modify or supplement Schedule I attached hereto as appropriate to reflect such issuance or Transfer. SECTION 22. Conversion of Class B Membership Units. (a) Conversion into Common Stock. Subject to and in compliance with the provisions of this Section 22, Class B Membership Units may be converted into fully-paid and nonassessable shares of Common Stock. The number of shares of Common Stock to which a holder of Class B Membership Units shall be entitled upon conversion shall be equal to the product obtained by (i) dividing the Class B Liquidation Allocation Amount by the Conversion Price (as herein defined) then in effect and (ii) multiplying the amount in the preceding clause (i) by a fraction, the numerator of which is the number of Class B Membership Units held by such Member that are being converted, and the denominator of which is 100 (representing the total number of Preferred Membership Units outstanding on the date hereof). The “Conversion Price” shall initially be $11.00, and shall be adjusted from time to time to reflect any stock splits, reverse stock splits, subdivisions or combinations with respect to the Common Stock occurring after the date hereof. (b) Optional Conversion. Class B Membership Units may, at the option of the holders of a majority of the Class B Membership Units outstanding, be converted (in whole or in increments of no less than 25 Class B Membership Units (subject to adjustment to reflect any stock splits, reverse stock splits, subdivisions or combinations with respect to the Class B Membership Units occurring after the date hereof)) into shares of Common Stock at any time after the earlier of: (i) the date on which the average market price of   -24- -------------------------------------------------------------------------------- the Common Stock (determined by the last sale price reported by the exchange or electronic trading system on which the Common Stock is then listed or traded or, if no sale price is reported for any day, the average of the last bid and asked prices) exceeds $11.00 per share (as adjusted from time to time to reflect any stock splits, reverse stock splits, subdivisions or combinations with respect to the Common Stock occurring after the date hereof) for 20 consecutive trading days; and (ii) the third anniversary of the Closing Date (the earlier of such dates being referred to as the “Optional Trigger Date”). Written notice of the election to convert shall be signed by the holders of a majority of the Class B Membership Units outstanding and delivered to USEY; provided, that such notice shall not be delivered prior to the Optional Trigger Date. (c) Automatic Conversion. All Class B Membership Units shall, at the option of USEY, be converted into shares of Common Stock at any time after the date on which the average market price of the Common Stock (determined by the last sale price reported by the exchange or electronic trading system on which the Common Stock is then listed or traded or, if no sale price is reported for any day, the average of the last bid and asked prices) exceeds $14.30 per share (as adjusted from time to time to reflect any stock splits, reverse stock splits, subdivisions or combinations with respect to the Common Stock occurring after the date hereof) for 20 consecutive trading days (such date being referred to as the “Automatic Trigger Date”). Written notice of USEY’s election to convert shall be delivered to each Class B Member; provided, that such notice shall not be delivered prior to the Automatic Trigger Date. (d) Termination of Conversion Right. If the Class B Membership Units have not been converted into shares of Common Stock in accordance with the terms of this Section 22 on or before the sixth anniversary of the Closing Date, the conversion rights granted in this Section 22 shall expire and the Class B Membership Units shall no longer be convertible into shares of Common Stock. (e) Mechanics of Conversion. Any conversion of Class B Membership Units into shares of Common Stock shall be effective immediately prior to the close of business on the date the notice delivered pursuant to clause (b) or (c) above is received by USEY or the Class B Members, as applicable (the “Effective Date”). The Person or Persons holding the Class B Membership Units which were converted shall, as of the Effective Date, be treated for all purposes as the record holder or holders of the Common Stock issuable upon such conversion and USEY shall, as soon as practicable after the Effective Date, issue and deliver to such Person or Persons a certificate or certificates for the number of shares of Common Stock to which each such Person is entitled. All Class B Membership Units which were converted shall, as of the Effective Date, be deemed to have been retired and canceled and the holder or holders thereof shall be deemed to have withdrawn as a Member or Members of the Company with respect to such Class B Membership Units. No fractional shares of Common Stock shall be issued upon conversion of the Class B Membership Units and, in lieu thereof, USEY shall promptly pay in cash the value of any fractional share of Common Stock otherwise issuable to any holder of Class B Membership Units (based on the last sale price of the Common Stock on the Effective Date as reported by the exchange or electronic trading system on which the Common Stock is then listed or traded or, if no sale price is reported on the Effective Date, the average of the last bid and asked prices). The Company shall promptly deliver to each Member whose Class B Membership Units have been converted cash in an amount equal to any distributions with respect to such Class B Membership Units which had been declared but not paid as of the Effective Date.   -25- -------------------------------------------------------------------------------- (f) Registration Rights. Shares of Common Stock issued upon conversion of Class B Membership Units shall be entitled to registration rights in accordance with that certain Registration Rights Agreement dated as of the date hereof between USEY and VTEX. (g) Covenants of USEY. USEY hereby covenants and agrees as follows: (i) all shares of Common Stock issued upon conversion of Class B Membership Units will, upon issuance in accordance with the terms hereof, be validly issued, fully paid and nonassessable; (ii) USEY shall at all times have authorized and reserved a sufficient number of shares of Common Stock to provide for conversion in full of all Class B Membership Units; and (iii) USEY shall use its reasonable best efforts to ensure that any shares of Common Stock issued upon conversion of Class B Membership Units are qualified for listing on any exchange or electronic trading system on which the shares of Common Stock are then listed or traded. (h) No Rights as a Stockholder. No Class B Member shall have any rights as a stockholder of USEY with respect to any shares of Common Stock issuable upon conversion of such Class B Membership Units until the date such shares of Common Stock are issued to such holder on USEY’s records in accordance with the terms hereof and applicable law. (i) Market Standoff. Each Member who acquires shares of Common Stock upon conversion of Class B Membership Units agrees that it will not, without the prior written consent of the managing underwriter for any registered public offering by USEY of equity securities for its own account, during the period commencing on the date of the final prospectus relating to such public offering and ending on the date specified by USEY and the managing underwriter (such period not to exceed one hundred twenty (120) days) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether such shares or any such securities are then owned or are later acquired), or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. SECTION 23. Dissolution. (a) Events of Dissolution. The Company shall be dissolved and terminated upon the happening of the first to occur of any of the following events: (i) The adoption by the Board of Managers of a resolution approving the dissolution and winding up of the Company, followed by the approval of such resolution by the Majority Interest; and (ii) Judicial dissolution pursuant to the Act.   -26- -------------------------------------------------------------------------------- (b) Automatic Continuation. The Company shall automatically continue without any action on the part of the Members upon the death, retirement, withdrawal, resignation, expulsion, bankruptcy (as defined in Section 18-304 of the Act) or dissolution of a Member or other event which terminates the continued membership of a Member until the Company is otherwise dissolved and wound up pursuant to the terms of this Agreement. SECTION 24. Winding Up and Distribution of Assets. (a) Winding Up. If the Company is dissolved, the Board of Managers shall wind up the affairs of the Company. (b) Distribution of Assets. Upon the winding up of the Company, the Board of Managers shall pay or make reasonable provision to pay all claims and obligations of the Company, including (i) all claims of and obligations to Members in their capacities as creditors, (ii) all costs and expenses of the liquidation and (iii) all contingent, conditional, or unmatured claims and obligations that are known to the Board of Managers, whether the identity of the claimant is known or unknown. If there are sufficient assets, such claims and obligations shall be paid in full and any such provision shall be made in full. If there are insufficient assets, such claims and obligations shall be paid or provided for according to their priority and, among claims and obligations of equal priority, ratably to the extent of assets available therefor. The remaining proceeds, if any, plus any remaining assets of the Company, shall be distributed to the Members in accordance with the positive balances of their respective Capital Accounts, as determined after taking into account all adjustments to Capital Accounts for the taxable year during which the liquidation occurs. For purposes of the application of this Section 24 and determining Capital Accounts on liquidation, all unrealized gains, losses and accrued income and deductions of the Company shall be treated as realized and recognized immediately before the date of distribution, and all items of income, gain, loss and deduction with respect to the year of liquidation shall be allocated among the Members. No Member has any obligation to restore a deficit balance in such Member’s Capital Account, if any, or on the Company’s balance sheet. SECTION 25. Conflict of Interest. No Member or Manager shall be required to act hereunder as its sole and exclusive business activity and any Member or Manager may have other business interests and engage in other activities in addition to those relating to the Company. Neither the Company nor any Member or Manager shall have any right by virtue of this Agreement in or to any such other interests or activities or to the income or proceeds derived therefrom. A Member or Manager or its Affiliates may transact business with the Company and, subject to applicable laws, has the same rights and obligations with respect thereto as any other Person. No transaction between a Member or a Manager or an Affiliate thereof and the Company shall be voidable solely because a Member or Manager or an Affiliate thereof has a direct or indirect interest in the transaction if the transaction contains substantially such terms and conditions with respect to the Company as would be contained in a similar agreement entered to as a result of arm’s-length negotiation with an unaffiliated, disinterested third party or if the Majority Interest authorizes, approves or ratifies the transaction.   -27- -------------------------------------------------------------------------------- SECTION 26. Taxation. (a) Tax Elections. The Board of Managers shall not, without the unanimous written consent of the Class A Members, cause the Company to make an election to be classified as a corporation for federal or state income tax purposes. The Board of Managers shall, upon the written request of any Class A Member and is benefited thereby, cause the Company to file an election under Section 754 of the Code and the Treasury Regulations thereunder to adjust the basis of the Company assets under Section 734(b) or 743(b) of the Code and a corresponding election under the applicable sections of state and local law. The Board of Managers shall have the authority to make all other Company elections permitted under the Code, including elections of methods of depreciation. (b) Company Tax Returns. The Board of Managers shall cause the necessary tax returns and information returns for the Company to be prepared. Each Member shall provide such information, if any, as may be needed by the Company for purposes of preparing such tax returns and information returns. The Board of Managers shall deliver to each Member such information required by such Member to enable such Member to prepare and file its United States federal and state income tax returns reflecting the operations of the Company. (c) Tax Audits. (i) USEY shall be the “tax matters partner” of the Company pursuant to Section 6231(a)(7) of the Code (the “Tax Matters Member”). Any cost or expense incurred by the Tax Matters Member in connection with its duties, including the preparation for or pursuance of administrative or judicial proceedings, shall be paid by the Company. (ii) If at any time the Tax Matters Member cannot or elects not to serve as the Tax Matters Member, is removed by the Class A Members as the Tax Matters Member or ceases to be a Member, the Majority Interest shall select another Member to be the Tax Matters Member. The Tax Matters Member, as an authorized representative of the Company, shall direct the defense of any claims made by the IRS to the extent that such claims relate to the adjustment of Company items at the Company level. The Tax Matters Member shall promptly deliver to each Member a copy of any notice of beginning of administrative proceedings or any report explaining the reasons for a proposed adjustment received from the IRS relating to or potentially resulting in an adjustment of Company items. The Tax Matters Member shall, unless the Majority Interest consents to the contrary, diligently and in good faith contest any proposed adjustment of a Company item that principally affects the Members at the administrative and judicial levels, including, if appropriate or if requested by the Majority Interest, appealing any adverse judicial decision, and shall consider in good faith any suggestions made by any Member or its counsel regarding the conduct of such administrative or judicial proceedings. The Tax Matters Member shall keep each Member advised of all material developments with respect to any proposed adjustment that come to its attention, including the scheduling of all conferences and substantive telephone calls with the IRS. Each Member shall be entitled, at its own expense, to attend all meetings with the IRS and to review in advance any material written information (including any pleadings, memoranda or similar items) to be submitted to the IRS. Without first   -28- -------------------------------------------------------------------------------- obtaining the consent of the Majority Interest, the Tax Matters Member shall not, with respect to any proposed adjustment of a Company item that materially and adversely affects any Member, (A) enter into a settlement agreement that purports to bind Members other than the Tax Matters Member (including any stipulation consenting to an entry of decision by any tax court) or (B) enter into an agreement or stipulation extending the statute of limitations. (iii) The Company shall promptly deliver to each Member a copy of all notices, communications, reports or writings of any kind with respect to income or similar taxes received from any taxing authority relating to the Company that might materially and adversely affect each Member, and shall keep such Members advised of all material developments with respect to any proposed adjustment of Company items that come to its attention. (iv) Each Member shall continue to have the rights described in this Section 26(c) with respect to tax matters relating to any period during which it was a Member, whether or not it is a Member at the time of the tax audit or contest. SECTION 27. Miscellaneous. (a) Governing Law. This Agreement and any controversies or claims hereunder shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its conflict of law rules. (b) Binding Effect. Except as otherwise specifically provided herein, this Agreement shall be binding upon and inure to the benefit of the parties and their legal representatives, heirs, administrators, executors, successors and assigns. (c) Construction. Wherever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, feminine and neuter. The words “include,” “includes” and “including” when used herein shall be deemed to be followed by the phrase “without limitation.” (d) Captions. Captions or section headings contained in this Agreement are inserted only as a matter of convenience and in no way define, limit or extend the scope or intent of this Agreement or any provision hereof. (e) Enforceability. If any provision of this Agreement, or the application of the provision to any Person or circumstance, shall be held invalid or unenforceable, the remainder of this Agreement, or the application of that provision to Persons or circumstances other than those with respect to which it is held invalid or unenforceable, shall not be affected thereby. (f) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.   -29- -------------------------------------------------------------------------------- (g) Notices. Any notices permitted or required to be given under this Agreement shall be delivered in Person or by overnight or express courier or by registered or certified mail, postage prepaid, and shall be addressed to the Company at its principal place of business and to any Member at the address reflected on the books and records of the Company. Whenever any notice is required to be given under law or the provisions of this Agreement, a waiver thereof in writing, signed by the Person or Persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. (h) Entire Agreement; Amendment. This Agreement and the other documents referred to herein constitute the entire agreement between the parties hereto with respect to the matters set forth herein and supersede all prior understandings or agreements between the parties with respect to such matters. Except as otherwise set forth herein, this Agreement may be amended at any time and from time to time by written consent of a Majority Interest; provided, that no amendment that alters or changes the Class B Liquidation Allocation Amount, the provisions of Section 22 or any other powers, preferences, or other special rights, privileges or restrictions of the Class B Membership Units so as to affect them adversely may be made without the written consent of the holders of a majority of the Class B Membership Units outstanding. (i) Further Assurances. The Members shall execute and deliver such further instruments and do such further acts and things as may be required to carry out the intent and purposes of this Agreement. Each Member shall execute all such certificates and other documents and shall do all such filing, recording, publishing, and other acts as the Board of Managers deems appropriate to comply with the requirements of law for the formation and operation of the Company and to comply with any laws, rules, and regulations relating to the acquisition, operation, or holding of the property of the Company. (j) Third Parties. Except as provided in Section 20 hereof, nothing in this Agreement, whether express or implied, shall be construed to give any Person other than a Member or the Company any legal or beneficial or other equitable right, remedy or claim under or in respect of this Agreement, any covenant, condition, provision or agreement contained herein or the property of Company. (k) Facsimile Signatures. The facsimile signature (or other signature by electronic transmission) of any Manager or Member may be used at all times and for all purposes in place of an original signature. (l) Reliance upon Books, Reports and Records. Unless he or she has knowledge concerning the matter in question which makes his or her reliance unwarranted, each Manager shall, in the performance of his or her duties hereunder, be entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, if prepared or presented by one or more employees of the Company or by legal counsel, accountants or other Persons as to matters such Manager reasonably believes to be within such Person’s professional or expert competence. (m) Waiver. No failure by the Company, any Manager or Member 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 any other covenant, duty, agreement or condition.   -30- -------------------------------------------------------------------------------- (n) Waiver of Partition. Except as may be otherwise required by law in connection with the winding up, liquidation and dissolution of the Company, each Member hereby irrevocably waives any and all rights that it may have to maintain an action for partition of any of the Company’s property. (o) Expenses. Each Member shall pay its fees and expenses incurred in connection with the negotiation and execution of this Agreement. (p) Disputes. Should any dispute arising under this Agreement result in litigation, the prevailing party in such litigation shall be entitled to recover in addition to any other damages all its costs, expenses and reasonable attorneys’ fees. (q) Issuance of Warrants. On the Closing Date, in consideration for the contributions to be made by VTEX hereunder, USEY agrees that it will issue to VTEX warrants (the “USEY Warrants”) in the forms attached as Exhibits B, C and D hereto, to acquire an aggregate of 500,000 shares of USEY Common Stock. (r) Transfer of USEY Warrants. Upon receipt by VTEX of the USEY Warrants, VTEX shall, on the Closing Date, transfer such number of USEY Warrants to Mssrs. Grant Emms and Desmond McVeigh as are set forth on Schedule II hereto in compliance with the terms of the USEY Warrants and the Registration Rights Agreement. [signature page follows]   -31- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the undersigned Members have executed this Agreement as of the date first set forth above.   US ENERGY SYSTEMS INC. By:     Name:   Title:   VTEX ENERGY INC. By:     Name:   Title:  

  [FORM OF SENIOR SECURED CONVERTIBLE NOTE] NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE. Cash Systems, Inc. Senior Secured Convertible Note Issuance Date: October ___, 2006   Original Principal Amount: U.S. $                          FOR VALUE RECEIVED, Cash Systems, Inc., a Delaware corporation (the “Company”), hereby promises to pay to [PORTSIDE GROWTH AND OPPORTUNITY FUND] [OTHER BUYERS] or registered assigns (“Holder”) the amount set out above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“Interest”) on any outstanding Principal at the rate of six and one-half percent (6.50%) per annum (the “Interest Rate”), from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon an Interest Date (as defined below) or the Maturity Date, acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). This Senior Secured Convertible Note (including all Senior Secured Convertible Notes issued in exchange, transfer or replacement hereof, this “Note”) is one of an issue of Senior Secured Convertible Notes issued pursuant to the Securities Purchase Agreement (as defined below) on the Closing Date (collectively, the “Notes” and such other Senior Secured Convertible Notes, the “Other Notes”). Certain capitalized terms used herein are defined in Section 28.   --------------------------------------------------------------------------------        (1) PAYMENTS OF PRINCIPAL. On the Maturity Date, the Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges, if any, on such Principal and Interest. The “Maturity Date” shall be October 10, 2011, as may be extended at the option of the Holder (i) in the event that, and for so long as, an Event of Default (as defined in Section 4(a)) shall have occurred and be continuing on the Maturity Date (as may be extended pursuant to this Section 1) or any event that shall have occurred and be continuing that with the passage of time and the failure to cure would result in an Event of Default and (ii) through the date that is ten (10) Business Days after the consummation of a Change of Control in the event that a Change of Control is publicly announced or a Change of Control Notice (as defined in Section 5(b)) is delivered prior to the Maturity Date. Other than as specifically permitted by the Note, the Company may not prepay any portion of the outstanding Principal, accrued and unpaid Interest or accrued and unpaid Late Charges, if any, on Principal and Interest.      (2) INTEREST; INTEREST RATE. Interest on the outstanding Principal amount of this Note shall commence accruing on the Issuance Date and shall be computed on the basis of a 365-day year and actual days elapsed and shall be payable quarterly, in arrears, on January 10, April 10, July 10 and October 10 of each year (each, an “Interest Date”), with the first Interest Date being January 10, 2007. Interest shall be payable on each Interest Date, to the record holder of this Note on the applicable Interest Date, in cash. Prior to the payment of Interest on an Interest Date, Interest on this Note shall accrue at the Interest Rate and be payable by way of inclusion of the Interest in the Conversion Amount in accordance with Section 3(b)(i). From and after the occurrence and during the continuance of an Event of Default or a Registration Rights Failure, the Interest Rate shall be increased to twelve percent (12.0%). In the event that such Event of Default or Registration Rights Failure, as applicable, is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided that the Interest as calculated and unpaid at such increased rate during the continuance of such Event of Default or Registration Rights failure, as applicable, shall continue to apply to the extent relating to the days after the occurrence of such Event of Default or Registration Rights Failure through and including the date of cure of such Event of Default or Registration Rights Failure. From and after the failure (an “Interest Test Failure”) of the Company to meet one or more Interest Tests (as defined in Section 14(f)), and so long as no Event of Default or a Registration Rights Failure has occurred and is continuing, the Interest Rate shall be increased to seven and one-half percent (7.50%) (the “Interest Test Failure Rate”) as of the first day of the Fiscal Quarter immediately succeeding the Fiscal Quarter in which the Interest Test Failure occurred. As of the end of the second (2nd) succeeding Fiscal Quarter during which the Interest Tests are met (the “Interest Cure Date”) following an Interest Test Failure, and so long as no Event of Default or a Registration Rights Failure has occurred and is continuing, the adjustment referred to in the preceding sentence shall cease to be effective as of the Interest Cure Date; provided that the Interest as calculated and unpaid at the Interest Test Failure Rate shall continue to apply to the extent relating to the days prior to the Interest Cure Date.   --------------------------------------------------------------------------------        (3) CONVERSION OF NOTES. This Note shall be convertible into shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), on the terms and conditions set forth in this Section 3.           (a) Conversion Right. Subject to the provisions of Section 3(d), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount; provided that the Company shall not be required to pay any tax that may be payable in respect of any issuance of Common Stock to any Person other than the converting Holder or with respect to any income tax due by the Holder with respect to such Common Stock.           (b) Conversion Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion Rate”).                (i) “Conversion Amount” means the sum of (A) the portion of the Principal to be converted, redeemed or otherwise with respect to which this determination is being made, (B) accrued and unpaid Interest with respect to such Principal and (C) accrued and unpaid Late Charges with respect to such Principal and Interest.                (ii) “Conversion Price” means, as of any Conversion Date (as defined below) or other date of determination, $8.00, subject to adjustment as provided herein.           (c) Mechanics of Conversion.                (i) Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion Date”), the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 10:00 p.m., New York Time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the Company and (B) if required by Section 3(c)(iii), surrender this Note to a common carrier for delivery to the Company as soon as practicable on or following such date (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction). On or before the second (2nd) Trading Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the second (2nd) Trading Day following the date of receipt of a Conversion Notice (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, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled 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 deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled. If this Note is physically surrendered for conversion as required by Section 3(c)(iii) and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three (3) Business Days after receipt of this Note and at its own expense, issue and deliver to the holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.                (ii) Company’s Failure to Timely Convert. If within three (3) Trading Days after the Company’s receipt of the facsimile copy of a Conversion Notice the Company shall fail to issue and deliver a certificate to the Holder or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon such holder’s conversion of any Conversion Amount (a “Conversion Failure ”),, and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of Common Stock issuable upon such conversion that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within five (5) 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 and other out-of-pocket expenses, 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 Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such 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 on the Conversion Date.                (iii) Registration; Book-Entry. The Company shall maintain a register (the “Register”) for the recordation of the names and addresses of the holders of each Note and the principal amount of the Notes held by such holders (the “Registered Notes”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and the holders of the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes, including, without limitation, the right to receive payments of principal and interest hereunder, notwithstanding notice to the contrary. A Registered Note may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register. Upon its receipt of a request to assign or sell all or part of any Registered Note by a Holder, the Company shall record the information contained therein in the Register and issue one or more new Registered Notes in the same aggregate principal amount as the principal amount of the surrendered Registered Note to the designated assignee or transferee pursuant to Section 18. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the   --------------------------------------------------------------------------------   Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note. The Holder and the Company shall maintain records showing the Principal, Interest and Late Charges, if any, converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion.                (iv) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of Notes for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of Notes electing to have Notes converted on such date a pro rata amount of such holder’s portion of its Notes submitted for conversion based on the principal amount of Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 23.                (v) Company’s Right of Mandatory Conversion.                     (A) Mandatory Conversion. If at any time from and after the one (1) year anniversary of the Issuance Date (the “Mandatory Conversion Eligibility Date”), (i) the Closing Sale Price of the Common Stock exceeds for each of any twenty (20) consecutive Trading Days following the Mandatory Conversion Eligibility Date (the “Mandatory Conversion Measuring Period”) 200% of the Conversion Price on the Issuance Date (as adjusted for any stock splits, stock dividends, recapitalizations, combinations, reverse stock splits or other similar events during such period) and (ii) there shall not have been any Equity Conditions Failure, the Company shall have the right to require the Holder to convert all, or any portion, of the Conversion Amount then remaining under this Note into fully paid, validly issued and nonassessable shares of Common Stock in accordance with Section 3(c) hereof at the Conversion Rate as of the Mandatory Conversion Date (as defined below) with respect to the Conversion Amount (a “Mandatory Conversion”). The Company may exercise its right to require conversion under this Section 3(c)(v)(A) by delivering within not more than three (3) Trading Days following the end of any such Mandatory Conversion Measuring Period a written notice thereof by facsimile and overnight courier to all, but not less than all, of the holders of Notes and the Transfer Agent (the “Mandatory Conversion Notice” and the date all of the holders received such notice is referred to as the “Mandatory Conversion Notice Date”). The Mandatory Conversion Notice shall be irrevocable. The Mandatory Conversion Notice shall state (1) the Trading Day selected for the Mandatory Conversion in accordance herewith, which Trading Day shall be at least twenty (20) Trading Days but not more than sixty (60) Trading Days following the Mandatory Conversion Notice Date (the “Mandatory Conversion Date”), (2) the aggregate Conversion Amount of the Notes subject to mandatory conversion from all of the holders of the Notes pursuant hereto (and analogous provisions under the Other Notes) and (3) the number of shares of Common Stock to be issued to the Holder on the Mandatory Conversion Date. All   --------------------------------------------------------------------------------   Conversion Amounts converted by the Holder after the Mandatory Conversion Notice Date shall reduce the Conversion Amount of this Note required to be converted on the Mandatory Conversion Date. The mechanics of conversion set forth in Section 3(c) shall apply to any Mandatory Conversion as if the Company and the Transfer Agent had received from the Holder on the Mandatory Conversion Date a Conversion Notice with respect to the Conversion Amount being converted pursuant to the Mandatory Conversion. Notwithstanding the foregoing, if the Company cannot effect a Mandatory Conversion, in whole or in part, of the Conversion Amount of this Note (such portion, the “Unconverted Amount”) as contemplated in any Mandatory Conversion Notice due to the limitation on conversions set forth in Section 3(d)(i), then, as of the applicable Mandatory Conversion Date, Interest on such Unconverted Amount shall cease to accrue and such Unconverted Amount shall be converted in accordance with Section 3(c)(iv) on such date such conversion is permitted under Section 3(d)(i).                     (B) Pro Rata Conversion Requirement. If the Company elects to cause a conversion of any Conversion Amount of this Note pursuant to Section 3(c)(v)(A), then it must simultaneously take the same action in the same proportion with respect to the Other Notes. If the Company elects a Mandatory Conversion of this Note pursuant to Section 3(c)(v)(A) (or similar provisions under the Other Notes) with respect to less than all of the Conversion Amounts of the Notes then outstanding, then the Company shall require conversion of a Conversion Amount from each of the holders of the Notes equal to the product of (I) the aggregate Conversion Amount of Notes which the Company has elected to cause to be converted pursuant to Section 3(c)(v)(A), multiplied by (II) the fraction, the numerator of which is the sum of the aggregate Original Principal Amount of the Notes purchased by such holder of outstanding Notes and the denominator of which is the sum of the aggregate Original Principal Amount of the Notes purchased by all holders holding outstanding Notes (such fraction with respect to each holder is referred to as its “Conversion Allocation Percentage,” and such amount with respect to each holder is referred to as its “Pro Rata Conversion Amount”); provided, however, that in the event that any holder’s Pro Rata Conversion Amount exceeds the outstanding Principal amount of such holder’s Note, then such excess Pro Rata Conversion Amount shall be allocated amongst the remaining holders of Notes in accordance with the foregoing formula. In the event that the initial holder of any Notes shall sell or otherwise transfer any of such holder’s Notes, the transferee shall be allocated a pro rata portion of such holder’s Conversion Allocation Percentage and the Pro Rata Conversion Amount.           (d) Limitations on Conversions.                (i) Beneficial Ownership. The Company shall not effect any conversion of this Note, and the Holder of this Note shall not have the right to convert any portion of this Note pursuant to Section 3(a), to the extent that after giving effect to such conversion, the Holder (together with the Holder’s affiliates) would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the number of shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with   --------------------------------------------------------------------------------   respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any Other Notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For purposes of this Section 3(d)(i), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-K, Form 10-Q or Form 8-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within two (2) Business Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. By written notice to the Company, the Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (i) any such increase will not be effective until the sixty-first (61st) day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder and not to any other holder of Notes.                (ii) Principal Market Regulation. The Company shall not be obligated to issue any shares of Common Stock upon conversion of this Note, and the Holder of this Note shall not have the right to receive upon conversion of this Note any shares of Common Stock, if the issuance of such shares of Common Stock would exceed the aggregate number of shares of Common Stock which the Company may issue upon conversion or exercise, as applicable, of the Notes and Warrants without breaching the Company’s obligations under the rules or regulations of the Principal Market (the “Exchange Cap”), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its stockholders as required by the applicable rules of the Principal Market for issuances of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the Required Holders. Until such approval or written opinion is obtained, no purchaser of the Notes pursuant to the Securities Purchase Agreement (the “Purchasers”) shall be issued in the aggregate, upon conversion or exercise, as applicable, of Notes or Warrants, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the principal amount of Notes issued to such Purchaser pursuant to the Securities Purchase Agreement on the Closing Date and the denominator of which is the aggregate principal amount of all Notes issued to the Purchasers pursuant to the Securities Purchase Agreement on the Closing Date (with respect to each Purchaser, the “Exchange Cap Allocation”). In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser’s Notes, the transferee shall be allocated a pro rata portion of such Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee   --------------------------------------------------------------------------------   with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of Notes shall convert all of such holder’s Notes into a number of shares of Common Stock which, in the aggregate, is less than such holder’s Exchange Cap Allocation, then the difference between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of Notes on a pro rata basis in proportion to the aggregate principal amount of the Notes then held by each such holder.      (4) RIGHTS UPON EVENT OF DEFAULT.           (a) Event of Default. Each of the following events shall constitute an “Event of Default”:                (i) the suspension from trading or failure of the Common Stock to be listed on an Eligible Market for a period of five (5) consecutive Trading Days or for more than an aggregate of ten (10) Trading Days in any 365-day period;                (ii) the Company’s (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock within ten (10) Business Days after the applicable Conversion Date or (B) notice, written or oral, to any holder of the Notes, including by way of public announcement or through any of its agents, at any time, of its intention not to comply with a request for conversion of any Notes into shares of Common Stock that is tendered in accordance with the provisions of the Notes;                (iii) at any time following the tenth (10th) consecutive Business Day that the Holder’s Authorized Share Allocation is less than the number of shares of Common Stock that the Holder would be entitled to receive upon a conversion of the full Conversion Amount of this Note (without regard to any limitations on conversion set forth in Section 3(d) or otherwise);                (iv) the Company’s failure to pay to the Holder any amount of Principal (including, without limitation, any redemption payments), Interest, Late Charges or other amounts when and as due under this Note or any other Transaction Document (as defined in the Securities Purchase Agreement) or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby to which the Holder is a party, except, in the case of a failure to pay Interest and Late Charges when and as due, in which case only if such failure continues for a period of at least five (5) Business Days;                (v) the Company shall either (i) fail to pay, when due, or within any applicable grace period, any payment with respect to any Indebtedness in excess of $250,000, individually or in the aggregate, due to any third party, other than, with respect to unsecured Indebtedness only, payments contested by the Company in good faith by proper proceedings and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP, or otherwise be in breach or violation of any agreement for monies owed or owing in an amount in excess of $250,000, individually or in the aggregate, which breach or violation permits the other party thereto to declare a default or otherwise   --------------------------------------------------------------------------------   accelerate amounts due thereunder, or (ii) suffer to exist any other circumstance or event that would, with or without the passage of time or the giving of notice, result in a default or event of default under any agreement binding the Company, which default or event of default would or is likely to have a material adverse effect on the business, operations, properties, prospects of financial condition of the Company or any of its Subsidiaries, individually or in the aggregate;                (vi) the Company or any of its Subsidiaries (other than Cash Systems of Canada, Inc. at any time while it is not required to comply with Section 14(g)), pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal, foreign or state law for the relief of debtors (collectively, “Bankruptcy Law”), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a “Custodian”), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due;                (vii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or any of its Subsidiaries in an involuntary case, (B) appoints a Custodian of the Company or any of its Subsidiaries or (C) orders the liquidation of the Company or any of its Subsidiaries, other than, in each case, with respect to Cash Systems of Canada, Inc. at any time while it is not required to comply with Section 14(g));                (viii) a final judgment or judgments for the payment of money aggregating in excess of $500,000 are rendered against the Company or any of its Subsidiaries and which judgments are not, within sixty (60) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within sixty (60) days after the expiration of such stay; provided, however, that any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $500,000 amount set forth above;                (ix) the Company breaches any covenant or other term or condition or any material representation or warranty of any Transaction Document, except, in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least ten (10) consecutive Business Days;                (x) any breach or failure in any respect to comply with Section 14 of this Note or failure to meet any Default Test set forth in Section 14(f) of this Note; or                (xi) any Event of Default (as defined in the Other Notes) occurs with respect to any Other Notes.           (b) Redemption Right. Upon the occurrence of an Event of Default with respect to this Note or any Other Note, the Company shall within (1) Business Day deliver written notice thereof via facsimile or e-mail and overnight courier (an “Event of Default Notice”) to the Holder. At any time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (the “Event of Default Redemption Notice”) to the Company, which Event of Default Redemption   --------------------------------------------------------------------------------   Notice shall indicate the portion of this Note the Holder is electing to redeem. Each portion of this Note subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount to be redeemed and (y) the Redemption Premium and (ii) the product of (A) the Conversion Rate with respect to such Conversion Amount in effect at such time as the Holder delivers an Event of Default Redemption Notice and (B) the greater of (1) the Closing Sale Price of the Common Stock on the date immediately preceding such Event of Default, (2) the Closing Sale Price of the Common Stock on the date immediately after such Event of Default and (3) the Closing Sale Price of the Common Stock on the date the Holder delivers the Event of Default Redemption Notice (the “Event of Default Redemption Price”). Redemptions required by this Section 4(b) shall be made in accordance with the provisions of Section 12. To the extent redemptions required by this Section 4(b) are deemed or determined by a court of competent jurisdiction to be prepayments of the Note by the Company, such redemptions shall be deemed to be voluntary prepayments. The parties hereto agree that in the event of the Company’s redemption of any portion of the Note under this Section 4(b), the Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any Redemption Premium due under this Section 4(b) is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its investment opportunity and not as a penalty.      (5) RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.           (a) Assumption. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance with the provisions of this Section 5(a) pursuant to written agreements in form and substance satisfactory to the Required Holders and approved by the Required Holders prior to such Fundamental Transaction, including agreements to deliver to each holder of Notes in exchange for such Notes a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including, without limitation, having a principal amount and interest rate equal to the principal amounts then outstanding and the interest rates of the Notes held by such holder, having similar conversion rights as the Notes and having similar ranking to the Notes, and satisfactory to the Required Holders and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of the Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon conversion or redemption of this Note at any time after the consummation of the Fundamental Transaction, in lieu of the shares of the Company’s Common Stock (or other securities, cash, assets or other property) issuable upon the conversion or redemption of the Notes prior to such Fundamental Transaction, such shares of the publicly   --------------------------------------------------------------------------------   traded common stock (or their equivalent) of the Successor Entity (including its Parent Entity), as adjusted in accordance with the provisions of this Note. The provisions of this Section shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion or redemption of this Note.           (b) Redemption Right. No sooner than fifteen (15) days nor later than ten (10) days prior to the consummation of a Change of Control, but not prior to the public announcement of such Change of Control, the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a “Change of Control Notice”). At any time during the period beginning on the date of the Holder’s receipt of a Change of Control Notice and ending twenty (20) Trading Days after the consummation of such Change of Control, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (“Change of Control Redemption Notice”) to the Company, which Change of Control Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this Section 5 shall be redeemed by the Company in cash at a price equal to the greater of (i) the product of (x) the Conversion Amount being redeemed and (y) the quotient determined by dividing (A) the greater of the Closing Sale Price of the Common Stock immediately prior to the consummation of the Change of Control, the Closing Sale Price immediately following the public announcement of such proposed Change of Control and the Closing Sale Price of the Common Stock immediately prior to the public announcement of such proposed Change of Control by (B) the Conversion Price and (ii) the product of the Conversion Amount being redeemed and the Change of Control Premium (the “Change of Control Redemption Price”). Redemptions required by this Section 5 shall be made in accordance with the provisions of Section 12 and shall have priority to payments to stockholders in connection with a Change of Control. To the extent redemptions required by this Section 5(b) are deemed or determined by a court of competent jurisdiction to be prepayments of the Note by the Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this Section 5, but subject to Section 3(d), until the Change of Control Redemption Price is paid in full, the Conversion Amount submitted for redemption under this Section 5(c) may be converted, in whole or in part, by the Holder into Common Stock pursuant to Section 3. The parties hereto agree that in the event of the Company’s redemption of any portion of the Note under this Section 5(b), the Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any redemption premium due under this Section 5(b) is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its investment opportunity and not as a penalty.      (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.           (a) Purchase Rights. If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without   --------------------------------------------------------------------------------   taking into account any limitations or restrictions on the convertibility of this Note) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.           (b) Other Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Note, (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Note) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Required Holders. The provisions of this Section shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of this Note.      (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.           (a) Adjustment of Conversion Price upon Issuance of Common Stock. If and whenever on or after the Subscription Date through the first (1st) anniversary of the Issuance Date, the Company issues or sells, or in accordance with this Section 7(a) 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, but excluding shares of Common Stock deemed to have been issued or sold by the Company in connection with any Excluded Security) for a consideration per share (the “New Issuance Price”) less than a price (the “Applicable Price”) equal to the Conversion Price in effect immediately prior to such issue or sale (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price. If and whenever on or after the first (1st) anniversary of the Issuance Date, the Company issues or sells, or in accordance with this Section 7(a) 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, but excluding shares of Common Stock deemed to have been issued or sold by the Company in connection with any Excluded Security) in a Dilutive Issuance, then immediately after such Dilutive Issuance, the Conversion Price then in effect shall be reduced to an amount equal the product of (A) the Conversion Price in effect immediately prior to such Dilutive Issuance and (B) the quotient determined by dividing (1) the sum of (I) the product derived by multiplying the Conversion Price in effect immediately prior to such Dilutive Issuance and the number of shares of Common Stock Deemed Outstanding immediately prior to   --------------------------------------------------------------------------------   such Dilutive Issuance plus (II) the consideration, if any, received by the Company upon such Dilutive Issuance, by (2) the product derived by multiplying (I) the Applicable Price in effect immediately prior to such Dilutive Issuance by (II) the number of shares of Common Stock Deemed Outstanding immediately after such Dilutive Issuance. For purposes of determining the adjusted Conversion Price under this Section 7(a), the following shall be applicable:                (i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion or exchange or exercise of any Convertible Securities issuable upon exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 7(a)(i), the “lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion or exchange or exercise of any Convertible Securities issuable upon exercise of such Option” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion or exchange or exercise of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion Price shall be made upon the actual issuance of such share of Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion or exchange or exercise of such Convertible Securities.                (ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon such conversion or exchange or exercise thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 7(a)(ii), the “lowest price per share for which one share of Common Stock is issuable upon such conversion or exchange or exercise” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the issuance or sale of the Convertible Security and upon the conversion or exchange or exercise of such Convertible Security. No further adjustment of the Conversion Price shall be made upon the actual issuance of such share of Common Stock upon conversion or exchange or exercise of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant to other provisions of this Section 7(a), no further adjustment of the Conversion Price shall be made by reason of such issue or sale.                (iii) Change in Option Price or Rate of Conversion. If the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exchange or exercise of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exchangeable or exercisable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or   --------------------------------------------------------------------------------   changed conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Subscription Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect.                (iv) Calculation of Consideration Received. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for a consideration of $.01. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Closing Sale Price of such securities on the date of receipt. If any Common Stock, Options or Convertible Securities are issued to the stockholders of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the Required Holders. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined, at the Company’s expense, within five (5) Business Days after the tenth (10th) day following the Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Required Holders. The determination of such appraiser shall be deemed binding upon all parties absent manifest error.                (v) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the 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.           (b) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. If the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time on or after the Subscription Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number   --------------------------------------------------------------------------------   of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased.           (c) Other Events. If any event occurs of the type contemplated by the provisions of this Section 7 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 Conversion Price so as to protect the rights of the Holder under this Note; provided that no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 7.           (d) De Minimis Adjustments. No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least $0.01 in such price; provided, however, that any adjustment which by reason of this Section 7(d) is not required to be made shall be carried forward and taken into account in any subsequent adjustments under this Section 7. All calculations under this Section 7 shall be made by the Company in good faith and shall be made to the nearest cent or to the nearest one hundredth of a share, as applicable. No adjustment need be made for a change in the par value or no par value of the Company’s Common Stock.      (8) HOLDER’S RIGHT OF OPTIONAL REDEMPTION. On October 10, 2009 (the “Holder Optional Redemption Date”), the Holder shall have the right, in its sole discretion, to require that the Company redeem all or any portion of the Note (a “Holder Redemption”) by delivering written notice thereof to the Company by October 9, 2009 (a “Holder Redemption Notice”). The Holder Redemption Notice shall indicate the Conversion Amount the Holder is electing to have redeemed (the “Holder Optional Redemption Amount”) on the Holder Optional Redemption Date. The portion of this Note subject to redemption pursuant to this Section 8 shall be redeemed by the Company in cash at a price equal to the Conversion Amount being redeemed (the “Holder Optional Redemption Price”). Redemptions required by this Section 8 shall be made in accordance with the provisions of Section 12. Notwithstanding anything to the contrary in this Section 8, but subject to Section 3(d), until the Holder receives the Holder Optional Redemption Price, the Holder Optional Redemption Amount may be converted, in whole or in part, by the Holder into Common Stock pursuant to Section 3, and any such conversion shall reduce the Holder Optional Redemption Amount.      (9) SECURITY. This Note and the Other Notes are secured to the extent and in the manner set forth in the Security Documents (as defined in the Securities Purchase Agreement).      (10) NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, 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 Note, and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note.   --------------------------------------------------------------------------------        (11) RESERVATION OF AUTHORIZED SHARES.           (a) Reservation. The Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock for each of the Notes equal to 130% of the Conversion Rate with respect to the Conversion Amount of each such Note as of the Issuance Date. So long as any of the Notes are outstanding, the Company shall take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Notes, 130% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Notes then outstanding; provided that at no time shall the number of shares of Common Stock so reserved be less than the number of shares required to be reserved by the previous sentence (without regard to any limitations on conversions) (the “Required Reserve Amount”). The initial number of shares of Common Stock reserved for conversions of the Notes and each increase in the number of shares so reserved shall be allocated pro rata among the holders of the Notes based on the principal amount of the Notes held by each holder at the Closing (as defined in the Securities Purchase Agreement) or increase in the number of reserved shares, as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s Notes, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Notes shall be allocated to the remaining holders of Notes, pro rata based on the principal amount of the Notes then held by such holders.           (b) Insufficient Authorized Shares. If at any time while any of the Notes remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes at least a number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal.      (12) HOLDER’S REDEMPTIONS.           (a) Mechanics. The Company shall deliver the applicable Event of Default Redemption Price to the Holder within five (5) Business Days after the Company’s receipt of the Holder’s Event of Default Redemption Notice. If the Holder has submitted a Change of Control Redemption Notice in accordance with Section 5(b), the Company shall deliver the applicable Change of Control Redemption Price to the Holder concurrently with the consummation of such Change of Control if such notice is received prior to the consummation of   --------------------------------------------------------------------------------   such Change of Control and within five (5) Business Days after the Company’s receipt of such notice otherwise. The Company shall deliver the Holder Optional Redemption Price on the Holder Optional Redemption Date. In the event of a redemption of less than all of the Conversion Amount of this Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal which has not been redeemed. In the event that the Company does not pay the applicable Redemption Price to the Holder within the time period required, at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or any portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption Price (together with any Late Charges thereon) has not been paid. Upon the Company’s receipt of such notice, (x) the Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 18(d)) to the Holder representing such Conversion Amount and (z) the Conversion Price of this Note or such new Notes shall be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which the Redemption Notice is voided and (B) the lowest Closing Bid Price of the Common Stock during the period beginning on and including the date on which the Redemption Notice is delivered to the Company and ending on and including the date on which the Redemption Notice is voided. The Holder’s delivery of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not affect the Company’s obligations to make any payments of Late Charges which have accrued prior to the date of such notice with respect to the Conversion Amount subject to such notice.           (b) Redemption by Other Holders. Upon the Company’s receipt of notice from any of the holders of the Other Notes for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 4(b), Section 5(b) or Section 8 (each, an “Other Redemption Notice”), the Company shall immediately, but no later than one (1) Business Day of its receipt thereof, forward to the Holder by facsimile a copy of such notice. If the Company receives a Redemption Notice and one or more Other Redemption Notices, during the seven (7) Business Day period beginning on and including the date which is three (3) Business Days prior to the Company’s receipt of the Holder’s Redemption Notice and ending on and including the date which is three (3) Business Days after the Company’s receipt of the Holder’s Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice and such Other Redemption Notices received during such seven (7) Business Day period, then the Company shall redeem a pro rata amount from each holder of the Notes (including the Holder) based on the principal amount of the Notes submitted for redemption pursuant to such Redemption Notice and such Other Redemption Notices received by the Company during such seven Business Day period.      (13) VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law, including, but not limited to, the General Corporation Law of the State of Delaware and as expressly provided in this Note.   --------------------------------------------------------------------------------        (14) COVENANTS.           (a) Rank. All payments due under this Note (A) shall rank pari passu with all Other Notes and (B) shall be senior to all other Indebtedness of the Company and its Subsidiaries, other than Permitted Indebtedness secured by Permitted Liens.           (b) Incurrence of Indebtedness. So long as this Note is outstanding, the Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness, other than (i) the Indebtedness evidenced by this Note and the Other Notes and (ii) other Permitted Indebtedness.           (c) Existence of Liens. So long as this Note is outstanding, the Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted Liens. Within twenty (20) days after the Issuance Date (the “Existing Lien Release Date”), the Company shall have effected the release of the Liens set forth on Schedule 3(ll) to the Securities Purchase Agreement (the “Existing Liens”) and shall have taken such other actions to evidence such release as reasonably requested by the Holder, including, without limitation the filing of UCC-3 financing statements with the Secretary of State of Delaware.           (d) Restricted Payments. The Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Permitted Indebtedness (other than this Note and the Other Notes), whether by way of payment in respect of principal of (or premium, if any) or interest on such Indebtedness, if at the time such payment is due or is otherwise made or, after giving effect to such payment, an event constituting, or that with the passage of time and without being cured would constitute, an Event of Default has occurred and is continuing; provided that notwithstanding the foregoing, no principal (or any portion thereof) of any Subordinated Indebtedness may be paid (whether upon maturity, redemption, acceleration or otherwise) so long as this Note is outstanding.           (e) Restriction on Redemption and Cash Dividends. Until all of the Notes have been converted, redeemed or otherwise satisfied in accordance with their terms, the Company shall not, directly or indirectly, redeem, repurchase or declare or pay any cash dividend or distribution on its capital stock without the prior express written consent of the Required Holders.           (f)      (i) Announcement of Operating Results. Commencing with the Fiscal Quarter ending December 31, 2006, the Company shall publicly disclose and disseminate its operating results (the “Operating Results”) (x) for each of the first three Fiscal Quarters of each fiscal year no later than the forty-fifth (45th) day after the end of such Fiscal Quarter and (y) for the fourth Fiscal Quarter of each fiscal year, no later than the ninetieth (90th) day after the end of such Fiscal Quarter. Such Operating Results shall include the amount of the Consolidated   --------------------------------------------------------------------------------   EBITDA, Consolidated Revenues and Consolidated Total Debt for the preceding Fiscal Quarter, and whether the Company has (i) Consolidated Revenues equal to or greater than the applicable Consolidated Revenue threshold set forth in the first row of Table A of the Table of Financial Thresholds attached hereto as Schedule I (the “Consolidated Revenue Interest Test”), (ii) Consolidated Revenues equal to or greater than the applicable Consolidated Revenue threshold set forth in the first row of Table B of the Table of Financial Thresholds attached hereto as Schedule I (the “Consolidated Revenue Default Test”), (iii) Consolidated EBITDA equal to or greater than the applicable Consolidated EBITDA threshold set forth in the second row of Table A of the Table of Financial Thresholds attached hereto as Schedule I (the “Consolidated EBITDA Interest Test”), (iv) Consolidated EBITDA equal to or greater than the applicable Consolidated EBITDA threshold set forth in the second row of Table B of the Table of Financial Thresholds attached hereto as Schedule I (the “Consolidated EBITDA Default Test”), (v) from and after the Fiscal Quarter ending March 31, 2008, achieved a Consolidated Total Debt to EBITDA Ratio equal to or less than the applicable Consolidated Total Debt to EBITDA threshold set forth in the third row of Table A of the Table of Financial Thresholds attached hereto as Schedule I (the “Consolidated Total Debt to EBITDA Interest Test”, and together with the Consolidated EBITDA Interest Test and the Consolidated Revenue Interest Test, the “Interest Tests”) and (vi) from and after the Fiscal Quarter ending March 31, 2008, achieved a Consolidated Total Debt to EBITDA Ratio equal to or less than the applicable Consolidated Total Debt to EBITDA threshold set forth in the third row of Table B of the Table of Financial Thresholds attached hereto as Schedule I (the “Consolidated Total Debt to EBITDA Default Test” and together with the Consolidated EBITDA Default Test and Consolidated Revenue Default Test, the “Default Tests”), concurrently with each such release of Operating Results, the Company also shall provide to the holders of Notes a written certification as to the amount of the Consolidated EBITDA, Consolidated Revenues and Consolidated Total Debt for the applicable Fiscal Quarter. In addition, if the Company has failed to meet any Interest Test or Default Test (collectively, the “Financial Tests”), the foregoing written certification that the Company provides to the holders shall also state each Financial Test that has not been met (the portion of such notice with respect to the failure to meet a Default Test, a “Financial Covenant Default Notice” and the portion of such notice with respect to the failure to meet an Interest Test, a “Insufficient Interest Test Notice”).                (ii) Concurrently with the delivery of the Financial Covenant Failure Notice or Insufficient Interest Test Notice, as applicable, to the holders, the Company shall also make publicly available (as part of a Quarterly Report on Form 10-Q or on a Current Report on Form 8-K, or otherwise) the Operating Results and, (x) if the Company has failed to meet one or more of the Interest Tests, the fact that the Interest under the Notes has automatically increased to the Interest Test Failure Rate and/or (y) if the Company has failed to meet the one or more of the Default Tests, the fact that an Event of Default has occurred under the Notes.           (g) Creation of New Subsidiaries. So long as the obligations of the Company under this Note are outstanding, if the Company shall create or acquire any Subsidiary, simultaneous with the creation or acquisition of such Subsidiary, the Company shall (i) promptly cause such Subsidiary to become a guarantor by executing a guaranty in favor of the Holder in form and substance reasonably acceptable to the Company, the Subsidiary and the Holder, (ii) promptly cause such Subsidiary to become a grantor under the Security Agreement by executing a joinder to the Security Agreement in form and substance reasonably acceptable to the   --------------------------------------------------------------------------------   Company, the Subsidiary and the Holder, (iii) promptly cause such Subsidiary to become a pledgor by the Company and such Subsidiary executing a pledge agreement in form and substance reasonably acceptable to the Company, the Subsidiary and the Holder, and (iv) promptly cause such Subsidiary to duly execute and/or deliver such opinions of counsel and other documents, in form and substance reasonable acceptable to the Holder, as the Holder shall reasonably request with respect thereto. In the event that at any time after the Issuance Date, Cash Systems of Canada, Inc. commences transacting any business or owns any properties or assets in excess of $5,000, the Company shall promptly cause Cash Systems of Canada, Inc. to comply with the foregoing sentence.           (h) Post-Closing Collateral Matters. Execute and deliver the documents and complete the tasks set forth on Schedule 14(h), in each case within the time limits specified on such schedule.      (15) PARTICIPATION. The Holder, as the holder of this Note, shall be entitled to receive such dividends paid and distributions made to the holders of Common Stock to the same extent as if the Holder had converted this Note into Common Stock (without regard to any limitations on conversion herein or elsewhere) and had held such shares of Common Stock on the record date for such dividends and distributions. Payments under the preceding sentence shall be made concurrently with the dividend or distribution to the holders of Common Stock.      (16) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote at a meeting duly called for such purpose or the written consent without a meeting of the Required Holders shall be required for any change or amendment to this Note or the Other Notes. No consideration shall be offered or paid to any holder of Notes to amend or consent to a waiver or modification of the Notes unless the same consideration also is offered to all of the holders of Notes.      (17) TRANSFER. This Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 2(f) of the Securities Purchase Agreement.      (18) REISSUANCE OF THIS NOTE.           (a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 18(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Note (in accordance with Section 18(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 3(c)(iii) following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note.   --------------------------------------------------------------------------------                  (b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal.                (c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 18(d) and in principal amounts of at least $100,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.                (d) Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 18(a) or Section 18(c), the Principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid Interest and Late Charges on the Principal and Interest of this Note, if any, from the Issuance Date.           (19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder 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 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.           (20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting   --------------------------------------------------------------------------------   Company creditors’ rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, financial advisory fees and attorneys’ fees and disbursements.           (21) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.           (22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.           (23) DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Closing Bid Price, the Closing Sale Price or the Weighted Average Price or the arithmetic calculation of the Conversion Rate or any Redemption Price, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within one (1) Business Day of receipt, or deemed receipt, of the Conversion Notice or Redemption Notice or other event giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation within one (1) Business Day of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within one Business Day submit via facsimile (a) the disputed determination of the Closing Bid Price, the Closing Sale Price or the Weighted Average Price to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Rate or any Redemption Price to the Company’s independent, outside accountant. The Company, at the Company’s expense, shall cause 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 five (5) 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.           (24) NOTICES; PAYMENTS.                (a) Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least twenty (20) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any pro rata subscription offer to holders of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or   --------------------------------------------------------------------------------   liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.                (b) Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Purchasers, shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any Interest Date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of Interest due on such date. Any amount of Principal or other amounts due under the Transaction Documents which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of fifteen percent (15%) per annum from the date such amount was due until the same is paid in full (“Late Charge”).           (25) CANCELLATION. After all Principal, accrued Interest and other amounts at any time owed on this Note have been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.           (26) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement.           (27) GOVERNING LAW; JURISDICTION; SEVERABILITY; JURY TRIAL. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or   --------------------------------------------------------------------------------   unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.      (28) CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:                (a) “Approved Stock Plan” means any employee benefit plan which has been or hereafter is approved by the Board of Directors of the Company, pursuant to which the Company’s securities may be issued to any employee, officer or director for services provided to the Company.                (b) “Bloomberg” means Bloomberg Financial Markets.                (c) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.                (d) “Change of Control” means any Fundamental Transaction other than (A) any reorganization, recapitalization or reclassification of Common Stock, in which holders of the Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization or reclassification to hold publicly traded securities and, directly or indirectly, the voting power of the surviving entity or entities necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities, or (B) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company.                (e) “Change of Control Premium” means, (i) until the third anniversary of the Issuance Date, 120%, (ii) commencing on the third anniversary of the Issuance Date until the fourth anniversary of the Issuance Date, 115%, and (iii) commencing on the fourth anniversary of the Issuance Date, 110%.                (f) “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities   --------------------------------------------------------------------------------   exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 23. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.                (g) “Closing Date” shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially issued Notes pursuant to the terms of the Securities Purchase Agreement.                (h) “Common Stock Deemed Outstanding” means, at any given time, the number of shares of Common Stock outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii) hereof regardless of whether the Options or Convertible Securities are actually exercisable at such time, but excluding any Common Stock owned or held by or for the account of the Company or issuable upon conversion or exercise, as applicable, of the Notes and the Warrants.                (i) “Consolidated EBITDA” means, for any period, Consolidated Net Income for such period (without giving effect to any extraordinary gains or losses) adjusted by adding thereto (in each case to the extent deducted in determining Consolidated Net Income for such period), without duplication, the amount of (i) total interest expense (subtracting therefrom any interest income) (inclusive of amortization of deferred financing fees and other original issue discount and banking fees and charges (e.g., letter of credit fees and commitment fees) including those arising from any beneficial conversion feature of the Notes) of the Company and its Subsidiaries determined on a consolidated basis for such period, (ii) provision for taxes based on income and foreign withholding taxes for the Company and its Subsidiaries determined on a consolidated basis for such period, (iii) all depreciation and amortization expense of the Company and its Subsidiaries determined on a consolidated basis for such period, (iv) all non-cash stock compensation expenses of the Company (i.e., expenses paid through the issuance of equity interests of Company, or options therefor, rather than in cash) incurred during such period (except to the extent any such expense will require a cash payment in a future period) and (v) provision for non-recurring expenses in an aggregate amount not exceeding $2,000,000 for the period commencing on the Issuance Date and continuing so long as any Notes remain outstanding.                (j) “Consolidated Net Income” means, for any period, the net income (or loss) of the Company and its Subsidiaries for such period, determined on a consolidated basis (after any deduction for minority interests); provided, however, that to the extent any portion of   --------------------------------------------------------------------------------   the commodity inventory of the Company and its Subsidiaries is valued pursuant to GAAP at the end of any period at the lower of cost or market value, then the net income for such period will be increased by the amount of any unrealized gains which the Company or any of its Subsidiaries would have recognized if such commodity inventory had been valued at market value in accordance with GAAP.                (k) “Consolidated Total Debt to EBITDA Ratio” means, for any Fiscal Quarter, the ratio of (i) Consolidated Total Debt for such Fiscal Quarter to (ii) the Consolidated EBITDA for the trailing twelve month period ending with such Fiscal Quarter.                (l) “Consolidated Total Debt” means, for any period, the total consolidated Indebtedness of the Company and its Subsidiaries for such period, as determined in accordance with GAAP consistent with past practices.                (m) “Consolidated Revenues” means, for any period, the total consolidated revenues of the Company and its Subsidiaries for such period, as determined in accordance with GAAP consistent with past practices.                (n) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.                (o) “Convertible Securities” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for Common Stock.                (p) “Eligible Market” means the Principal Market, The New York Stock Exchange, Inc., the American Stock Exchange, The Nasdaq Global Select Market or The Nasdaq Capital Market.                (q) “Equity Conditions” means each of the following conditions: (i) on each day during the period beginning three (3) months prior to the applicable date of determination and ending on and including the applicable date of determination (the “Equity Conditions Measuring Period”), either (x) the Registration Statement filed pursuant to the Registration Rights Agreement shall be effective and available for the resale of all remaining Registrable Securities in accordance with the terms of the Registration Rights Agreement or (y) all shares of Common Stock issuable upon conversion of the Notes and exercise of the Warrants shall be eligible for sale without restriction and without the need for registration under any applicable federal or state securities laws; (ii) during the Equity Conditions Measuring Period the Common Stock is designated for quotation on the Principal Market or any other Eligible Market and shall not have been suspended from trading on such exchange or market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension   --------------------------------------------------------------------------------   by such exchange or market been threatened or pending either (A) in writing by such exchange or market or (B) by falling below the then effective minimum listing maintenance requirements of such exchange or market; (iii) during the Equity Conditions Measuring Period, the Company shall have delivered Conversion Shares upon conversion of the Notes and Warrant Shares upon exercise of the Warrants to the holders on a timely basis as set forth in Section 2(c)(ii) hereof (and analogous provisions under the Other Notes) and Sections 2(a) of the Warrants; (iv) any applicable shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section 3(d) hereof and the rules or regulations of the Principal Market or any other applicable Eligible Market; (v) during the six (6) month period ending on and including the date immediately preceding the applicable date of determination, the Company shall not have failed to timely make any payments within five (5) Business Days of when such payment is due pursuant to any Transaction Document; (vi) during the Equity Conditions Measuring Period, there shall not have occurred either (A) the public announcement of a pending, proposed or intended Fundamental Transaction which has not been abandoned, terminated or consummated, or (B) an Event of Default or (C) an event that with the passage of time or giving of notice would constitute an Event of Default; (vii) the Company shall have no knowledge of any fact that would cause (x) the Registration Statements required pursuant to the Registration Rights Agreement not to be effective and available for the resale of all remaining Registrable Securities in accordance with the terms of the Registration Rights Agreement or (y) any shares of Common Stock issuable upon conversion of the Notes and shares of Common Stock issuable upon exercise of the Warrants not to be eligible for sale without restriction pursuant to Rule 144(k) and any applicable state securities laws; and (viii) the Company otherwise shall have been in material compliance with and shall not have materially breached any provision, covenant, representation or warranty of any Transaction Document.                (r) “Equity Conditions Failure” means that on any day during the period commencing ten (10) Trading Days prior to the applicable Mandatory Conversion Notice Date through the applicable Mandatory Conversion Date, the Equity Conditions have not been satisfied (or waived in writing by the Holder).                (s) “Excluded Securities” means any Common Stock issued or issuable: (i) (x) in connection with any Approved Stock Plan to the extent such Common Stock would not result in a Dilutive Issuance or (y) in connection with any Approved Stock Plan, which Common Stock would result in a Dilutive Issuance, provided, that such Common Stock does not exceed 300,000 shares of Common Stock in the aggregate during the immediately preceding twelve (12) month period; (ii) upon conversion of the Notes or the exercise of the Warrants; (iii) pursuant to a bona fide firm commitment underwritten public offering with a nationally recognized underwriter which generates gross proceeds to the Company in excess of $20,000,000 (other than an “at-the-market offering” as defined in Rule 415(a)(4) under the 1933 Act and “equity lines”); (iv) upon conversion of any Options or Convertible Securities which are outstanding on the day immediately preceding the Subscription Date, provided that the terms of such Options or Convertible Securities are not amended, modified or changed on or after the Subscription Date; and (v) in connection with mergers, acquisitions, strategic business partnerships or joint ventures, in each case with non-affiliated third parties and otherwise on an arm’s-length basis, the primary purpose of which, in the reasonable judgment of the Company’s Board of Directors, is not to raise additional capital.   --------------------------------------------------------------------------------                  (t) “Fiscal Quarter” means each of the fiscal quarters adopted by the Company for financial reporting purposes that correspond to the Company’s fiscal year as of the date hereof that ends on December 31.                (u) “Fundamental Transaction” means that the Company shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person or Persons, if the holders of the Voting Stock (not including any shares of Voting Stock held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such consolidation or merger) immediately prior to such consolidation or merger shall hold or have the right to direct the voting of less than 50% of the Voting Stock or such voting securities of such other surviving Person immediately following such transaction, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (iii) allow another Person to make a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the outstanding shares of Voting Stock (not including any shares of Voting Stock held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than the 50% of the outstanding shares of Voting Stock (not including any shares of Voting Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock purchase agreement or other business combination), (v) reorganize, recapitalize or reclassify its Common Stock or (vi) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock.                (v) “GAAP” means United States generally accepted accounting principles, consistently applied.                (w) “Indebtedness” of any Person means, without duplication (i) all indebtedness for borrowed money, (ii) all obligations issued, undertaken or assumed as the deferred purchase price of property or services, including (without limitation) “capital leases” in accordance with generally accepted accounting principles (other than trade payables entered into in the ordinary course of business), (iii) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (iv) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (v) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (vi) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently applied for the periods covered thereby, is classified as a capital lease, (vii) all indebtedness referred to in clauses (i) through (vi) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any   --------------------------------------------------------------------------------   mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (viii) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (i) through (vii) above.                (x) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.                (y) “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.                (z) “Permitted Indebtedness” means (i) Indebtedness incurred by the Company that is made expressly subordinate in right of payment to the Indebtedness evidenced by this Note, as reflected in a written agreement acceptable to the Holder and approved by the Holder in writing, and which Indebtedness does not provide at any time for (1) the payment, prepayment, repayment, repurchase or defeasance, directly or indirectly, of any principal or premium, if any, thereon until ninety-one (91) days after the Maturity Date or later and (2) total interest and fees at a rate in excess of six and one-half percent (6.50%) per annum (such Indebtedness, the “Subordinated Indebtedness”); provided, however, that any Subordinated Indebtedness incurred in connection with the repayment of the Notes shall not be limited by clause (2) of the foregoing, (ii) Indebtedness secured by Permitted Liens (other than the Existing Liens), (iii) Indebtedness under this Note and the Other Notes, and (iv) extensions, refinancings and renewals of any items in clauses (i) through (ii) above, provided that the principal amount is not increased or the terms modified to impose more burdensome terms upon the Company or its Subsidiaries, as the case may be.                (aa) “Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (iv) Liens (A) upon or in any equipment (as defined in the Security Agreement) acquired or held by the Company or any of its Subsidiaries to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such equipment, or (B) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment, (v) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clauses (i) and (iv) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced does not increase, (vi) Liens securing the Company’s obligations under   --------------------------------------------------------------------------------   the Notes; (vii) leases or subleases and licenses and sublicenses granted to others in the ordinary course of the Company’s business, not interfering in any material respect with the business of the Company and its Subsidiaries taken as a whole, (viii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of custom duties in connection with the importation of goods, (ix) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 4(a)(vii), (x) Liens created in favor of certain financial institutions to secure the Company’s obligations under its automated teller machine cash agreements, (xi) Liens created in favor of credit card processors on accounts designated under the Company’s credit processing arrangements, and (xii) prior to the Existing Lien Release Date, the Existing Liens.                (bb) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.                (cc) “Principal Market” means The Nasdaq Global Market.                (dd) “Redemption Notices” means, collectively, the Event of Default Redemption Notices, the Change of Control Redemption Notices and the Holder Redemption Notice, each of the foregoing, individually, a Redemption Notice.                (ee) “Redemption Premium” means (i) in the case of the Events of Default described in Section 4(a)(i) – (v) and (viii) – (xi), 120% or (ii) in the case of the Events of Default described in Section 4(a)(vi) – (vii), 100%.                (ff) “Redemption Prices” means, collectively, the Event of Default Redemption Price, Change of Control Redemption Price and the Holder Optional Redemption Price, each of the foregoing, individually, a Redemption Price.                (gg) “Registration Rights Agreement” means that certain registration rights agreement dated as of the Subscription Date by and among the Company and the initial holders of the Notes relating to, among other things, the registration of the resale of the Common Stock issuable upon conversion of the Notes and exercise of the Warrants.                (hh) “Registration Rights Failure” means the failure of the applicable Registration Statement required to be filed pursuant to the Registration Rights Agreement to be declared effective by the SEC on or prior to the date that is sixty (60) days after the applicable Effectiveness Deadline (as defined in the Registration Rights Agreement), or, while the applicable Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of the applicable Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for sale of all of such holder’s Registrable Securities (as defined in the Registration Rights Agreement) in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of ten (10) consecutive days or for more than an aggregate of thirty (30) days in any 365-day period (other than days during an Allowable Grace Period (as defined in the Registration Rights Agreement));   --------------------------------------------------------------------------------                  (ii) “Required Holders” means the holders of Notes representing at least two-thirds (2/3rd) of the aggregate principal amount of the Notes then outstanding.                (jj) “SEC” means the United States Securities and Exchange Commission.                (kk) “Securities Purchase Agreement” means that certain securities purchase agreement dated as of the Subscription Date by and among the Company and the initial holders of the Notes pursuant to which the Company issued the Notes.                (ll) “Subscription Date” means October 6, 2006.                (mm) “Subsidiary” means any entity in which the Company, directly or indirectly, owns any of the capital stock or holds an equity or similar interest. For purposes of this Note, the joint venture entered into between the Company, Bally Gaming, Inc. and Scotch Twist, Inc. shall not be considered a Subsidiary.                (nn) “Successor Entity” means the Person, which may be the Company, formed by, resulting from or surviving any Fundamental Transaction or the Person with which such Fundamental Transaction shall have been made, provided that if such Person is not a publicly traded entity whose common stock or equivalent equity security is quoted or listed for trading on an Eligible Market, Successor Entity shall mean such Person’s Parent Entity.                (oo) “Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York Time).                (pp) “Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).                (qq) “Warrants” has the meaning ascribed to such term in the Securities Purchase Agreement, and shall include all warrants issued in exchange therefor or replacement thereof.                (rr) “Weighted Average Price” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market during the period beginning at 9:30:01 a.m., New York Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York Time (or such other time as the Principal Market publicly announces is the official close of trading) as   --------------------------------------------------------------------------------   reported by Bloomberg through its “Volume at Price” functions, or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York Time (or such other time as such market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York Time (or such other time as such market publicly announces is the official close of trading) as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 23. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.      (29) DISCLOSURE. Upon receipt or delivery by the Company of any notice in accordance with the terms of this Note, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries, the Company shall within one (1) Business Day after any such receipt or delivery publicly disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, nonpublic information, relating to the Company or its Subsidiaries, the Company shall indicate to the Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume that all matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries. [Signature Page Follows]   --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issuance Date set out above.                                 CASH SYSTEMS, INC.                       By:                               Name:             Title:       --------------------------------------------------------------------------------   EXHIBIT I CASH SYSTEMS, INC. CONVERSION NOTICE Reference is made to the Senior Secured Convertible Note (the “Note”) issued to the undersigned by Cash Systems, Inc. (the “Company”). In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock par value $0.001 per share (the “Common Stock”) of the Company, as of the date specified below.               Date of Conversion:                             Aggregate Conversion Amount to be converted:               Please confirm the following information:               Conversion Price:                             Number of shares of Common Stock to be issued:               Please issue the Common Stock into which the Note is being converted in the following name and to the following address:               Issue to:                                                                     Facsimile Number:                             Authorization:                                 By:                                         Title:                         Dated:                         Account Number:                      (if electronic book entry transfer)               Transaction Code Number:                      (if electronic book entry transfer) --------------------------------------------------------------------------------   ACKNOWLEDGMENT      The Company hereby acknowledges this Conversion Notice and hereby directs [INSERT NAME OF TRANSFER AGENT] to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated October ___, 2006 from the Company and acknowledged and agreed to by [INSERT NAME OF TRANSFER AGENT].                                 CASH SYSTEMS, INC.                       By:                               Name:             Title:       --------------------------------------------------------------------------------   Schedule I Table of Financial Thresholds Table A Interest Tests                                                                                       Fiscal   Fiscal   Fiscal   Fiscal   Fiscal   Fiscal   Fiscal   Fiscal   Fiscal         Quarter   Quarter   Quarter   Quarter   Quarter   Quarter   Quarter   Quarter   Quarter   Each     ending   ending   ending   ending   ending   ending   ending   ending   ending   Fiscal     December   March 31,   June 30,   September   December   March 31,   June 30,   September   December   Quarter     31, 2006   2007   2007   30, 2007   31, 2007   2008   2008   30, 2008   31, 2008   Thereafter Consolidated Revenue   $22.0 million   $22.0 million   $22.0 million   $22.0 million   $22.0 million   $24.0 million   $24.0 million   $24.0 million   $24.0 million   $24.0 million Consolidated EBITDA   $750,000   $1.0 million   $1.5 million   $1.75 million   $2.0 million   $2.0 million   $2.0 million   $2.25 million   $2.25 million   $2.5 million Total Debt to EBITDA Ratio   N/A     N/A       N/A       N/A       N/A       4.5       4.25       4.0       3.75       3.75   Table B Default Tests                                                                                       Fiscal   Fiscal   Fiscal   Fiscal   Fiscal   Fiscal   Fiscal   Fiscal   Fiscal         Quarter   Quarter   Quarter   Quarter   Quarter   Quarter   Quarter   Quarter   Quarter   Each     ending   ending   ending   ending   ending   ending   ending   ending   ending   Fiscal     December   March 31,   June 30,   September   December   March 31,   June 30,   September   December   Quarter     31, 2006   2007   2007   30, 2007   31, 2007   2008   2008   30, 2008   31, 2008   Thereafter Consolidated Revenue   $20.0 million   $20.0 million   $20.0 million   $20.0 million   $20.0 million   $22.0 million   $22.0 million   $22.0 million   $22.0 million   $22.0 million Consolidated EBITDA   $250,000   $500,000   $1.0 million   $1.25 million   $1.5 million   $1.5 million   $1.5 million   $1.75 million   $1.75 million   $2.0 million Total Debt to EBITDA Ratio   N/A   N/A     N/A       N/A       N/A       4.75       4.5       4.25       4.0       4.0     --------------------------------------------------------------------------------   Schedule 14(h)           1. No later than twenty (20) Business Days after the Closing Date, the Company shall cause to be filed the UCC-3 termination statements necessary to terminate the following UCC-1 financing statements existing as of the date hereof and deliver to the Collateral Agent the acknowledgement filings of such UCC termination statements:                                       Jurisdiction   Initial              Debtor   Secured Party   of Filing   Filing Number Cash Systems, Inc.   VIRTUALFUND.COM, INC.   DE     11805790   Cash Systems, Inc.   VIRTUALFUND.COM, INC.   MN     20012247115   Cash Systems, Inc.   Diebold Incorporated   MN     20012257839             2. No later than two (2) Business Days after the Closing Date, the Company shall cause to be filed the UCC-3 termination statements necessary to terminate the following UCC-1 financing statements existing as of the date hereof and deliver to the Collateral Agent the acknowledgement filings of such UCC termination statements:                                       Jurisdiction   Initial              Debtor   Secured Party   of Filing   Filing Number Cash Systems, Inc.   Fidelity Bank   DE     32063413   Cash Systems, Inc.   Fidelity Bank   MN     2110443   Cash Systems, Inc.   Fidelity Bank   MN     2173634   Cash Systems, Inc.   Fidelity Bank   MN     2236807             3. (a) If at any time after the date that is twenty (20) Business Days following the Closing Date, the average daily balance of any account of the Company that is not subject to an account control agreement in favor of the Collateral Agent exceeds $250,000 during any calendar month (excluding the calendar month in which the Closing Date occurs), the Company shall, within twenty (20) Business Days following the last day of such calendar month, deliver to the Collateral Agent an account control agreement, in form and substance reasonably satisfactory to the Collateral Agent, duly executed by the Company and the depositary bank in which such account is maintained.                (b) Notwithstanding anything to the contrary contained in clause (a) above, and without limiting any of the foregoing, if at any time on or after the date that is twenty (20) Business Days following the Closing Date, the total aggregate amount of the Company’s cash that is not subject to a control agreement in favor of the Collateral Agent exceeds   --------------------------------------------------------------------------------   $1,000,000 (the “Maximum Free Cash Amount”), the Company shall within two (2) Business Days following such date, transfer to an account subject to an account agreement in favor of the Collateral Agent an amount sufficient to reduce the total aggregate amount of the Company’s cash that is not subject to an account control agreement in favor of the Collateral Agent to an amount not in excess of the Maximum Free Cash Amount.  

Exhibit 10.4 SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED LEASE AGREEMENT THIS SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED LEASE AGREEMENT (this “Amendment”) is made and entered into as of October 1, 2006 by and among each of the parties identified on the signature page hereof as Landlord, as landlord (collectively, “Landlord”), and FIVE STAR QUALITY CARE TRUST, a Maryland business trust, as tenant (“Tenant”). W I T N E S S E T H: WHEREAS, pursuant to the terms of that certain Second Amended and Restated Lease Agreement, dated as of November 19, 2004, as amended by that certain First Amendment of Lease, dated as of May 17, 2005, that certain Second Amendment to Second Amended and Restated Lease Agreement, dated as of June 3, 2005, that certain Third Amendment to Second Amended and Restated Lease Agreement, dated as of October 31, 2005, that certain Third Amendment to Second Amended and Restated Lease Agreement, dated as of December 30, 2005, that certain Letter Agreement, dated as of March 13, 2006, and that certain Fifth Amendment to Second Amended and Restated Lease Agreement, dated as of September 1, 2006 (as so amended, the “Consolidated Lease”), Landlord leases to Tenant, and Tenant leases from Landlord, the Leased Property (this and other capitalized terms used but not otherwise defined herein having the meanings given such terms in the Consolidated Lease), all as more particularly described in the Consolidated Lease; and WHEREAS, on or about the date hereof, Senior Housing Properties Trust has acquired all of the stock and other equity interests in RSA Healthcare, Inc. (“RSA”), whose wholly-owned subsidiary, Savannah Square, Inc. (the “Savannah Square Owner”), owns the fee simple interest in a senior living facility known as Savannah Square and located in Savannah, Georgia (the “Savannah Square Property”); and WHEREAS, Landlord and Tenant would prefer to add the Savannah Square Property to the Consolidated Lease on the date hereof but it is not feasible to do so because of certain financing restrictions which currently encumber the Savannah Square Property; and WHEREAS, instead of adding the Savannah Square Property to the Consolidated Lease as of the date hereof, the Savannah Square Owner is leasing the Savannah Square Property to Five Star Quality Care-Savannah, LLC (the “Savannah Square Operator”) pursuant to a separate Lease Agreement, dated as of the date   -------------------------------------------------------------------------------- hereof, between the Savannah Square Owner and the Savannah Square Operator; and WHEREAS, Landlord and Tenant have agreed to amend the Consolidated Lease in certain respects in order to (among other reasons) add the Savannah Square Property to the Consolidated Lease as soon as the applicable financing restrictions are removed; and WHEREAS, the Savannah Square Owner has agreed to join in this Amendment for purposes of evidencing its consent to this Amendment and its agreement to become a Landlord under the Consolidated Lease and to lease the Savannah Square Property to Tenant as soon as it becomes feasible to do so; and NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows: 1.             Definition of Savannah Square Lease.  Effective as of the date hereof, the following new definition for the term “Savannah Square Lease” is hereby added to the Consolidated Lease as a new Section 1.101: “Savannah Square Lease”  shall mean that certain Lease Agreement, dated as of September 30, 2006, between Savannah Square, Inc., as landlord, and Five Star Quality Care-Savannah, LLC, as tenant. 2.             Definition of Savannah Square Leased Property.  Effective as of the date hereof, the following new definition for the term “Savannah Square Leased Property” is hereby added to the Consolidated Lease as a new Section 1.102: “Savannah Square Leased Property”  shall mean the “Leased Property”, as defined therein, under the Savannah Square Lease. 3.             Default under Savannah Square Lease.  Effective as of the date hereof, Section 12.1(m) of the Consolidated Lease is hereby amended by deleting the existing Section 12.1(m) in its entirety and replacing it with the following: should there occur an “Event of Default”, as defined therein, under the Savannah Square Lease. 2 --------------------------------------------------------------------------------   4.             Financial Statements.  Effective as of the date hereof, Section 17.2(f) of the Consolidated Lease is hereby amended by deleting the existing Section 17.2(f) in its entirety and replacing it with the following: promptly, upon Notice from Landlord, such other information concerning the business, financial condition and affairs of Tenant, any Guarantor, and/or any Affiliated Party of Tenant which is a party to an LTA GMAC Lease or the Savannah Square Lease as Landlord reasonably may request from time to time. 5.             Savannah Square Property.  Effective as of the date hereof, the following new Section 21.12 is hereby added to the Consolidated Lease immediately following Section 21.11: Savannah Square Property.  Landlord and Tenant expressly acknowledge and agree that, effective automatically upon the release of the Savannah Square Leased Property from the financing which is secured by the Savannah Square Leased Property, the Savannah Square Leased Property shall be added to and demised under this Agreement in accordance with the terms and conditions hereof, the Minimum Rent payable hereunder shall be increased by an amount equal to the Minimum Rent payable under the Savannah Square Lease, and the Additional Rent payable hereunder shall be increased by an amount equal to the Additional Rent payable under the Savannah Square Lease.  The addition of the Savannah Square Property in accordance with the terms hereof shall be automatic without any requirement that Landlord or Tenant take any action or execute any document, instrument, amendment or confirmation with respect thereto.  Notwithstanding the foregoing, Landlord and Tenant shall execute and deliver such documents, instruments, agreements and confirmations as the other party shall reasonably request with respect to the foregoing. 6.             Ratification.  As amended hereby, the Consolidated Lease is hereby ratified and confirmed. [Signature Page Follows.] 3 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to be duly executed, as a sealed instrument, as of the date first set forth above. LANDLORD:                 ELLICOTT CITY LAND I LLC,       ELLICOTT CITY LAND II LLC,       HRES2 PROPERTIES TRUST,       SNH CHS PROPERTIES TRUST,       SPTIHS PROPERTIES TRUST,       SPT-MICHIGAN TRUST,       SPTMNR PROPERTIES TRUST,       SNH/LTA PROPERTIES TRUST       and SNH/LTA PROPERTIES GA LLC                           By: /s/ John R. Hoadley         John R. Hoadley         Treasurer of each of the foregoing entities                 TENANT:                 FIVE STAR QUALITY CARE TRUST                 By: /s/ Bruce J. Mackey Jr.         Bruce J. Mackey Jr.         Treasurer, Chief Financial Officer         and Assistant Secretary       THE SAVANNAH SQUARE OWNER HEREBY JOINS IN THE EXECUTION OF THIS AMENDMENT FOR THE LIMITED PURPOSES OF CONSENTING TO THE TERMS AND CONDITIONS HEREOF ONCE THE FINANCING RESTRICTIONS ARE NO LONGER APPLICABLE TO THE SAVANNAH SQUARE PROPERTY. SAVANNAH SQUARE OWNER: SAVANNAH SQUARE, INC., a Georgia corporation /s/ John R. Hoadley John R. Hoadley Treasurer     4 --------------------------------------------------------------------------------

AMENDED AND RESTATED GUARANTY   February 13, 2006   WHEREAS Brent W. Swanick has given a guarantee dated September 30, 2004 in favour of Laurus Master Fund, Ltd. a Cayman Islands Company (“Laurus”) (the “2004 Swanick Guarantee”);   WHEREAS Cancable Inc., an Ontario corporation (“Cancable Canada”) Cancable Holding Corp., a Delaware corporation (“Cancable Holding”) and Laurus have entered into a Securities Purchase Agreement dated December 31, 2005 (as amended, modified or supplemented from time to time, the “2005 Securities Purchase Agreement”) providing for the execution of the Related Agreements (as defined therein)(the “2005 Related Agreements”);   WHEREAS Iview Digital Video Solutions Inc., a federal Canadian corporation, (“Iview”), Creative Vistas, Inc. (the “Parent”) and Iview Holding Corp., a Delaware corporation (“Iview Holding”) have entered into a Securities Purchase Agreement dated February 13, 2006 (as amended, modified or supplemented from time to time, the “2006 Securities Purchase Agreement”) providing for the execution of the Related Agreements (as defined therein)( the “2006 Related Agreements”);   WHEREAS it is a condition of the 2006 Securities Purchase Agreement that the 2004 Swanick Guaranty is amended and restated to among other things include the obligations pursuant to the 2005 Related Agreements and the 2006 Related Agreements;   NOW THEREFORE FOR VALUE RECEIVED, and in consideration of note purchases from, loans made or to be made or credit otherwise extended or to be extended by Laurus to or for the account of Cancable Canada, Iview and the Parent ( collectively the “Debtors”), from time to time and at any time and for other good and valuable consideration and to induce Laurus, in its discretion, to purchase such notes, make such loans or extensions of credit and to make or grant such renewals, extensions, releases of collateral or relinquishments of legal rights as Laurus may deem advisable, the undersigned (the “Guarantor” or “the undersigned”) irrevocably and unconditionally guarantees to Laurus, its successors, endorsees and assigns the prompt payment when due (whether by acceleration or otherwise) of all present and future obligations and liabilities of any and all kinds of the Debtors to Laurus and of all instruments of any nature evidencing or relating to any such obligations and liabilities upon which any of the Debtors is or may become liable to Laurus, whether incurred by the Debtors as makers, endorsers, drawers, acceptors, guarantors, accommodation parties or otherwise, and whether due or to become due, secured or unsecured, absolute or contingent, joint or several, and however or whenever acquired by Laurus, whether arising under, out of, or in connection with (i) the 2005 Securities Purchase Agreement, (ii) each 2005 Related Agreement, (the 2005 Securities Purchase Agreement and the 2005 Related Agreements, as each may be amended, modified, restated or supplemented from time to time, are collectively referred to herein as the “2005 Documents”), (iii) the 2006 Securities Purchase Agreement, (iv) each 2006 Related Agreement (the 2006 Securities Purchase Agreement and the Related Agreements, as each may be amended, modified, restated or supplemented from time to time are collectively referred to herein as the “2006 Documents”) or any documents, instruments or agreements relating to or executed in connection with the 2005 Documents, 2006 Documents or any documents, instruments or agreements referred to therein or otherwise, or any other indebtedness, obligations or liabilities of any of the Debtors to Laurus, whether now existing or hereafter arising, direct or indirect, liquidated or unliquidated, absolute or contingent, due or not due and whether under, pursuant to or evidenced by a note, agreement, guaranty, instrument or otherwise (all of which are herein collectively referred to as the “Obligations”), and irrespective of the genuineness, validity, regularity or enforceability of such Obligations, or of any instrument evidencing any of the Obligations or of any collateral therefor or of the existence or extent of such collateral, and irrespective of the allowability, allowance or disallowance of any or all of the Obligations in any case commenced by or against any of the Debtors under Title 11, United States Code, the Bankruptcy and Insolvency Act (Canada) (the “BIA”) and the Companies’ Creditors Arrangement Act (the “CCAA”) including, without limitation, obligations or indebtedness of any or all of the Debtors for post-petition interest, fees, costs and charges that would have accrued or been added to the Obligations but for the commencement of such case. For greater certainty, the Indebtedness (as defined in the Debenture dated as of December 31, 2005 granted by A.C. Technical Systems Ltd. in favor of Laurus registered as instrument No. DR463328) shall include the Obligations hereunder. Terms not otherwise defined herein shall have the meaning assigned such terms in the 2006 Securities Purchase Agreement. In furtherance of the foregoing, the undersigned hereby agree as follows:   --------------------------------------------------------------------------------   1.   No Impairment. Laurus may at any time and from time to time, either before or after the maturity thereof, without notice to or further consent of the undersigned, extend the time of payment of, exchange or surrender any collateral for, renew or extend any of the Obligations or increase or decrease the interest rate thereon, or any other agreement with any of the Debtors or with any other party to or person liable on any of the Obligations, or interested therein, for the extension, renewal, payment, compromise, discharge or release thereof, in whole or in part, or for any modification of the terms thereof or of any agreement between Laurus and any of the Debtors or any such other party or person, or make any election of rights Laurus may deem desirable under the United States Bankruptcy Code, as amended, the BIA, the CCAA, or any other federal, provincial or state bankruptcy, reorganization, moratorium or insolvency law relating to or affecting the enforcement of creditors’ rights generally (any of the foregoing, an “Insolvency Law”) without in any way impairing or affecting this Amended and Restated Guaranty. This instrument shall be effective regardless of the subsequent incorporation, merger, amalgamation or consolidation of the Debtors or Guarantor, or any change in the composition, nature, personnel or location of the Debtors or Guarantor and shall extend to any successor entity to the Debtors or Guarantor, including a debtor in possession or the like under any Insolvency Law.   2.   Guaranty Absolute. The undersigned guarantees that the Obligations will be paid strictly in accordance with the terms of the 2005 Documents and 2006 Documents and/or any other document, instrument or agreement creating or evidencing the Obligations, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Debtors with respect thereto. Guarantor hereby knowingly accept the full range of risk encompassed within a contract of “continuing guaranty” which risk includes the possibility that the Debtors will contract additional indebtedness for which Guarantor may be liable hereunder after the Debtors’ financial condition or ability to pay their lawful debts when they fall due has deteriorated, whether or not the Debtors have properly authorized incurring such additional indebtedness. The undersigned acknowledges that (i) no oral representations, including any representations to extend credit or provide other financial accommodations to the Debtors, have been made by Laurus to induce the undersigned to enter into this Amended and Restated Guaranty and (ii) any extension of credit to the Debtors shall be governed solely by the provisions of the 2005 Documents and 2006 Documents. The liability of the undersigned under this Amended and Restated Guaranty shall be absolute and unconditional, in accordance with its terms, and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (a) any waiver, indulgence, renewal, extension, amendment or modification of or addition, consent or supplement to or deletion from or any other action or inaction under or in respect of the 2005 Documents and 2006 Documents or any other instruments or agreements relating to the Obligations or any assignment or transfer of any thereof, (b) any lack of validity or enforceability of any 2005 Document and/or 2006 Document or other documents, instruments or agreements relating to the Obligations or any assignment or transfer of any thereof, (c) any furnishing of any additional security to Laurus or its assignees or any acceptance thereof or any release of any security by Laurus or its assignees, (d) any limitation on any party’s liability or obligation under the 2005 Documents and/or 2006 Documents or any other documents, instruments or agreements relating to the Obligations or any assignment or transfer of any thereof or any invalidity or unenforceability, in whole or in part, of any such document, instrument or agreement or any term thereof, (e) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to the Debtors, or any action taken with respect to this Amended and Restated Guaranty by any trustee, receiver, interim receiver, or receiver and manager, or by any court, in any such proceeding, whether or not the undersigned shall have notice or knowledge of any of the foregoing, (f) any exchange, release or nonperfection of any collateral, or any release, or amendment or waiver of or consent to departure from any guaranty or security, for all or any of the Obligations or (g) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the undersigned. Any amounts due from the undersigned to Laurus shall bear interest until such amounts are paid in full at the highest rate then applicable to the Obligations. Obligations include post-petition interest whether or not allowed or allowable.   2 --------------------------------------------------------------------------------   3.   Limited Recourse   Notwithstanding any other provision hereof, the liability of the undersigned hereunder and the recourse of Laurus for payment and performance of this guaranty and the Obligations shall be limited to the Collateral, as defined in the Share Pledge Agreement dated September 30, 2004 among the undersigned, A.C. Technical Systems Ltd. and A.C. Technical Acquisition Corp. (now Creative Vistas Acquisition Corp.) in favour of Laurus, and the Share Pledge Agreement dated December 31, 2005 among the Parent, Creative Vistas Acquisition Corp., Cancable Canada and Cancable Holding in favour of Laurus, and any proceeds arising in respect of any transfer of the Collateral, and Laurus shall not have, under any circumstances, have any right hereunder to any other assets of the undersigned.   4.   Payment.   3 --------------------------------------------------------------------------------     (a) Payment shall be made to Laurus at the office of Laurus from time to time on demand as Obligations hereunder become due. The undersigned shall make all payments to Laurus on the Obligations without setoff, counterclaim, restrictions or conditions of any kind and free and clear of, and without deduction or withholdings for or on account of, (i) any present or future duties, taxes, levies, imposts, fees, deductions, assessments, withholdings or other charges of any nature whatsoever or interest, penalties or other amounts in respect thereof imposed or levied by or on behalf of the Canadian Government or of any province or territory thereof or any authority or agency therein or thereof having power to tax (collectively, “Taxes”); or (ii) any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Amended and Restated Guaranty or any of the other Documents (collectively, “Other Taxes”) unless such deduction or withholding is required by law or the administrative practice of any taxation authority.     (b) If the undersigned shall be required by law to deduct or withhold in respect of any Taxes or Other Taxes from or in respect of any sum payable hereunder to Laurus, then:   (i)      the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section) Laurus receives an amount equal to the sum it would have received had no such deductions or withholdings been made;   (ii) the undersigned shall make such deductions and withholdings;   (iii) the undersigned shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and   (iv) to the extent not paid to Laurus pursuant to clause (i) above, the undersigned shall also pay to Laurus, at the time interest is paid, all additional amounts which Laurus specifies as necessary to preserve the after-tax yield Laurus would have received if such Taxes or Other Taxes had not been imposed.   (c)   Within thirty (30) days after the date of any payment by the undersigned of Taxes or Other Taxes, upon Laurus’ request, the undersigned shall furnish to Laurus the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment reasonably satisfactory to Laurus.   (d)   The undersigned will indemnify Laurus for the full amount of Taxes and Other Taxes paid by Laurus. If Laurus receives a refund in respect of any Taxes or Other Taxes for which Laurus has received payment from the undersigned hereunder, so long as no Event of Default, or act, condition or event which with notice or passage of time or both would constitute an Event of Default, shall exist or have occurred and be continuing, Laurus shall hold for the account of the undersigned, the amount of such refund plus any interest received (but only to the extent of indemnity payments made, or additional amounts paid, by the undersigned under this Section with respect to the Taxes or Other Taxes giving rise to such refund). If Taxes or Other Taxes were not correctly or legally asserted, Laurus shall, upon request of the undersigned, and at its expense, provide such documents to the undersigned in form and substance satisfactory to Laurus, as the undersigned may reasonably request, to enable the undersigned to contest such Taxes or Other Taxes pursuant to appropriate proceedings then available to the undersigned (so long as providing such documents shall not, in good faith determination of Laurus, have a reasonable likelihood of resulting in any liability of Laurus). The obligations of the undersigned under this Section shall survive the termination or revocation of this Amended and Restated Guaranty and the 2005 Documents and the 2006 Documents and the payment of all amounts payable under this Amended and Restated Guaranty and the 2005 Documents and the 2006 Documents.   4 --------------------------------------------------------------------------------   5.   Limitation on Obligations. It is the intention of the undersigned that the maximum amount of the Obligations of the undersigned hereunder shall be equal to, but not in excess of, the highest rate permitted by applicable law then applicable to the Obligations. To that end, with respect to the determination of the “highest rate permitted by applicable law then applicable to the Obligations”, but only to the extent such Obligations would otherwise be avoidable, the Obligations of the undersigned hereunder shall be limited to the highest rate that the undersigned is permitted to pay in respect of the Obligations under any applicable Insolvency Law. Any such limitation shall be apportioned amongst the Obligations owed to Laurus pro rata. This Section 5 is intended solely to preserve the rights of Laurus hereunder to the maximum extent permitted by applicable law, and neither the undersigned nor any person shall have any rights under this Section 5 that it would not otherwise have under any applicable law.   6.   Waivers.   (a)  This Amended and Restated Guaranty is a guaranty of payment and not of collection. Laurus shall be under no obligation to institute suit, exercise rights or remedies or take any other action against the Debtors or any other person liable with respect to any of the Obligations or resort to any collateral security held by it to secure any of the Obligations as a condition precedent to the undersigned being obligated to perform as agreed herein and the undersigned hereby waives any and all rights which it may have by statute or otherwise which would require Laurus to do any of the foregoing. The undersigned further consents and agrees that Laurus shall be under no obligation to marshal any assets in favor of Guarantor, or against or in payment of any or all of the Obligations. The undersigned hereby waives all suretyship defenses and any rights to interpose any defense, counterclaim or offset of any nature and description which the undersigned may have or which may exist between and among Laurus, any of the Debtors and/or the undersigned with respect to the undersigned’s obligations under this Amended and Restated Guaranty, or which the Debtors may assert on the underlying debt, including but not limited to failure of consideration, breach of warranty, fraud, payment (other than cash payment in full of the Obligations), statute of frauds, bankruptcy, infancy, statute of limitations, accord and satisfaction, and usury.   5 --------------------------------------------------------------------------------   (b)  The undersigned further waives (i) notice of the acceptance of this Amended and Restated Guaranty, of the making of any such loans or extensions of credit, and of all notices and demands of any kind to which the undersigned may be entitled, including, without limitation, notice of adverse change in any of the Debtors’ financial condition or of any other fact which might materially increase the risk of the undersigned and (ii) presentment to or demand of payment from anyone whomsoever liable upon any of the Obligations, protest, notices of presentment, non-payment or protest and notice of any sale of collateral security or any default of any sort.   (c)  Notwithstanding any payment or payments made by the undersigned hereunder, or any setoff or application of funds of the undersigned by Laurus, the undersigned shall not be entitled to be subrogated to any of the rights of Laurus against any of the Debtors or against any collateral or guarantee or right of offset held by Laurus for the payment of the Obligations, nor shall the undersigned seek or be entitled to seek any contribution, indemnification or reimbursement from the Debtors in respect of payments made by the undersigned hereunder, until all amounts owing to Laurus by the Debtors on account of the Obligations are paid in full and Laurus’ obligation to extend credit pursuant to the 2005 Documents and 2006 Documents have been terminated. If, notwithstanding the foregoing, any amount shall be paid to the undersigned on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full and Laurus’ obligation to extend credit pursuant to the 2005 Documents and 2006 Documents shall not have been terminated, such amount shall be held by the undersigned in trust for Laurus, segregated from other funds of the undersigned, and shall forthwith upon, and in any event within two (2) business days of, receipt by the undersigned, be turned over to Laurus in the exact form received by the undersigned (duly endorsed by the undersigned to Laurus, if required), to be applied against the Obligations, whether matured or unmatured, in such order as Laurus may determine, subject to the provisions of the 2005 Documents and 2006 Documents. Any and all present and future debts and obligations of the Debtors to the undersigned are hereby waived and postponed in favor of, and subordinated to the full payment and performance of, all present and future debts and Obligations of the Debtors to Laurus.   7.   Security. All sums at any time to the credit of the undersigned and any property of the undersigned in Laurus’ possession or in the possession of any bank, financial institution or other entity that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, Laurus (each such entity, an “Affiliate”) shall be deemed held by Laurus or such Affiliate, as the case may be, as security for any and all of the undersigned’s obligations to Laurus and to any Affiliate of Laurus, no matter how or when arising and whether under this or any other instrument, agreement or otherwise.   8.   Representations and Warranties. The undersigned hereby represents and warrants (all of which representations and warranties shall survive until all Obligations are indefeasibly satisfied in full and the 2005 Documents and 2006 Documents have been irrevocably terminated), that:   6 --------------------------------------------------------------------------------   (a)  Legal, Valid and Binding Character. This Amended and Restated Guaranty constitutes its legal, valid and binding obligation enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting the enforcement of creditor’s rights and general principles of equity that restrict the availability of equitable or legal remedies.    (b)  Violations. The execution, delivery and performance of this Amended and Restated Guaranty will not violate any requirement of law applicable to it or any contract, agreement or instrument to it is a party or by which it or any of its property is bound or result in the creation or imposition of any mortgage, lien or other encumbrance other than to Laurus on any of its property or assets pursuant to the provisions of any of the foregoing, which, in any of the foregoing cases, could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.   (c)  Consents or Approvals. No consent of any other person or entity (including, without limitation, any creditor of the undersigned) and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required in connection with the execution, delivery, performance, validity or enforceability of this Amended and Restated Guaranty by it, except to the extent that the failure to obtain any of the foregoing could not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.   (d)  Litigation. No litigation, arbitration, investigation or administrative proceeding of or before any court, arbitrator or governmental authority, bureau or agency is currently pending or, to the best of its knowledge, threatened (i) with respect to this Amended and Restated Guaranty or any of the transactions contemplated by this Amended and Restated Guaranty or (ii) against or affecting it, or any of its property or assets, which, in each of the foregoing cases, if adversely determined, could reasonably be expected to have a Material Adverse Effect.   (e)  Financial Benefit. It has derived or expects to derive a financial or other advantage from each and every loan, advance or extension of credit made under the 2005 Documents and 2006 Documents or other Obligation incurred by the Debtors to Laurus.   9.   Acceleration.   (a)  If any breach of any covenant or condition or other event of default shall occur and be continuing under any agreement made by the Debtors or the undersigned to Laurus, or the Debtors or the undersigned should at any time become insolvent, or make a general assignment, or if a proceeding in or under any Insolvency Law shall be filed or commenced by, or in respect of, any of the undersigned, or if a notice of any lien, levy, or assessment is filed of record with respect to any assets of the undersigned by the United States of America or Canada, or any respective department, agency, or instrumentality of either country, or if any taxes or debts owing at any time or times hereafter to any one of them becomes a lien or encumbrance upon any assets of the undersigned in Laurus’ possession, or otherwise, any and all Obligations shall for purposes hereof, at Laurus’ option, be deemed due and payable without notice notwithstanding that any such Obligation is not then due and payable by the Debtors.   7 --------------------------------------------------------------------------------   (b)  The undersigned will promptly notify Laurus of any default by such undersigned in its respective performance or observance of any term or condition of any agreement to which the undersigned is a party if the effect of such default is to cause, or permit the holder of any obligation under such agreement to cause, such obligation to become due prior to its stated maturity and, if such an event occurs, Laurus shall have the right to accelerate such undersigned’s obligations hereunder.   10.   Payments from Guarantor. Laurus, in its sole and absolute discretion, with or without notice to the undersigned, may apply on account of the Obligations any payment from the undersigned or any other Guarantor, or amounts realized from any security for the Obligations, or may deposit any and all such amounts realized in a non-interest bearing cash collateral deposit account to be maintained as security for the Obligations.   11.   Tax Gross Up. Any and all payments by the Guarantor hereunder, and any amounts on account of interest or deemed interest, shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding taxes imposed on net income or franchise taxes of Laurus by the jurisdiction in which such person is organized or has its principal office (all such non-excluded taxes, levies, imposts, deductions, charges withholdings and liabilities, collectively or individually, “Taxes”). If any Guarantor shall be required to deduct any Taxes from or in respect of any sum payable hereunder to Laurus, (i) the sum payable shall be increased by the amount (an “additional amount”) necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 11) Laurus shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) such Guarantor shall make such deductions and (iii) such Guarantor shall pay the full amount deducted to the relevant governmental authority in accordance with applicable law.   In addition, the Guarantor agrees to pay to the relevant governmental authority in accordance with applicable law any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Amended and Restated Guaranty (“Other Taxes”). The Guarantor shall deliver to Laurus official receipts, if any, in respect of any Taxes or Other Taxes payable hereunder promptly after payment of such Taxes or Other Taxes or other evidence of payment reasonably acceptable to Laurus.   The Guarantor hereby indemnifies and agrees to hold Laurus harmless from and against Taxes and Other Taxes (including, without limitation, Taxes and Other Taxes imposed on any amounts payable under this Section 11) paid by such person, whether or not such Taxes or Other Taxes were correctly or legally asserted. Such indemnification shall be paid within ten (10) days from the date on which any such person makes written demand therefore specifying in reasonable detail the nature and amount of such Taxes or Other Taxes.   8 --------------------------------------------------------------------------------   12.   Costs. The undersigned shall pay on demand, all costs, fees and expenses (including, without limitation, expenses for legal services of every kind) relating or incidental to the enforcement or protection of the rights of Laurus hereunder or under any of the Obligations.   13.   No Termination. This is a continuing irrevocable guaranty and shall remain in full force and effect and be binding upon the undersigned, and the undersigned’s successors and assigns, until all of the Obligations have been paid in full and Laurus’ obligation to extend credit pursuant to the 2005 Documents and 2006 Documents has been irrevocably terminated. If any of the present or future Obligations are guaranteed by persons, partnerships or corporations in addition to the undersigned, the death, release or discharge in whole or in part or the bankruptcy, amalgamation, merger, consolidation, incorporation, liquidation or dissolution of one or more of them shall not discharge or affect the liabilities of any undersigned under this Amended and Restated Guaranty.   14.   Recapture. Anything in this Amended and Restated Guaranty to the contrary notwithstanding, if Laurus receives any payment or payments on account of the liabilities guaranteed hereby, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver, interim receiver or receiver and manager or any other party under any Insolvency Law, common law or equitable doctrine, then to the extent of any sum not finally retained by Laurus, the undersigned’s obligations to Laurus shall be reinstated and this Amended and Restated Guaranty shall remain in full force and effect (or be reinstated) until payment shall have been made to Laurus, which payment shall be due on demand.   15.   Books and Records. The books and records of Laurus showing the account between Laurus and the Debtors shall be admissible in evidence in any action or proceeding, shall be binding upon the undersigned for the purpose of establishing the items therein set forth and shall constitute prima facie proof thereof.   16.   No Waiver. No failure on the part of Laurus to exercise, and no delay in exercising, any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by Laurus of any right, remedy or power hereunder preclude any other or future exercise of any other legal right, remedy or power. Each and every right, remedy and power hereby granted to Laurus or allowed it by law or other agreement shall be cumulative and not exclusive of any other, and may be exercised by Laurus at any time and from time to time.   17.   Waiver of Jury Trial. THE UNDERSIGNED DOES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR WITH RESPECT TO THIS AMENDED AND RESTATED GUARANTY OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR RELATING OR INCIDENTAL HERETO. THE UNDERSIGNED DOES HEREBY CERTIFY THAT NO REPRESENTATIVE OR AGENT OF LAURUS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LAURUS WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.   9 --------------------------------------------------------------------------------   18.   Governing Law; Jurisdiction; Amendments. THIS INSTRUMENT CANNOT BE CHANGED OR TERMINATED ORALLY, AND SHALL BE GOVERNED, CONSTRUED AND INTERPRETED AS TO VALIDITY, ENFORCEMENT AND IN ALL OTHER RESPECTS IN ACCORDANCE WITH THE LAWS OF THE PROVINCE OF ONTARIO AND THE FEDERAL LAWS OF CANADA. THE UNDERSIGNED EXPRESSLY CONSENTS TO THE JURISDICTION AND VENUE OF THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK, AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR ALL PURPOSES IN CONNECTION HEREWITH. ANY JUDICIAL PROCEEDING BY THE UNDERSIGNED AGAINST LAURUS INVOLVING, DIRECTLY OR INDIRECTLY ANY MATTER OR CLAIM IN ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED HEREWITH SHALL BE BROUGHT ONLY IN THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. THE UNDERSIGNED FURTHER CONSENTS THAT ANY SUMMONS, SUBPOENA OR OTHER PROCESS OR PAPERS (INCLUDING, WITHOUT LIMITATION, ANY NOTICE OR MOTION OR OTHER APPLICATION TO EITHER OF THE AFOREMENTIONED COURTS OR A JUDGE THEREOF) OR ANY NOTICE IN CONNECTION WITH ANY PROCEEDINGS HEREUNDER, MAY BE SERVED INSIDE OR OUTSIDE OF THE STATE OF NEW YORK OR THE SOUTHERN DISTRICT OF NEW YORK BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY PERSONAL SERVICE PROVIDED A REASONABLE TIME FOR APPEARANCE IS PERMITTED, OR IN SUCH OTHER MANNER AS MAY BE PERMISSIBLE UNDER THE RULES OF SAID COURTS. THE UNDERSIGNED WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREON AND SHALL NOT ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE OR BASED UPON FORUM NON CONVENIENS.   19.   Judgment Currency. If, for the purpose of obtaining or enforcing judgment against any Guarantor in any court in any jurisdiction, it becomes necessary to convert into any other currency (such other currency being hereinafter in this section referred to as the “Judgment Currency”) an amount due under this Amended and Restated Guaranty in any currency (the “Obligation Currency”) other than the Judgment Currency, the conversion shall be made at the rate of exchange prevailing on the business day immediately preceding (a) the date of actual payment of the amount due, in the case of any proceeding in the courts of New York or in the courts of any other jurisdiction that will give effect to such conversion being made on such date, or (b) the date on which the foreign court determines, in the case of any proceeding in the courts of any other jurisdiction (the applicable date as of which such conversion is made pursuant to this section being hereinafter in this section referred to as the “Judgment Conversion Date”).   10 --------------------------------------------------------------------------------   If, in the case of any proceeding in the court of any jurisdiction referred to in the preceding paragraph, there is a change in the rate of exchange prevailing between the Judgment Conversion Date and the date of actual receipt of the amount due in immediately available funds, the Guarantor shall pay such additional amount (if any, but in any event not a lesser amount) as may be necessary to ensure that the amount actually received in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of the Obligation Currency which could have been purchased with the amount of the Judgment Currency stipulated in the judgment or judicial order at the rate of exchange prevailing on the Judgment Conversion Date. Any amount due from any Guarantor under this section shall be due as a separate debt and shall not be affected by judgment being obtained for any other amounts due under or in respect of this Amended and Restated Guaranty.   20.   Severability. To the extent permitted by applicable law, any provision of this Amended and Restated Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.   21.   Amendments, Waivers. No amendment or waiver of any provision of this Amended and Restated Guaranty nor consent to any departure by the undersigned therefrom shall in any event be effective unless the same shall be in writing executed by the undersigned directly affected by such amendment and/or waiver and Laurus.   22.   Notice. All notices, requests and demands to or upon the undersigned, shall be in writing and shall be deemed to have been duly given or made (a) when delivered, if by hand, (b) three (3) days after being sent, postage prepaid, if by registered or certified mail, (c) when confirmed electronically, if by facsimile, or (d) when delivered, if by a recognized overnight delivery service in each event, to the numbers and/or address set forth beneath the signature of the undersigned.   23.   This Amended and Restated Guaranty may be executed in any number of counterparts which shall, collectively and separately constitute one agreement. Any signature delivered by a party by facsimile transmission or by sending a scanned copy by electronic mail shall be deemed an original signature hereto.   24.   Successors. Laurus may, from time to time, without notice to the undersigned, sell, assign, transfer or otherwise dispose of all or any part of the Obligations and/or rights under this Amended and Restated Guaranty. Without limiting the generality of the foregoing, Laurus may assign, or grant participations to, one or more banks, financial institutions or other entities all or any part of any of the Obligations. In each such event, Laurus, its Affiliates and each and every immediate and successive purchaser, assignee, transferee or holder of all or any part of the Obligations shall have the right to enforce this Amended and Restated Guaranty, by legal action or otherwise, for its own benefit as fully as if such purchaser, assignee, transferee or holder were herein by name specifically given such right. Laurus shall have an unimpaired right to enforce this Amended and Restated Guaranty for its benefit with respect to that portion of the Obligations which Laurus has not disposed of, sold, assigned, or otherwise transferred.   11 --------------------------------------------------------------------------------   25.   It is understood and agreed that any person or entity that desires to become a Guarantor hereunder, or is required to execute a counterpart of this Amended and Restated Guaranty after the date hereof pursuant to the requirements of any of the 2005 Documents or 2006 Documents, shall become Guarantor hereunder by (x) executing a joinder agreement in form and substance satisfactory to Laurus, (y) delivering supplements to such exhibits and annexes to such 2005 Documents or 2006 Documents as Laurus shall reasonably request and (z) taking all actions as specified in this Amended and Restated Guaranty as would have been taken by such Guarantor had it been an original party to this Amended and Restated Guaranty, in each case with all documents required above to be delivered to Laurus and with all documents and actions required above to be taken to the reasonable satisfaction of Laurus.   26.   Release. Nothing except cash payment in full of the Obligations shall release the undersigned from liability under this Amended and Restated Guaranty.   27.   Limitation of Obligations under this Amended and Restated Guaranty. The Guarantor and Laurus (by its acceptance of the benefits of this Amended and Restated Guaranty) hereby confirm that it is their intention that this Amended and Restated Guaranty not constitute (i) a fraudulent transfer or conveyance for purposes of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act or any similar federal, provincial or state law; or (ii) a preference or a preferential transfer for purposes of the BIA or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect in any bankruptcy, insolvency or similar proceeding with respect to the Debtors. To effectuate the foregoing intention, the Guarantor which is subject to the Bankruptcy Code, the Uniform Fraudulent Conveyance Act or any similar US federal or state law and Laurus (by its acceptance of the benefits of this Amended and Restated Guaranty) hereby irrevocably agrees that the Obligations guaranteed by such Guarantor shall be limited to such amount as will, after giving effect to such maximum amount and all other (contingent or otherwise) liabilities of such Guarantor that are relevant under such laws and after giving effect to any rights to contribution pursuant to any agreement providing for an equitable contribution among such Guarantor and the other Guarantor (including this Amended and Restated Guaranty), result in the Obligations of such Guarantor under this Amended and Restated Guaranty in respect of such maximum amount not constituting a fraudulent transfer or conveyance, preference or preferential transfer.   28.   Understanding With Respect to Waivers and Consents. The Guarantor warrants and agrees that each of the waivers and consents set forth in this Amended and Restated Guaranty is made voluntarily and unconditionally after consultation with outside legal counsel and with full knowledge of its significance and consequences, with the understanding that events giving rise to any defense or right waived may diminish, destroy or otherwise adversely affect rights which such Guarantor otherwise may have against the Debtors, Laurus or any other person or entity or against any collateral. If, notwithstanding the intent of the parties that the terms of this Amended and Restated Guaranty shall control in any and all circumstances, any such waivers or consents are determined to be unenforceable under applicable law, such waivers and consents shall be effective to the maximum extent permitted by law.   12 --------------------------------------------------------------------------------   29.   Remedies Not Exclusive. The remedies conferred upon Laurus in this Amended and Restated Guaranty are intended to be in addition to, and not in limitation of any other remedy or remedies available to Laurus under applicable law or otherwise.   [Remainder of this page has been intentionally left blank.]   13 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, this Amended and Restated Guaranty has been executed by the undersigned this 13th day of February, 2006.         BRENT W. SWANICK       /s/ BRENT SWANICK                   14 --------------------------------------------------------------------------------

Exhibit 10.1 ASSET PURCHASE AGREEMENT This Asset Purchase Agreement (the “Agreement”), is made as of this 25th day of August, 2006, by and among LINCARE INC., a corporation duly organized and existing under the laws of the State of Delaware, having its principal place of business at 19387 U.S. 19 North, Clearwater, Florida 33764 (hereinafter referred to as “Lincare”); PEDIATRIC SERVICES OF AMERICA, INC., a corporation duly organized and existing under the laws of the State of Delaware, having its principal place of business at 310 Technology Parkway, Norcross, Georgia 30092-2929 and certain of Pediatric Services of America, Inc.’s affiliates listed on the signature page hereto (hereinafter collectively referred to as the “Company”). WITNESSETH: WHEREAS, the Company is engaged in the business of marketing, advertising, selling, leasing, renting, distributing or otherwise providing oxygen, oxygen equipment, aerosol inhalation therapy equipment and respiratory medications, nasal continuous positive airway pressure devices, infant monitoring equipment and services, home sleep studies-related therapy equipment, enteral, and other respiratory therapy and durable medical equipment, products, supplies and services to customers in their homes or other alternative site care facilities in the Territory (as defined in Section 1.1(f) hereof) and respiratory therapy staffing; and WHEREAS, Lincare desires to acquire, and Company desires to sell to Lincare, substantially all of the Assets (as defined in Section 1.1(a) hereof) and Business (as defined in Section 1.1(b) hereof) (hereinafter, the “Transaction”). NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the parties hereto agree and contract as follows: Article 1 - DEFINITIONS 1.1 In this Agreement, the following terms shall mean the following: (a) “Assets” shall mean and include all assets and properties owned, leased, rented, used or otherwise possessed by the Company for use in the Business of every kind, character and description, whether tangible or intangible, and wherever located, except for the Excluded Assets (as defined in Section 1.1(c) hereof). The Assets shall include, but shall not be limited to, the following: (i) subject to Sections 1.1(c)(vii) and 1.1(c)(ix) hereof, all of Company’s rights with respect to the real property leased, rented, used or otherwise possessed by the Company, which are not identified on Schedule 4.5(a) as Excluded Assets, subject to the terms and conditions set forth in Schedule 4.5(a). For purposes of this Agreement, those Company facilities, in which Company’s Business is shared with other Company businesses, shall be referred to as the “Shared Locations”; (ii) all of the oxygen equipment, aerosol inhalation therapy equipment, nasal continuous positive airway pressure devices, infant monitoring equipment, home sleep study and related therapy equipment, respiratory medications, enteral, and all other respiratory therapy and durable medical equipment, products and supplies owned, leased, rented, used or otherwise possessed by the Company’s Business regardless of the actual ownership thereof by the Company or otherwise (including, but not limited to, all of such items presently located with customers in their homes or alternative site care facilities), which are set forth in Schedule 4.5(c)(i) hereof; (iii) all of the inventory, disposables, spare parts, materials, work-in-process and supply items owned, leased, rented, used or otherwise possessed by Company’s Business; (iv) all other equipment, products, machines, furniture, fixtures, furnishings, parts, and supplies owned, leased, rented, used or otherwise possessed by Company’s Business, which are set forth in Schedule 4.5(c)(iii) hereof; (v) all patents, trademarks, trade names, service marks, copyrights and applications therefor owned or licensed by Company’s Business, as set forth on Schedule 4.5(l) hereof; (vi) the originals and all copies of: all Customer (as defined in Section 4.5(e)) files (including, but not limited to, the original certificates of medical necessity, the original physician orders and the original of any other evidence of -------------------------------------------------------------------------------- medical necessity related to equipment or services being rendered to any customer of the Business as of the Closing Date, and the original of any other information supporting the billing for such Customer), the current and historical referral list of the Business and, except for corporate records and minutes, all other documents, files and records of, or relating to, any of the Assets or the Business; (vii) all of the rights and interests in and to the specific contracts, agreements and leases of the Business set forth on Schedules 4.5(a) and 4.5(b) attached hereto, but specifically excluding as Excluded Assets, subject to the provisions of Sections 3.4 and 4.5(b)(ii) and (iii) hereof, those contracts, agreements and leases designated on Schedules 4.5(a) and 4.5(b) hereof as Excluded Assets; provided, however, that if at any time it is determined that any contract, agreement or lease was omitted from such schedules after the Closing, the parties shall work together in good faith to determine whether such contract, agreement or lease shall be an Asset or Excluded Asset under this Agreement. However, Lincare, in its sole discretion shall determine if, for any such omitted contract pertaining to an Asset as defined herein, the Contract Asset Purchase Requirements (as defined in Section 3.4 hereof) of Sections 3.4 and 4.5(b)(iii) shall apply to any such contract, agreement or lease. The Contract Asset Purchase Requirement shall not apply to assets that are not Assets of the Business as defined herein. If Lincare does not expressly accept responsibility in writing for the contract, agreement or lease which is not included on Schedules 4.5(a) or 4.5(b), the obligations of that contract, agreement or lease remain the responsibility of the Company. If Lincare deems it necessary or appropriate to make payment under any such undisclosed contract, agreement or lease which it does not expressly accept, Lincare shall have, in addition to its other rights hereunder (including its right to indemnification pursuant to Article 7), the right to make such payment on behalf of Company without assuming any liability therefor, and to deduct such amount from its payment obligations under the Agreement in accordance with Section 7.2 hereof. Company agrees to amend promptly Schedule 4.5(a) or 4.5(b) hereof, as the case may be, after the Closing Date, to include all such additional contracts, agreements, and leases in accordance with the above determinations; (viii) the sole and exclusive use of all regulatory licenses and permits owned, held, used, or otherwise possessed by the Company in respect of the Business, to the extent assignable; (ix) all of the Business of Company; (x) all funds, refunds, receivables, notes, security deposits, prepayments, evidences of indebtedness, credits, claims, deposits, debts and obligations of any kind due and owing to Company’s Business as of the Closing Date or which become due or owing to the Company’s Business on or after the Closing Date or which accrue to the Company’s Business on or after the Closing Date; provided, however, any security deposit related to either real estate or real estate lease that is not assumed by, or otherwise assigned to, Lincare shall be an Excluded Asset; (xi) except for those telephone numbers set forth on Schedule 1.1(a)(xi), the exclusive use of the telephone numbers of the Company’s Business and all intangible personal property rights and goodwill relating to the Company’s Business; (xii) the right to all billings for any equipment, products, supplies or services provided to any customers of Company’s Business after the Closing Date; (xiii) all vehicles owned, leased, rented, used or otherwise possessed in the operation of the Business, which are set forth on Schedule 1.1(a)(xiii), free and clear of all liens and Encumbrances; (xiv) all billed and unbilled accounts receivable, less credit balances related thereto, of Company’s Business as of the Closing Date (the “Accounts Receivable”) (other than receivables from governmental third party payors which by law may not be assigned) as well as the right to any deposits, security, or collateral related to the Accounts Receivable; (xv) an amount equal to the value of all billed and unbilled receivables, less credit balances related thereto, of the Business related to Medicare, Medicaid and other third party claims due from beneficiaries or governmental third party payors in respect of services through the Closing Date which by law may not be assigned (“Government Patient Receivables,” or collectively with the Accounts Receivables, the “Receivables”) which shall be collected as set forth in Article 14 herein; and (xvi) any interest or rights in the Company’s property located at 6861 West Park Avenue in Houma, Louisiana.   -2- -------------------------------------------------------------------------------- (b) “Business” shall mean the entire business of Company’s Respiratory Therapy and Equipment Services Division, including but not limited to, the business of marketing, advertising, selling, leasing, renting, distributing or otherwise providing oxygen, oxygen equipment, aerosol inhalation therapy equipment and respiratory medications, enteral, nasal continuous positive airway pressure devices, infant monitoring equipment and services, home sleep studies-related therapy equipment, and other respiratory therapy and durable medical equipment, products, supplies and services to customers in their homes or other alternative site care facilities within the Territory and respiratory therapy staffing. (c) “Excluded Assets” shall mean exclusively the following: (i) the cash, cash equivalents and deposits in banks and other financial institutions on hand at the close of business on the day immediately prior to the Closing Date; (ii) subject to the provisions of Sections 3.4 and 4.5(b)(ii) and (iii) hereof, the contracts, agreements and leases designated on Schedules 4.5(a) and 4.5(b) hereof as Excluded Assets; (iii) all Medicare, Medicaid and other public or private insurance carrier provider numbers owned, held, used, or otherwise possessed by the Company; (iv) any trademarks, trade name, service marks, copyrights, and applications therefor belonging or relating to Company or PSA Properties Corporation or relating to the names “Pediatric Services of America,” “PSA Healthcare,” or “Pharmacy Services of America”, including without limitation, those items set forth in Schedule 1.1(c)(iv); (v) {intentionally left blank}; (vi) all books, records, and documents relating primarily to the Excluded Liabilities; (vii) any interest or rights in the Company’s lease to the property located at 770 Baconsfield Drive, Building 1, in Macon, GA, except that Lincare shall be allowed to utilize the location for a period of up to ninety (90) days after the Closing Date for a transition period; (viii) any security deposit related to either real estate and/or a real estate lease where such real estate or real estate lease is designated as a shared location of Schedule 4.5(a) hereof or where such real estate or real estate lease is not assumed by or otherwise assigned to Lincare; and (ix) those assets listed on Schedule 1.1(c) hereto. (d) “Accepted Liabilities” shall mean exclusively the following: (i) all debts, liabilities and obligations of every kind whatsoever incurred in connection with or arising out of Lincare’s conduct of the Business or ownership of the Assets from and after the Closing Date; (ii) pursuant to the provisions of Section 4.5(b)(ii) hereof, Lincare shall be responsible only for the liabilities, duties and obligations arising out of the contracts, agreements and leases listed on Schedules 4.5(a) and 4.5(b) hereof, (which are not otherwise designated as Excluded Assets on such schedules or which are expressly accepted by Lincare pursuant to Section 1.1(a)(vii)) which liabilities, duties and obligations arise and pertain to periods commencing on or after the Closing Date; (iii) expenses associated with the administration of the Termination Plan as more fully described in Article 16 hereof; and, (iv) liabilities related to inventory and supplies ordered by the Company in the ordinary course of business prior to the Closing Date, but not received prior to the Closing Date.   -3- -------------------------------------------------------------------------------- (e) “Excluded Liabilities” shall mean and include all debts, liabilities and obligations of Company of every kind, character and description whatsoever, except for the Accepted Liabilities. Without limiting the generality of the foregoing, the Excluded Liabilities shall include, but shall not be limited to, the following: (i) the obligation to pay all invoices which are dated before the Closing Date or which relate to goods or services consumed or used before the Closing Date; (ii) the liabilities and obligations under all contracts, agreements and leases designated as Excluded Assets on Schedules 4.5(a) or 4.5(b) hereof; (iii) the obligation to satisfy any claims and litigation against the Company, including, but not limited to, those claims and litigation listed on any Schedule hereto, and any claim or litigation, whether or not listed on a Schedule hereto, that arose prior to the Closing Date; (iv) the obligation, in accordance with the provisions of Section 4.5(b)(iii) hereof, to pay off in full those certain leases and rental agreements expressly designated on Schedules 4.5(a) and 4.5(b) hereof as subject to this Section 1.1(e) or Sections 3.4 or 4.5(b)(iii), as well as any obligations pertaining to any lease or rental agreement which the Company failed to disclose but existed prior to the Closing Date unless expressly accepted by Lincare as provided in Section 1.1(a)(vii); (v) the obligation to satisfy any refund or recoupment requests from any third party payor for dates of service prior to the Closing Date. (f) “Territory” shall mean the United States of America. 1.2 In addition to the terms defined in Section 1.1 hereof, other terms defined elsewhere in this Agreement shall have the meanings set forth therein. Article 2 - PURCHASE AND SALE OF ASSETS Subject to the terms and conditions set forth in this Agreement, at Closing (as hereinafter defined) Company shall sell, convey, transfer, assign, and deliver to Lincare, and Lincare shall purchase and accept from Company, good and marketable title to the Assets, free and clear of any restrictions or conditions to transfer or assignment and free and clear of all liens, mortgages, pledges, encumbrances, agreements, leases, contracts, claims, security interests, taxes, conditions enforceable by any third party, covenants, conditions or restrictions of any kind or description (hereinafter referred to collectively as “Encumbrances”). Lincare and Company acknowledge and agree that the term “Encumbrances” shall not include the Accepted Liabilities described in Section 1.1(d) hereof. Article 3 - PURCHASE PRICE AND METHOD OF PAYMENT 3.1 Purchase Price and Method of Payment. The aggregate purchase price (hereinafter referred to as the “Purchase Price”) for the Assets and the Business shall be Thirty-Five Million Two Hundred Thousand and no/100 Dollars ($35,200,000.00), payable to Company, or its designees, as follows: (a) Thirty-One Million Two Hundred Thousand and no/100 Dollars ($31,200,000.00) shall be paid by wire transfer at the Closing (as such term is defined in Section 6.1 hereof); (b) Two Million Five Hundred Thousand and no/100 Dollars ($2,500,000.00) shall be payable, without interest, six (6) months after the Closing Date, subject to the terms and conditions of this Agreement; and (c) One Million Five Hundred Thousand and no/100 Dollars ($1,500,000.00) shall be payable, without interest, twelve (12) months after the Closing Date, subject to the terms and conditions of this Agreement. 3.2 Excluded Assets. Notwithstanding anything to the contrary contained in this Agreement, Lincare shall not acquire or receive hereunder any title to or interest in any of the Excluded Assets, which Excluded Assets shall remain the property of the Company.   -4- -------------------------------------------------------------------------------- 3.3 Accepted Liabilities. In connection with its purchase of the Assets hereunder, at Closing Lincare shall assume and be responsible for the Accepted Liabilities, including the assumption of, and responsibility for, the payment and/or satisfaction of the Accepted Liabilities in accordance with their terms. 3.4 Excluded Liabilities. Lincare shall not assume, nor be responsible for, any Excluded Liabilities. All Excluded Liabilities shall be retained by, and shall be the sole responsibility of, Company. If Lincare deems it reasonably necessary or appropriate to make payment of any Excluded Liability, Lincare shall have, in addition to its other rights hereunder (including its right to indemnification pursuant to Article 7), the right to make such payment on behalf of Company without assuming liability therefore, and to deduct such amounts from its payment obligations under this Agreement in accordance with Section 7.2 hereof. With respect to the obligations Company is required to satisfy pursuant to Section 1.1(e)(iv) of this Agreement, Company shall deliver to Lincare title to all such leased or rented Assets free and clear of any Encumbrances. Company’s obligations under the preceding sentence are referred to herein as the “Contract Asset Purchase Requirements.” The Contract Asset Purchase Requirements shall include, but shall not be limited to, the payment of any purchase options, re-licensing fees, transfer fees, or other similar payments relating to any of such Assets. 3.5 Preliminary Purchase Price Allocation. The preliminary Purchase Price allocation is attached as Exhibit 3.5 hereto, though it is subject to change based on actual circumstances at the time of filing an allocation statement. Lincare and the Company shall file, in accordance with the Internal Revenue Code of 1986, as amended, an asset allocation statement on Form 8594 with its federal income tax return for the tax year in which the Closing Date occurs and shall contemporaneously provide the other parties with a copy of the Form 8594 being filed. Such allocations on Form 8594 shall be materially consistent with the preliminary allocation on Exhibit 3.5, and no party shall take a materially inconsistent position in reporting the allocation for any tax reporting purposes. The preliminary purchase price allocation set forth on Exhibit 3.5 shall also set forth an allocation by state where necessary to calculate applicable state sales or transfer taxes applicable to this transaction. Article 4 - REPRESENTATIONS AND WARRANTIES OF COMPANY The representations and warranties of Company set forth this Article shall be true and correct as of the date of this Agreement and true and correct as of the Closing Date as if made at and as of such dates, except with respect to representations and warranties which speak as to an earlier date, which shall be true and correct at and as of such date. Company represents, warrants, and covenants as follows: 4.1 Organization, Standing and Qualification of Company. Pediatric Services of America, Inc. is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has all necessary corporate powers, governmental qualifications and authorizations to own its assets and to operate the Business in each jurisdiction in which such assets are now owned and such Business is now operated by it. Pediatric Services of America, Inc. d/b/a PSA HealthCare is a corporation duly organized, validly existing, and in good standing under the laws of the State of Georgia and has all necessary corporate powers, governmental qualifications, and authorizations to own its assets and to operate the Business in each jurisdiction in which such assets are now owned and such Business is now operated by it. PSA Capital Corporation is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has all necessary corporate powers, governmental qualifications, and authorizations to own its assets and to operate the Business in each jurisdiction in which such assets are now owned and such Business is now operated by it. 4.2 Affiliates. Except for those entities set forth on Schedule 4.2, Company does not own or control, directly or indirectly, in whole or in part, any other corporation, partnership, association, or organization, or any interest therein. 4.3 Financial Statements. (a) Company has delivered to Lincare copies of the following financial statements for the Company, which are set forth in Schedule 4.3(a) hereof. (b) All of the financial statements referenced in Section 4.3(a) above and otherwise set forth in Schedule 4.3(a) are hereinafter referred to collectively as the “Financial Statements.” The Financial Statements fairly present in all material respects the financial condition of the Company as of the dates stated and the operation of the Company for the periods stated. Company represents and warrants there has been no material adverse change in the assets, liabilities, financial performance or capitalization of the Company since October 1, 2005, except as set forth in Schedule 4.3(b).   -5- -------------------------------------------------------------------------------- 4.4 Taxes. (a) Except as set forth on Schedule 4.4(a), Company has timely filed with the appropriate taxing authorities all tax returns in all jurisdictions in which tax returns are required to be filed, and such tax returns are correct and complete in all respects. Company is not the beneficiary of any extension of time within which to file any tax return. All taxes of Company (whether or not shown on any tax return) have been fully and timely paid. There are no liens for any taxes (other than a lien for current real property or ad valorem taxes not yet due and payable) on any of the Assets of Company. Except as set forth on Schedule 4.4(a), no claim has ever been made by an authority in a jurisdiction where Company does not file a tax return that Company may be subject to taxes by that jurisdiction. (b) Except as set forth on Schedule 4.4(b), Company has never received any notice of assessment or proposed assessment in connection with any taxes, and there are no threatened or pending disputes, claims, audits or examinations regarding any taxes of Company or the assets of Company. No officer or employee responsible for tax matters of Company expects any taxing authority to assess any additional taxes for any period for which tax returns have been filed. Company has not waived any statute of limitations in respect of any taxes or agreed to a tax assessment or deficiency. (c) Except as set forth on Schedule 4.4(c), Company has complied with all applicable laws, rules and regulations relating to the withholding of taxes and the payment thereof to appropriate authorities, including taxes required to have been withheld and paid in connection with amounts paid or owing to any employee or independent contractor, and taxes required to be withheld and paid pursuant to Sections 1441 and 1442 of the Internal Revenue Code or similar provisions under foreign law. (d) Except as set forth on Schedule 4.4(d), the unpaid taxes of Company (i) did not, as of the most recent fiscal month end, exceed the reserve for tax liability (rather than any reserve for deferred taxes established to reflect timing differences between book and tax income) set forth on the face of the most recent balance sheet (rather than in any notes thereto) for Company and (ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with past custom and practice of Company in filing its tax returns. (e) Except as set forth on Schedule 4.4(e), Company is not a party to any tax allocation or sharing agreement and Company has not been a member of an affiliated group filing a consolidated federal income tax return (other than a group the common parent of which is Parent) or has any tax liability of any person under Treasury Regulation Section 1.1502-6 or any similar provision of state, local or foreign Law (other than the other members of the consolidated group of which Parent is parent), or as a transferee or successor, by contract or otherwise. (f) With respect to liabilities for any such taxes, assessments or other charges which are not yet due and payable, Company represents, warrants and covenants that Company will pay all such amounts when due, except as otherwise provided in Section 6.8(j) hereof. Subject to Section 6.8(j) hereof, any such unpaid liability of the Company for federal, state or local taxes (including, without limitation, interest and penalties) shall be the sole responsibility of Company. If the Internal Revenue Service or any other taxing authority seeks to collect any such liability from Lincare or from any other member of Lincare’s affiliated group, Company shall indemnify and hold harmless any such party for the entire amount of such liability pursuant to the provisions of Article 7 hereof. If Lincare deems it necessary or appropriate to make payment of any taxes due or payable for periods prior to the Closing Date, Lincare shall have, in addition to its other rights hereunder (including its right to indemnification pursuant to Article 7), the right to make such payment on behalf of Company without assuming any liability therefore and to deduct such amounts from its payment obligations under this Agreement in accordance with Section 7.2 hereof. (g) With respect only to the Business, the Company has delivered to Lincare true and complete copies of the Company’s personal property and employment (including Forms 940 and 941, and the wage detail reports for such returns) tax returns filed for the fiscal years ending 2004 and 2005, as well as all such returns filed since December 31, 2005. The Company shall remain responsible for any tax liability which arises from an audit of any tax period prior to the Closing Date. 4.5 Schedules. Company has delivered to Lincare the following Schedules, which are true, complete and accurate: (a) Real Estate. Schedule 4.5(a) is a complete list of all land, warehouses, office buildings, stores and other buildings and real property rented, leased, used, occupied or otherwise possessed by the Company in connection with the Company’s operation of the Business. Except as identified on Schedule 4.5(a), Company does not own, use, occupy or otherwise possess any real property used in connection with the operation of the Business. As to each such property rented,   -6- -------------------------------------------------------------------------------- leased, used, occupied or otherwise possessed by the Company, Schedule 4.5(a) lists the location of the property; the name and address of lessor; the expiration date of such lease; and the monthly rent payable under the lease. Each such property rented or leased is held under a valid and enforceable lease, binding upon each of the parties thereto. Each such lease is in full force and effect in all material respects in accordance with its terms and there are no existing defaults or events of default under any such lease. Company has not given or received any notice of any claimed default or termination with respect to any such lease. Schedule 4.5(a) identifies all violations, of which Company knew or should have reasonably known, of any applicable law, statute, ordinance, code, rule, regulation or standard relating to any building rented, leased, used, occupied or otherwise possessed by the Company or the operations of the Company conducted therein. The facilities listed in Schedule 4.5(a) have been regularly and appropriately maintained in the normal course of business, to the best of Company’s knowledge, and the fixtures, mechanical systems (including electrical, plumbing, heating, ventilation and air conditioning), roof and structural systems of the facilities listed on Schedule 4.5(a) are in satisfactory working condition and in a satisfactory state of maintenance and repair. Subject to Section 6.8(j) hereof, Company represents that all rent and other use or maintenance fees or charges associated therewith (to the extent that any such fees or charges are due and payable) have been paid in full through the end of the calendar month in which the Closing occurs. Company further represents that all necessary third party consents to the transfer or assignment of Company’s right to use such properties have been obtained or will obtained within sixty (60) days after the Closing Date. If such consent is not obtained by Company within that period, Lincare shall have the right to seek any actual damages, including, but not limited to, moving, relocation, advertising, printing and utility hook up charges, resulting from Company’s failure to transfer the contract or agreement and shall deduct such damage from its payment obligations under the Agreement, in accordance with Section 7.2 hereof. (b) Agreements and Contracts. (i) Schedule 4.5(b) is a complete list of all contracts and agreements (including, without limitation, agreements relating to the purchase, sale, lease or rental of equipment, materials, products, supplies and services, preferred provider agreements, health maintenance organization agreements or any other managed care contracts or agreements, service contracts, employment and consulting agreements, covenants not to compete, distributorship agreements, leases of personal property, licenses of intellectual property rights, security agreements, and loan agreements) relating, in whole or part, to the Business or the Assets. Schedule 4.5(b) specifies the type of agreement and the names of the parties to such agreement. The agreements listed in Schedule 4.5(b) are valid, binding and enforceable upon the parties thereto. Except as indicated in Schedule 4.5(b), all contracts and agreements relating, in whole or in part, to the Business or the Assets are in full force and effect in accordance with their terms and, to Company’s best knowledge, there are no existing defaults or events of default under any such contract or agreement. The Company has not given or received any notice of any claimed default or termination with respect to any contract or agreement relating, in whole or in part, to the Business or the Assets. Except as disclosed on Schedule 4.5(b), neither this Agreement nor consummation of the transactions contemplated hereby shall result in a default under or breach of, or require the consent or approval of any party to any agreement listed on Schedule 4.5(b) with respect to the transfer and assignment of such contract or agreement to Lincare hereunder, except those specific agreements identified on Schedule 4.5(b) as requiring third party consent or approval prior to any such transfer or assignment. With respect to each contract and agreement listed on Schedule 4.5(b) hereof (A) that is not designated as an Excluded Assets on said Schedule and is designated as requiring the consent or approval of a third party and (B) where the aggregate annual payments to be made by or to Company under such contract or agreement exceed Fifteen Thousand and no/100 Dollars ($15,000.00) (the “Agreement Requiring Consent”), Company shall obtain the consent or approval effective as of the Closing Date either prior to the Closing Date or within 45 days after the Closing Date. The Company shall be responsible for any reasonable out–of–pocket costs required to obtain the consents or approvals for each Agreement Requiring Consent. In the event any such consents or approvals are not obtained by the Closing Date, Lincare shall reasonably cooperate with Company during such 45-day period in obtaining the required consents or approvals for each Agreement Requiring Consent. If such consent or approval is not obtained by Company within that period, Lincare shall have the right to seek appropriate damages from Company for the failure to transfer the Agreement Requiring Consent effective as of the Closing Date and shall deduct such damage from its payment obligations under the Agreement, in accordance with Section 7.2 hereof. Company shall remain responsible for any contract, agreement or lease which is not disclosed on the Schedules hereto unless Lincare accepts responsibility for such contract in writing as provided in Section 1.1(a)(vii) hereof. With respect to any contract and agreement relating, in whole or part, to the Business or the Assets; which is not listed on Schedule 4.5(b) hereof as of the Closing Date; for which Lincare does accept responsibility in writing as provided in Section 1.1(a)(vii) hereof; which requires the consent or approval of a third party; and where the aggregate annual payments to be made by or to Company under such contract or agreement exceed Fifteen Thousand and no/100 Dollars ($15,000.00), Company shall obtain the consent or approval effective as of the Closing Date from such third party as soon as practicable after receipt of Lincare’s written notice accepting responsibility; and if such consent or approval is not obtained within forty five (45) days after Lincare’s written notice, then Company shall be responsible for damages as provided above.   -7- -------------------------------------------------------------------------------- With respect to each contract and agreement listed on Schedule 4.5(b) hereof (A) that is not designated as an Excluded Assets on said Schedule and is designated as requiring the consent or approval of a third party and (B) where the aggregate annual payments to be made by or to Company under such contract or agreement do not exceed Fifteen Thousand and no/100 Dollars ($15,000.00) or with respect to each contract or agreement relating, in whole or part, to the Business or the Assets; which is not listed on Schedule 4.5(b) hereof; for which Lincare does accept responsibility in writing as provided in Section 1.1(a)(vii) hereof; which requires the consent or approval of a third party; and where the aggregate annual payments to be made by or to Company under such contract or agreement do not exceed Fifteen Thousand and no/100 Dollars ($15,000.00), Company shall reasonably cooperate with Lincare in Lincare’s efforts in obtaining consent or approval to the contract’s or agreement’s assignment. (ii) Schedules 4.5(a) and 4.5(b) contain each and every contract, agreement and lease of, or relating to, the operation of the Business or any of the Assets, and Schedules 4.5(a) and 4.5(b) list each of the contracts, agreements and leases which are included in the Assets, except those contracts, agreements and leases which are designated on such schedules as Excluded Assets. It is understood and agreed between the parties that Lincare shall assume the liabilities, duties and obligations of Company only under the contracts, agreements and leases listed on Schedules 4.5(a) or 4.5(b) which: (A) are not Excluded Assets; and (B) which liabilities, duties and obligations arise and pertain to periods commencing on or after the Closing Date. Company shall remain solely liable for all liabilities, duties and obligations under all contracts, agreements and leases which: (X) are Excluded Assets; (Y) are not Excluded Assets but which liabilities, duties and obligations arise or pertain to periods prior to the Closing Date; or (Z) were not disclosed to Lincare on any Schedule hereto, and Lincare has not expressly accepted in accordance with Section 1.1(a)(vii). (iii) Notwithstanding anything to the contrary contained in this Agreement, Lincare shall obtain title to all Assets covered by: (X) those certain contracts, agreements and leases identified on Schedule 4.5(b) as Excluded Assets to which the Contract Asset Purchase Requirements pertain; and (Y) contracts, agreements or leases which were not disclosed on any Schedule hereto, and Company shall have completed the Contract Asset Purchase Requirements set forth in Section 3.4 of this Agreement with respect to the assets covered by such contracts, agreements and leases. (c) Personal Property. Schedules 4.5(c)(i), 4.5(c)(ii), and 4.5(c)(iii) list by type and quantity the tangible personal property owned, rented, leased, used or otherwise possessed by Company in the operation of the Business and pertaining to the asset classes described below: (i) Schedule 4.5(c)(i) lists, in summary form, the oxygen equipment, respiratory therapy equipment, and pharmacy equipment and other items of durable medical equipment and other tangible personal property owned, leased, rented, used or otherwise possessed by Company in the operation of the Business (including, but not limited to, all of such items currently located with customers in their homes or alternative site care facilities); (ii) Schedule 4.5(c)(ii) lists, in summary form, the vehicles owned, leased, rented, used or otherwise possessed by the Company in the operation of the Business that are included among the Assets to be acquired by Lincare; and, (iii) Schedule 4.5(c)(iii) lists, in summary form, all other personal property owned, leased, rented, used or otherwise possessed by the Company in the operation of the Business that are included among the Assets to be acquired by Lincare, such as phone systems, copiers, fax machines and other office equipment. Except for those cylinders Company leased from TMGCO, LLC or Sky Oxygen, which have not been rendered free and clear of Encumbrances by the Closing Date and which are so designated in Schedule 4.5(c)(i) hereof (the “Encumbered Cylinders”), Company owns and has good and marketable title to all of the tangible personal property included in the Assets (whether or not any such Asset is included within the asset classes described in Sections 4.5(c)(i)-(iii) above), free and clear of any restrictions or conditions to transfer or assignment and free and clear of all Encumbrances. With respect to the personal property included on Schedule 4.5(c)(i), 4.5(c)(ii), and 4.5(c)(iii), if a claim is made by a third party that the property is not owned by Company and that there are rental or other charges owed for the property or any other Encumbrance on the property, the Company shall remain responsible for such charges (including demurrage if applicable) or Encumbrance. To the extent Lincare deems it necessary or appropriate to pay any amounts as a result of such claim, it shall have, in addition to its other rights hereunder (including its right to indemnification pursuant to Article 7), the right to make such payment on behalf of Company without assuming any liability therefore, and to deduct such amounts from its payment obligations under the Agreement in accordance with Section 7.2 hereof.   -8- -------------------------------------------------------------------------------- Each item of personal property included in the Assets has been regularly and appropriately maintained and repaired in the normal course of business and substantially all of such items are in satisfactory working condition and in a satisfactory state of maintenance and repair as of the Closing Date. Each item of personal property included in the Assets is transferred with all applicable warranties, including, but not limited to, the manufacturers’ warranties to the extent such warranties are transferable to Lincare. (d) Receivables. Schedule 4.5(d) contains a summary of the Receivables of or pertaining to the Company’s Business, including an aging of such Receivables in the manner described as follows: less than 120 days from the date of original invoice; less than 180 days from the date of original invoice; less than 240 days from the date of original invoice; less than 365 days from the date of original invoice; greater than 365 days from the date of original invoice; and, the total amount of all Receivables. Each of the Receivables listed: (i) arose from valid sales or rentals in the ordinary course of business; (ii) relates to equipment or products provided to customers covered under the Medicare, Medicaid or other third party public or private insurance program, or were provided on a direct bill basis, each of which customers were qualified under such programs to receive such products and services or were provided on a direct bill basis to customers who, to the Company’s best knowledge, were otherwise capable of paying for such products and services; (iii) relates to billings by or on behalf of the Company which were prepared and submitted with all the complete and correct forms, documents, test results and other information necessary to receive payment with respect to each such Receivables, evidence of which is maintained in the appropriate Customer file to the extent required by law, and which billings were prepared and submitted in conformity with all applicable laws, rules, regulations codes and guidelines of federal, state and local health care programs and in conformity with the requirements of each third party payor; and (iv) has been diligently pursued for payment in accordance with the requirements of the respective payors. Company has not received nor has it applied for any cash advances from any Medicare, Medicaid or third party public or private insurance program or carrier, whether or not any such cash advance has been repaid to or recouped by such insurance program or carrier. Except as already reflected in the amount of the Receivables shown on Schedule 4.5(d), no refunds, reimbursements, discounts or other adjustments are payable or anticipated to be made with respect to any of the Receivables. To the best of Company’s knowledge, there are no Encumbrances, or rights of setoff, recoupment or assignments with respect to or affecting the Receivables. Except as may be set forth in Schedule 4.5(d), the Receivables listed on Schedule 4.5(d) are owned, legally and beneficially, by the Company, and none of such Receivables is owned, legally or beneficially, by any other person or entity, or are being collected for, or are to be paid to, or for the benefit of, any other person or entity. Company guarantees the collection by Lincare of the Receivables to the extent as more fully described in Article 15 hereof. Insofar as Company cannot deliver to Lincare on the Closing Date an updated summary of the Receivables that are true and correct as of the Closing Date, Company may provide an updated Receivables listing within ten (10) days after the Closing Date, at which time such updated listing shall be deemed Schedule 4.5(d). (e) Equipment, Products, and Services. Schedule 4.5(e) lists all equipment, products, and services currently supplied to each active customer (the “Customer”) of the Company’s Business as of the date of this Agreement. For each such Customer, Schedule 4.5(e) lists the Customer’s name and address, the Customer’s account number, and the equipment, products and services currently supplied to such Customer. Each Customer has been duly qualified under the Medicare, Medicaid or other third party public or private insurance program for reimbursement for services rendered by the Company, or is being provided services on a direct bill basis unless there is documentation of the Customer’s financial inability to pay for such services. (f) Employment and Personnel Matters. (i) Schedule 4.5(f)(i) sets forth the name of each of the employees of Company’s Business, and the current annual rate of compensation for each such person; (ii) Schedule 4.5(f)(ii) sets forth all bonus, hospitalization, medical, life and disability insurance, vacation, termination, and IRS code sec. 401(k) plans in effect which provide benefits to present and past employees of Company’s Business; (iii) Schedule 4.5(f)(iii) sets forth all claims and litigation asserted by or against Company in connection with the Business (or any director, officer or employee of Company’s Business in such representative capacity) arising from transactions and occurrences after June 1, 2001, or any claim or litigation, whenever arising, which is still pending as of the date hereof, which claims any right to workers compensation benefits, unpaid wages, commissions or other amounts asserted to be   -9- -------------------------------------------------------------------------------- due or owing to any current or former officer, director, employee, contractor or agent of the Company in connection with the Business or alleges any claim relating to race discrimination, age discrimination, harassment, sex discrimination, sexual harassment, wrongful termination, violation of a confidentiality or non-competition agreement (whether or not Company is a party to such agreement), or any other personnel or employment matter. As to each such claim or litigation, Schedule 4.5(f) lists the identity of the claimant; a brief description of the matter; and the outcome or status of the matter. Whether listed or not on any Schedule hereto, Lincare does not assume the liability or responsibility for any such claim or litigation which has been asserted or which might be asserted and which arose from actions prior to the Closing Date; (iv) Schedule 4.5(f)(iv) sets forth all collective bargaining agreements or other contracts with labor unions to which the Company is a party or is otherwise subject; and (v) Schedule 4.5(f)(v) sets forth all employment agreements, consulting agreements, independent contractor agreements, and covenants not to compete of Company’s Business (including, but not limited to, covenants not to compete with any predecessors in interest of the Company or the Business) that are currently in effect. Lincare does not assume the responsibilities or liabilities of any such agreement unless it is specifically listed on Schedule 4.5(f) as an Accepted Liability and the subject employee, contractor or agent has provided written consent to the assignment of the employment contract to Lincare prior to the Closing Date. For those employees of the Company’s Business who are not subject to an employment agreement, Company represents that those employees are at-will employees and, for those Hired Employees (as defined in Section 16), Company shall have terminated those Hired Employees from employment prior to the Closing Date, and Company shall remain liable for any obligations owed to Company’s employees, including wages, benefits, bonuses or any other amount arising from employment with the Company, except that Lincare shall be liable for any administrative expenses associated with the Termination Plan as described in Article 16 hereof. If Lincare deems it necessary or appropriate to make payment to any employee of Company for amounts due by Company, Lincare shall have, in addition to its other rights hereunder (including its right to indemnification pursuant to Article 7), the right to make such payment on behalf of Company without assuming any liability therefor, and to deduct such amounts from its payment obligations under the Agreement in accordance with Section 7.2 hereof. Company is in compliance in all material respects with all federal, state and local laws, statutes, ordinances, rules, regulations, codes and orders relating to conditions of employment, and Company has no knowledge of or has any reasonable grounds to anticipate any labor dispute. Company has not incurred any liability for any arrearage of wages or other payments in respect of employment and Company has made all contributions to employee benefit plans required by such plans to be made on or before the date hereof. All liabilities and expenses with respect to compensation or benefits applicable to all directors, officers and employees of the Company under any employee benefit plan shall remain the sole responsibility of Company. The parties hereto agree that Company shall be solely responsible for providing any notices and otherwise complying with any requirements of the Worker Adjustment and Retraining Notification (“WARN”) Act, 29 U.S.C. § 2101 and any other like state or local law or rule, and that Lincare shall have no obligations under the WARN Act and no liability for any failure or alleged failure to comply with the Act with respect to any employment losses of Company. Company agrees to indemnify Lincare against any and all claims by any person or entity alleging failure to comply with the WARN Act in accordance with Article 7 hereof. (g) Claims, Investigations and Litigation. Except as otherwise disclosed on Schedule 4.5(f), Schedule 4.5(g) lists all investigations (regardless of whether a claim has been filed), claims and litigation asserted by or against Company in connection with the Business of any nature whatsoever, arising from transactions and occurrences after June 1, 2003, or any such investigation, claim or litigation, whenever arising, which is still active, open or pending as of the date hereof, and any litigation, or to the best of Company’s knowledge, any investigation (including government investigations or audits) commenced after June 1, 2003, or whenever commenced, if still pending. Schedule 4.5(g) also lists each judgment, order, writ, corporate integrity agreement, settlement agreement, injunction and decree of any federal, state or local court or governmental authority to which Company is a party or by which it is bound or which relates to any of the ownership interests in the Business or the Assets. As to each such claim, investigation, audit or litigation, Schedule 4.5(g) lists the type of proceeding; the identity of the claimant or investigating agency; a brief description of the matter; the damages claimed or relief sought; and the outcome or status of the matter. Company also agrees to provide copies of any relevant documents relating to any claims, litigation or judgments listed on Schedule 4.5(g). Except as set forth in Schedule 4.5(g), there are no claims, lawsuits, arbitrations, government proceedings, investigations or audits pending relating to the Business to which Company or any of its directors, officers or employees is a party (as plaintiff, defendant or otherwise) or which relate to any of the ownership interests in the Business or the Assets. To the   -10- -------------------------------------------------------------------------------- best of Company’s knowledge, there are no grounds for the filing or receipt of any other claim or the commencement of any other lawsuit, arbitration or proceeding by or against, or investigation of, Company in respect of the Business or involving the assets of, or equity interests in, the Business or the Assets except as set forth in Schedule 4.5(g). Whether listed or not on any Schedule hereto, Lincare does not assume the liability or responsibility for any such claim or litigation which has been asserted or which might be asserted and arose from actions prior to the Closing Date. (h) Health Care Compliance. Schedule 4.5(h) lists, for the entire period of operation of Company, all claims, contact letters, subpoenas, statements, audits, suspensions or pre-pay review actions, pending negotiations and other matters (including, but not limited to, all correspondence or communications with governmental agencies, intermediaries or carriers) concerning or relating to any federal or state government funded health care program that involves, implies, relates to, or alleges: (A) any violation or irregularity with respect to any activity, practice or policy of Company in respect of the Business; or (B) any violation or irregularity with respect to any claim for payment or reimbursement made by Company in respect of the Business, or any payment or reimbursement paid to Company in respect of the Business. In addition, Schedule 4.5(h) lists all claims, statements and other matters (including, but not limited to, all correspondence or communications with any agency) concerning or relating to any federal or state regulatory agency, including the FDA, DOT, state or local licensure entities, investigation of the Company in respect of the Business or notice of irregularity to the Company in respect of the Business. Except as set forth on Schedule 4.5(h), there are no violations or irregularities nor to the knowledge of Company are there any reasonable grounds to anticipate the commencement of any investigation or inquiry, or the assertion of any claim or demand by any such government agency, intermediary or carrier against Company with respect to any of the activities, practices, policies or claims of the Business, or any payments or reimbursements received by Company in respect of the Business. Except as set forth in Schedule 4.5(h), Company is not currently subject to any outstanding audit by any such government agency, intermediary or carrier in respect of the Business, and to the best of Company’s knowledge, there are no reasonable grounds to anticipate any such audit of the Business in the foreseeable future. Specifically, Company represents that the Company in respect of the Business is not in violation of any federal or state false claims act or anti kick-back statutes. For any claim or investigation, whether listed or not on any Schedule hereto, which arose from actions prior to the Closing Date, the Company shall remain responsible for defending the claim and cooperating with the investigation. If Lincare deems it necessary or appropriate to expend monies to defend or resolve such investigations, it shall have, in addition to its other rights hereunder (including its right to indemnification pursuant to Article 7), the right to deduct such amounts from its payment obligations under the Agreement in accordance with Section 7.2 hereof. Company represents that the Company has not (i) been heretofore excluded, debarred, suspended or been otherwise determined to be, or identified as, ineligible to participate in any governmental program (collectively, the “Government Programs”) nor is about to be excluded, debarred, suspended or otherwise determined to be, or identified as, ineligible to participate in any Government Program; (ii) received any information or notice, or become aware, by any means or methods, that it is the subject of any investigation or review regarding its participation in any Government Programs; and (iii) been convicted of any crime relating to any Government Program. The listing of Company on the Office of Inspector General’s (OIG) exclusion list or OIG’s website for excluded individuals/entities shall constitute a breach of this Section 4.5(h). If Lincare deems it necessary or appropriate to expend monies to defend or resolve any such investigations, or to the extent Lincare incurs any expenses, sanctions, penalties or fines which arose from acts prior to the Closing Date, it shall have, in addition to its other rights hereunder (including its right to indemnification pursuant to Article 7), the right to deduct such amounts from its payment obligations under the Agreement in accordance with Section 7.2 hereof. (i) Licenses and Permits. Schedule 4.5(i) lists all governmental licenses, permits and authorizations which are held or used by Company in respect of the Business. With respect to each such license, permit or authorization, Schedule 4.5(i) contains a brief description of the license, permit or authorization; the identity of the issuing agency or authority; the license or permit number; and the expiration date of each such license, permit or authorization. Such licenses, permits and authorizations are the only governmental licenses, permits and authorizations currently required by Company for the operation of the Business and all such licenses, permits and authorizations are in effect as of the date hereof. Company has complied in all respects with all conditions or requirements imposed by such licenses, permits and authorizations. The Company has received no notice of, nor to the best of the Company’s knowledge, is there any reason to believe that any appropriate authority intends to cancel or terminate any of such licenses, permits or authorizations or that valid grounds for such cancellation or termination currently exist. (j) Environmental Matters. Schedule 4.5(j) lists, for the entire period from June 1, 2000, to the Closing Date, any and all claims, suits, actions or proceedings (including government investigations and audits) relating to the release, discharge or emission of any pollutants or contaminants, or to the generation, treatment, storage or disposal of any wastes resulting from the operation of the Business or ownership of the Assets. With respect to each such pending or prior matter, Schedule 4.5(j) lists the date of the claim, suit, action or proceeding (including governmental investigations and audits); the   -11- -------------------------------------------------------------------------------- claimant or investigating agency; the nature and a brief description of the matter; the damages claimed or relief sought; and the status, outcome or disposition of the matter. Except as set forth in Schedule 4.5(j), to the knowledge of Company, there are no claims, suits, actions, or proceedings (including governmental investigations and audits), asserted or threatened, relating to environmental matters of the types specified in this Section 4.5(j) or otherwise, to which Company, in respect of the Business, is a party; nor does Company know or have any reasonable grounds to know of any activity of Company or potential liability of Company in connection with Company’s operation or ownership of the Business or the Assets involving or relating to the release, discharge or emission of any pollutants or contaminants, or to the generation, treatment, storage or disposal of any wastes, or otherwise relating to the protection of the environment. For any claim or investigation, whether listed or not on any Schedule hereto, which arose from actions prior to the Closing Date, the Company shall remain responsible for defending the claim and cooperating with the investigation. If Lincare deems it necessary or appropriate to expend monies to defend or resolve such investigations, it shall have, in addition to its other rights hereunder (including its right to indemnification pursuant to Article 7), the right to deduct such amounts from its payment obligations under the Agreement in accordance with Section 7.2 hereof. (k) Directors and Officers. Schedule 4.5(k) lists the officers and directors of Company in office as of the date hereof. Schedule 4.5(k) also lists all contracts, agreements, commitments, leases, instruments, debts, or obligations: (i) between Company and any of its directors, officers, or shareholders affecting the Business or the Assets; and (ii) among or between any directors, officers, or shareholders of Company affecting the Business or the Assets. With respect to each such contract, agreement, commitment, lease, instrument, debt, or obligation, Schedule 4.5(k) indicates the parties; their relationship to Company; and a general description of the subject matter thereof. If not expressly assumed by Lincare, Company shall remain responsible for such contract, agreement, commitment, lease, instrument, debt or other obligation, whether listed or not on any Schedule hereto. (l) Intangible Property. Schedule 4.5(l) lists all corporate names, patents, trademarks, trade names, service marks, and applications therefor and all copyrights owned, held, used or otherwise possessed by Company in respect to the Business, and all patent, trademark and service mark licenses to which Company is a party as they relate to the Business. Company owns or possesses adequate licenses or other rights to use all corporate names, patents, trademarks, trade names, service marks and copyrights, if any, used in the conduct of its business as now operated. Schedule 4.5(l) lists each registration, application, license or other agreement to which Company is a party with respect to the use of any corporate name, trademark, trade name, service mark, copyright or patent and the expiration date of such registration or license, as it relates to the Business. The Company does not know, or have any reasonable grounds to know, of any claims asserted by third parties with respect to such rights. (m) Changed Conditions. Except as listed in Schedule 4.5(m), since October 1, 2005 the business of the Business has been conducted in substantially the same manner as theretofore and there has not been any: (i) transaction by Company relating to the Business except in the ordinary course of business as conducted on that date; (ii) material adverse change in the condition (financial or otherwise) of the liabilities, assets, equity, properties, business, or prospects of the Business; (iii) labor dispute, or other similar event or condition of any character, materially or adversely affecting the financial condition, business, assets, or prospects of the Business; (iv) material change in business or accounting methods or practices (including, without limitation, any change in depreciation or amortization policies or rates) by Company in respect of the Business; (v) revaluation by Company of any of the assets of the Business; (vi) lease, sale or transfer of any tangible or intangible asset of the Business, except in the ordinary course of business and for fair market value; (vii) entry into, or amendment or termination of, any contract, agreement, or license, except in the ordinary course of Business and upon fair market value, terms and conditions; (viii) waiver or release of any right or claim of Company in respect of the Business, except in the ordinary course of business and upon fair market value, terms and conditions;   -12- -------------------------------------------------------------------------------- (ix) other event or condition of any character that has, or might reasonably have, a material and adverse effect on the financial condition, business, or assets of the Business which are not otherwise reflected in the Financial Statements; (x) amendment of Company’s Certificate of Incorporation or By-Laws materially affecting the Business or the Assets; or (xi) agreement by Company to do any of the things described in the preceding clauses (i) through (x). 4.6 Title to Assets and Condition of Assets. Company has good and marketable title to, or holds by valid and enforceable agreement of lease or license, all of the tangible assets owned, leased, rented, licensed, used or otherwise possessed by it in respect of the Business, and such assets are free and clear of all Encumbrances. 4.7 No Violation. Neither this Agreement nor the consummation of the Transaction violate or will violate in any material respect any statute, law, regulation, rule, ordinance, code, standard, order, writ, judgment, injunction, decree, determination or award to which the Company is subject, or conflict with or constitute a default under Company’s Certificate of Incorporation or By-Laws or any indenture, mortgage, lease, lien, instrument or other agreement by which Company is bound, nor will it result in an event which, whether immediately or upon the giving of notice or lapse of time or both, will permit the acceleration of the maturity date of any obligation under any such indenture, mortgage, lease, lien, instrument or other agreement or the creation of any lien or Encumbrance on the Assets, nor will it enable any party to any agreement relating to the Business to which Company is a party to exercise a right to terminate or otherwise modify the terms thereof. 4.8 Compliance With Law. To the best of Company’s knowledge, Company has complied with, and is not in violation of any federal, state, or local statutes, laws, ordinances, rules, regulations, codes or standards (including, but not limited to, compliance with all statutes, laws, ordinances, rules, regulations relating to any federal or state government funded health care program and the federal fraud and abuse statutes, laws, rules, regulations or guidance). The Company has received no notice of any claimed violation of any federal, state or local statute, law, ordinance, rule, regulation, code, standard or order, nor, to the best of Company’s knowledge, has any such violation occurred. 4.9 Legal Power and Authority To Enter Transaction. Company has the full right, power, legal capacity, and authority to enter into and deliver this Agreement and to perform its obligations hereunder and the Transaction. The execution, delivery and performance of this Agreement and the Transaction have been duly authorized by Company, and a copy of such resolutions so authorizing the execution, delivery and performance of this Agreement, certified by Secretary of Company has been delivered to Lincare. This Agreement constitutes the valid and binding obligation of Company and is enforceable in accordance with its terms. Except as stated above, no approvals or consents of any persons or entities are required for Company to execute and deliver this Agreement or to perform its obligations hereunder and the Transaction. 4.10 Assets. (a) The Assets sold, conveyed, transferred, assigned, and delivered to Lincare hereunder constitute all of the assets necessary for the operation of the Business, as currently and historically conducted (other than the Excluded Assets), and any person or entity having a direct or indirect ownership interest in the Company, does not currently provide nor has it, he, or she historically provided to Company any tangible or intangible assets whatsoever. The Assets sold, conveyed, transferred, assigned, and delivered to Lincare hereunder are all of the assets owned, leased, rented, used or otherwise possessed by the Company in respect of the Business, except for the Excluded Assets. (b) Notwithstanding anything to the contrary contained in this Agreement, if an asset would otherwise be included in the Assets because it is owned, leased, rented, used or otherwise possessed by the Company in respect of the Business but such asset is in fact owned, leased, rented or otherwise possessed by a person or entity having a direct or indirect ownership interest in the Company, then such asset shall nevertheless be included in the Assets. Lincare shall assume no liabilities or debts associated with such assets, and any corresponding liabilities or debts shall be satisfied by the Company prior to the Closing Date. 4.11 Books and Records. The books and records of the Company, including, without limitation, the minute books, stock certificate books and stock ledger, accounting and service and billing records, are complete, true and correct in all material respects and fairly reflect the conduct of the Company and the Business.   -13- -------------------------------------------------------------------------------- 4.12 Disclosure. No representation or warranty made herein by Company, nor in any transaction documents furnished or to be furnished to Lincare pursuant to this Agreement, contains or will contain any untrue statement of fact, or omits or will omit to state a material fact necessary to make the statements contained therein not misleading. To the extent the Company fails to disclose any information which creates a liability attached to the Assets or to the Business or Lincare which Lincare did not expressly accept, that liability shall remain the responsibility of the Company, and if Lincare deems it necessary or appropriate to make payment of any such liability it shall have, in addition to its other rights hereunder (including its right to indemnification pursuant to Article 7), the right to make such payment on behalf of the Company without assuming any liability therefore, and to deduct such amount from its payment obligations under the Agreement in accordance with Section 7.2 hereof. 4.13 Billings and Collection. In acknowledgement of the fact that third party payors are billed in advance for the rental of equipment and services, and therefore, a portion of the pre Closing revenues will include revenues attributable to the rental of equipment and related services provided by Lincare on or after the Closing Date, Company represents that the Company has not billed for any equipment, products, supplies or services provided by the Company to any Customers of Company on and after the Closing Date, it being agreed that the right to all such billings on and after the Closing Date shall be included in the Assets purchased by Lincare and shall be for the sole benefit of Lincare. The billings of the Business were prepared and submitted with all the complete and correct forms, documents, test results (which were performed by a provider qualified to bill Medicare for the test, i.e. a Part A provider, a laboratory, an independent diagnostic testing facility or a physician) and other information necessary to receive payment for such bills and were prepared and submitted in conformity with all applicable laws, rules, regulations codes and guidelines of federal, state and local health care programs and in conformity with the requirements of each third party payor. 4.14 Filings. In respect of the Business, after Closing Company shall discontinue use of, and deactivate, all of its Medicare, Medicaid and other public or private insurance provider numbers upon the conclusion of its collections and/or write-offs of its accounts receivable. 4.15 Survival of Representations and Warranties. All representations, warranties, covenants and agreements made by Company in or pursuant to this Agreement or in any writing, certificate, schedule, exhibit, statement, list, report, instrument, or other document furnished or delivered to Lincare in connection with, or in contemplation of, this Agreement, or the purchase and sale of the Assets shall be true and correct as of the date of this Agreement and as of the Closing Date as if made at and as of such date, except with respect to representations and warranties which speak as to an earlier date which shall be at and as of such date, and shall survive the execution, delivery and performance of this Agreement and the Closing; provided, however, that the representations and warranties contained in Sections 4.1, 4.2, 4.3, 4.5 (a)-(f), (i), and (k)-(m), 4.6, 4.9, 4.10 and 4.11 of this Agreement shall survive only for a period of five (5) years after the Closing Date (the “Survival Period”), and the remaining representations and warranties (the “Remaining Representations”) shall survive until the expiration of all applicable statutes of limitation, subject to any tolling thereof, provided that any matter as to which a claim has been asserted with respect to any such Remaining Representations by Lincare’s notice to Company that is pending or unresolved at the end of any applicable limitation period shall remain subject to Company’s representations, warranties to and indemnification of Lincare, notwithstanding any applicable statute of limitations (which the parties hereby waive solely with respect to any such pending or unresolved claim) until such claim is finally terminated or resolved by the parties or by a court of competent jurisdiction and any amounts payable hereunder in respect thereof are finally determined and paid. Notwithstanding the above, in no event shall the duration of any of the Remaining Representations of Company be limited for a shorter period of time than the Survival Period. The representations in Section 4.12 as they relate to representations in other Sections shall survive to the extent set forth above for such other Sections. Article 5 - REPRESENTATIONS AND WARRANTIES OF LINCARE The representations and warranties of Lincare set forth this Article shall be true and correct as of the date of this Agreement and as of the Closing Date as if made at and as of such dates, except with respect to representations and warranties which speak as to an earlier date, which shall be at and as of such date. Lincare represents, warrants and covenants as follows: 5.1 Organization, Standing and Qualification. Lincare is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all necessary corporate powers, governmental qualifications and authorizations necessary to own its assets and to operate its business in each jurisdiction in which such assets are now owned and such business is now operated by it. 5.2 Legal Power and Authority To Enter Transaction. Lincare has the full right, power, legal capacity, and authority to enter into and deliver this Agreement and to perform its obligations hereunder and the Transaction. The execution,   -14- -------------------------------------------------------------------------------- delivery and performance of this Agreement and the Transaction have been duly authorized by Lincare’s Board of Directors, a copy of such resolutions so authorizing the execution, delivery and performance of this Agreement, certified by the Secretary of Lincare, has been delivered to Company. This Agreement constitutes the valid and binding obligation of Lincare and is enforceable in accordance with its terms. 5.3 Survival of Representations and Warranties. All representations and warranties made by Lincare in or pursuant to this Agreement shall survive the execution, delivery and performance of this Agreement and the Closing; provided, however, that the representations and warranties contained in Article 5 of this Agreement shall survive only for a period of five (5) years after the Closing Date, provided, that any matter as to which a claim has been asserted with respect to such representations and warranties by Company’s notice to Lincare that is pending or unresolved at the end of said limitation period shall remain subject to Lincare’s representations, warranties to and indemnification of Company, notwithstanding any applicable statute of limitations (which the parties hereby waive) until such matter is finally terminated or resolved by the parties or by a court of competent jurisdiction and any amounts payable hereunder are finally determined and paid. Article 6 - CLOSING 6.1 Access to Information prior to Closing. Company shall afford to Lincare access to Company’s information relating to the Business for purposes of Lincare’s due diligence review of Company’s Business as set forth in that certain letter of intent executed by Lincare and Company and dated May 24, 2006 (the “LOI”). 6.2 Date, Time and Place. The closing under this Agreement (herein referred to as the “Closing”) shall take place via telecopy on the second business day after the conditions set forth in Section 6.3 hereof shall have been satisfied or waived or at such other time and date as shall be fixed by agreement by the parties hereto (said date shall herein be referred to as the “Closing Date”) with the original counterparts to be exchanged by the parties via overnight delivery service for delivery on the next business day following the Closing Date. All transactions at the Closing shall be deemed to have taken place simultaneously at 12:01 a.m. (EST) on the Closing Date, and no transaction shall be deemed to have been completed and no document, instrument or certificate shall be deemed to have been delivered until all transactions are completed and all documents delivered. 6.3 Conditions precedent to the obligations of Lincare’s and Company’s consummation of the Transaction. (a) The respective obligations of each party to consummate the Transaction shall be subject to the satisfaction at or prior to the Closing Date of the following conditions: (i) no statute, rule, regulation, executive order, decree, ruling, or preliminary or permanent injunction shall have been enacted, entered, promulgated, or enforced by any federal or state court or administrative agency that prohibits, restrains, enjoins, or restricts the consummation of the Transaction that has not been withdrawn or terminated; and (ii) no claim, action, suit, arbitration, inquiry, proceeding or investigation shall have been commenced by or before any federal, state, or local governmental, regulatory, or administrative authority, agency, or commission or any court, tribunal or judicial or arbitral body against Lincare or Company, seeking to restrain or seeking materially and adversely to alter the Transaction. (b) The obligation of Company to consummate the Transaction shall be subject to the satisfaction at or prior to the Closing Date of the conditions set forth in Section 6.6(b) hereof and of the following additional conditions: the representations and warranties of Lincare set forth in Article 5 hereof shall be true and correct as of the date of this Agreement and as of the Closing Date as if made at and as of such dates, except with respect to representations and warranties which speak as to an earlier date, which shall be true and correct at and as of such date. (c) The obligation of Lincare to consummate the Transaction shall be subject to the satisfaction at or prior to the Closing Date of the conditions set forth in Section 6.5 hereof and of the following additional conditions: (i) Lincare’s completion of its due diligence review of Company’s Business as set forth in the LOI; (ii) Company shall have performed its obligations under the Agreement required to be performed by it at or prior to the Closing Date; and   -15- -------------------------------------------------------------------------------- (iii) the representations and warranties of Company set forth in Article 4 hereof shall be true and correct as of the date of this Agreement and true and correct as of the Closing Date as if made at and as of such dates, except with respect to representations and warranties which speak as to an earlier date, which shall be true and correct at and as of such date. 6.4 Termination. (a) This Agreement may be terminated and the Transaction abandoned at any time prior to the Closing Date as stated below: (i) by mutual consent of Company and Lincare; or (ii) by either of Company or Lincare if a governmental authority shall have issued an order, decree or ruling or taken any other action, in each case permanently restraining, enjoining or otherwise prohibiting the Transaction and such order, decree, ruling or other action shall have become final and non-appealable; or (iii) if the closing of the Transaction shall not have occurred on or before September 30, 2006, unless the parties mutually agree to extend the time period; or (iv) by Lincare if, (1) during or upon the completion of Lincare’s due diligence, Lincare determines based upon Lincare’s findings in due diligence that Lincare does not intend to consummate the Transaction. Such findings in due diligence may be based upon, without limitation, Company’s representations and warranties set forth in the Agreement being or becoming inaccurate or untrue or Company’s revised exhibits and schedules to the Agreement being unsatisfactory to Lincare in its sole discretion; or (2) prior to the closing of the Contemplated Transaction, Company has failed or is unable to deliver to Lincare the necessary business components or assets to operate the Business as contemplated by Lincare, including but not limited to contracts of the Business, employment agreements, or covenant agreements; or (3) Lincare otherwise determines for reasons other than with respect to Section 6.4(a)(iv)(1) and (2) not to close the Transaction; or (v) by Company if, (1) any of Lincare’s representations or warranties contained in the Agreement are or shall have become inaccurate or untrue; or (2) subsequent to the execution of the Agreement and prior to the Closing Date, Lincare reduces the Purchase Price for any reason other than as a result of Lincare’s findings as set forth in Section 6.4(a)(iv)(1) or Company’s failure or inability as set forth in Section 6.4(a)(iv)(2). (b) In the event of termination of this Agreement, written notice thereof shall forthwith be given to the other party to this Agreement and this Agreement shall terminate and the Transaction shall be thereby deemed abandoned, without further action by any of the parties hereto, except that if such termination is based upon the occurrence of the event set forth in Section 6.4(a)(iii) hereof, such termination shall not require the delivery of notice by either party. If this Agreement is terminated, no party hereto shall have any liability or further obligation to the other party to this Agreement resulting from such termination, only except that the binding provisions of the LOI shall remain in full force and effect and only except as set forth in the following sentence. In the event Lincare terminates the Agreement only for reasons as contemplated in Sections 6.4(a)(iv)(3) hereof or if Company terminates the Agreement only for the reason specified in Section 6.4(a)(v)(2), Lincare shall be liable to the Company in the amount of Two Million Four Hundred Thousand and no/100 Dollars ($2,400,000.00).   -16- -------------------------------------------------------------------------------- 6.5 Obligations of Company. At the Closing, Company shall deliver or have delivered to Lincare the following: (a) lease assignments, assumption agreements and estoppel certificates, in form and substance reasonably satisfactory to Lincare, sufficient to transfer to Lincare all of Company’s rights with respect to the premises leased or rented by Company at the locations listed on Schedule 4.5(a) hereto which are not identified as Excluded Assets; (b) bills of sale, in form and substance reasonably satisfactory to Lincare, sufficient to convey to Lincare good and marketable title to the Assets; (c) a certificate of title and a bill of sale for each automobile, truck or other vehicle included in the Assets, in the form required by the applicable statutes, laws, rules and regulations of the state of registration; (d) an incumbency certificate, dated as of the Closing Date and executed by the Secretary of Company certifying the identity and signature of the officers executing any documents required by or relating to this Agreement; (e) a copy of all corporate resolutions necessary to authorize the execution, delivery and performance of this Agreement by Company and copies of Company’s Certificate of Incorporation, as amended, and Certificate of Good Standing, each certified by the Secretary of the state of Company’s incorporation, and the By-Laws of Company, as amended, certified by the Secretary of Company; (f) except as otherwise expressly set forth herein, all required consents of third parties to the sale, conveyance, transfer, assignment and delivery of the Assets of the Business to Lincare by virtue of its purchase of the Assets (or an agreement that such consents shall be obtained within 30 days of the Closing Date); (g) any other consents, waivers, instruments or documents as may be reasonably requested by Lincare, including without limitation employment agreements executed by certain Company employees required by Lincare to be employed with Lincare contemporaneously with the effective date of this Agreement; (h) Uniform Commercial Code termination statements, lease termination statements, releases and any other documents necessary to evidence that each of the Assets is being sold, conveyed, transferred, assigned and delivered to Lincare free and clear of any Encumbrances; (i) a document authorizing Lincare to endorse the name of Company on any checks, drafts, notes or instruments acquired by Lincare as part of the Assets which are received by Company or by Lincare after the Closing Date for dates of service occurring after the Closing Date in connection with Lincare’s purchase of the Assets pursuant to this Agreement, provided further, Lincare acknowledges and agrees, to the extent any of the foregoing negotiable instruments include monies relating to Company’s nursing or PPEC business (“Non Business Monies”), Lincare shall forward such Non Business Monies as soon as practicable. (j) completed and executed CMS Form 855S, to be filed by Lincare, for purposes of deactivating all of Company’s Medicare billing numbers with respect to the Business (Company shall deliver all such Forms to Lincare within ten (10) business days after the Closing Date). (k) an executed sublease agreement in substantially the form attached hereto as Exhibit 6.5(k) for approximately 16000 square feet of the Company’s facility located at 310 Technology Parkway, Norcross, Georgia 30092-2929 for a term of one year from the Closing Date, with two (2) options to extend for a period of three (3) years each, at an annual rental rate of One Hundred Sixty Five Thousand Dollars ($165,000.00) (the “Facilities Lease”); (l) updated exhibits and schedules to the Agreement, if any, which shall have been delivered prior to the Closing; (m) a deed to that certain parcel described in Section 1.1(a)(xi) hereof, subject to an inspection of said parcel; and (n) an executed Collection Agreement in the form attached hereto as Exhibit 14 hereof.   -17- -------------------------------------------------------------------------------- 6.6 Obligations of Lincare. At the Closing, Lincare shall deliver to Company the following: (a) payment of all amounts required to be paid by Lincare to Company at the Closing pursuant to the provisions of Section 3.1 hereof; (b) a copy of all corporate resolutions of Lincare necessary to authorize the execution, delivery and performance of this Agreement by Lincare, certified by the Secretary of Lincare; (c) an executed Facilities Lease; and (d) an executed Collection Agreement in the form attached hereto as Exhibit 14 hereof. 6.7 Risk of Loss. Until the Closing, any loss of, or damage to, the Assets or Business from fire, casualty, or any other occurrence shall be the sole responsibility of Company. 6.8 Cooperation After the Closing. (a) Promptly after the Closing, Company shall put Lincare into full possession and enjoyment of the Assets. (b) Lincare and Company will, at any time, and from time to time, after the Closing Date, execute and deliver such further instruments of conveyance and transfer and take such additional action as may be reasonably necessary to effect, consummate, confirm or evidence the transactions contemplated by this Agreement. (c) Company shall be responsible for all income, franchise, sales, use, property, employment (including social security payments), payroll or other tax liabilities, including, without limitation, any interest and penalties thereon, which are attributable to operation or ownership of Company or the Assets or the operation of the Business for periods prior to the Closing Date. Lincare shall be responsible for any such taxes attributable to its ownership of the Assets or the operation of the Business for periods following the Closing Date. Any such taxes requiring apportionment (because Company has paid such liabilities attributable to a period subsequent to the Closing Date or Lincare will pay such taxes attributable to a period prior to the Closing Date) shall be pro-rated on the basis of the fiscal year covered by such taxes, or otherwise on a mutually acceptable equitable basis. If either party shall have paid any taxes for which the other party is responsible as aforesaid, appropriate adjustments will be made by the parties at or as promptly as practicable after the Closing Date. Notwithstanding anything in the foregoing to the contrary, if Lincare will or deems it necessary or appropriate to pay taxes for which Company is responsible, Lincare shall have the right to deduct any amount paid or to be paid by Lincare from the installment payments of the Purchase Price in accordance with Section 7.2 hereof. (d) It is acknowledged that Lincare has waived compliance by Company with the provisions of any bulk sales or transfer law of any state that is or may be applicable to the transactions contemplated hereby and Company agrees to indemnify Lincare with respect to such waiver and non-compliance in accordance with the provisions of Article 7 hereof in accordance with Section 7.2 hereof. (e) Company shall use its best efforts to obtain all consents of third parties and to make all filings with and give all notices to third parties and to do any and all other acts and things which may be necessary or reasonably required in order to transfer to Lincare all of the Assets, free and clear of any Encumbrances, and to effect fully the transactions contemplated by this Agreement. In case any Assets or rights have not at the Closing been transferred effectively, or are subject to any Encumbrance, Company shall use its best efforts to cooperate with Lincare in any lawful arrangement to provide that Lincare shall receive the benefit of Company’s interest in any of such Assets and rights. (f) Company agrees that, after the Closing, it shall provide reasonable cooperation and assistance to Lincare, with respect to any matters, disputes, suits or claims by or against any person not a party to this Agreement. (g) If, within one (1) year after the Closing Date, Lincare determines it is reasonably necessary to have an audit performed of any or all of the Financial Statements, Company agrees to use reasonable efforts to cooperate with Lincare and to provide Lincare with all reasonable assistance required to prepare such audited financial statements, including, without limitation, the following: (i) providing Lincare and its representatives with all necessary information, data, documents and records relating to the Business for the time periods covered by the Financial Statements; and (ii) delivery of representation letters by Company, and Company’s legal counsel, to Lincare or its auditors. If requested by Lincare, Company shall use its reasonable best efforts to cause the Company’s accountants, auditors and legal counsel to cooperate with and to assist Lincare and its representatives in the preparation of any such audited financial statements, it being expressly agreed and understood that Lincare shall be solely responsible for the reasonable fees and expenses of the Company’s external accountants, auditors and legal counsel and internal staff members in rendering such assistance and cooperation to Lincare and its representatives.   -18- -------------------------------------------------------------------------------- (h) Except for the Encumbered Cylinders, it is understood and agreed by the parties that on the Closing Date, Company shall cause to be delivered to Lincare title to all high pressure cylinders owned, leased, rented, used or otherwise possessed by Company, free and clear of all Encumbrances (including, but not limited to, any lease or rental obligations). Notwithstanding the above, the parties agree that those tanks listed on Schedule 6.8(h) (“Large Tanks”) do not need to be delivered free and clear of Encumbrances. The parties understand and agree that M tanks shall not be deemed hereby to be Large Tanks. Lincare agrees to assume responsibility for the lease/rental of such Large Tanks, but only for the number of Large Tanks, which is the lesser of (i) the number of tanks disclosed on Schedule 6.8(h) or (ii) the actual number of Large Tanks in use by the Business on and after Closing. Lincare will assume no responsibility for any discrepancy between the number of Large Tanks claimed to be on rental by the vendor and the number of Large Tanks claimed to be on rental by Company, nor be responsible for any charges associated with such a discrepancy (either rental or buyout of such tanks). Lincare assumes responsibility only for the number of Large Tanks actually in use by the Business at the time of Closing. Company agrees that the Encumbered Cylinders shall be free and clear of Encumbrances no later than October 1, 2006. Subject to the foregoing sentence, after the Closing, Lincare shall reasonably cooperate with Company in Company’s efforts to deliver the Encumbered Cylinders free and clear of Encumbrances, such cooperation including aiding Company in replacing cylinders as appropriate and communicating with Lincare cylinder vendors as appropriate. Notwithstanding anything in this Section 6.4(h) to the contrary, the parties understand and agree that the Company is solely liable for delivering the Encumbered Cylinders free and clear of Encumbrances and that Lincare shall have no liability in respect of any claim by a cylinder vendor or lessor relating to the purchase of cylinders, rental charges associated with cylinders, shortfall of cylinders, or otherwise. To the extent that there is a shortfall in the number of cylinders rented or leased by Company, such shortfall shall not be setoff against any cylinders owned by Company. (i) If it is impracticable for Company to provide to Lincare at the Closing all of the Uniform Commercial Code termination statements, lease termination statements, releases and other documents necessary to evidence delivery to Lincare of title to the Assets free and clear of any Encumbrances, Company shall deliver all such statements, releases and documents to Lincare no later than thirty (30) business days after the Closing. (j) Notwithstanding anything to the contrary in this Agreement, the following prorations relating to the Assets will be made as soon as practicable after the Closing Date, with Company liable to the extent such items relate to any time period prior to the Closing Date with Lincare liable to the extent such items relate to periods from and after the Closing Date: (i) ad valorem, personal property, real estate, occupancy and other similar taxes, if any, on or with respect to the Assets; (ii) the amount of charges for rent, water, telephone, electricity and other utilities; and, (iii) other similar items. The net amount of all such prorations will be settled and paid as soon as practicable after the Closing Date. The parties hereto understand and agree that amounts owed by Company shall be considered an Excluded Liability of Company and amounts owed by Lincare shall be considered an Accepted Liability of Lincare. (k) If, after the Closing Date, Company requests access to Company records transferred to Lincare relating to periods prior to the Closing Date in connection with: (i) any examination or audit of Company by any taxing or other governmental authority relating to periods prior to the Closing Date; (ii) any tax filings of Company relating to periods prior to the Closing Date; (iii) defending any third party claims, whether such claims are the subject of indemnification pursuant to the provisions of this Agreement or otherwise; (iv) any audit or investigation by Medicare, Medicaid or any other third party payor relating to services, equipment, products or supplies provided by Company prior to the Closing Date; or (v) pursuant to any other lawful order of any court or other governmental agency; then Lincare agrees to provide Company or its authorized agents with reasonable and prompt access to such records at the location and in the form which such records are maintained at the date of any such request. Upon Company’s request and at its sole expense, Lincare shall provide copies of any such records to Company or its authorized agents. Lincare agrees to maintain such Company records for all applicable statutes of limitations time periods, including particularly such statutes of limitations relating to the health care records of minors. (l) with respect to the Shared Locations, the parties hereto agree that the party agreeing to vacate any such Shared Location pursuant to Schedule 4.5(a) shall be allowed to utilize such location for a period not to exceed one hundred twenty (120) days after the Closing Date for a transition period.   -19- -------------------------------------------------------------------------------- Article 7 – REMEDIES 7.1 Indemnification. (a) Indirect Action. (i) Company shall defend, indemnify and hold Lincare harmless from, against, and in respect of, any and all claims, demands, lawsuits, proceedings, losses, obligations, assessments, fines, penalties, administrative or judicial orders, costs, expenses, liabilities and damages, including interest, penalties and reasonable attorneys’ fees (singly the “Claim” and collectively the “Claims”) Lincare may incur from a third party, which arise or result from or relate to: (1) Company’s breach of, or failure to perform, any of their respective representations, warranties, covenants, obligations, liabilities, commitments or agreements under this Agreement (including, without limitation, any misrepresentation in, or omission from, any schedule, exhibit, statement, certificate, writing, list, instrument or report or other document furnished or to be furnished pursuant to this Agreement; (2) Lincare’s being required to assume or discharge any of the Excluded Liabilities or Company’s operation of the Business prior to the Closing; or (3) Lincare’s being required to assume or discharge by operation of law any debt, liability or obligation of Company, including, but not limited to, any liability or obligation arising under any federal, state or local bulk sales, bulk transfer or fraudulent conveyance law. (ii) Lincare shall defend, indemnify and hold Company harmless from, against, and in respect of, any and all Claims Company may incur from a third party, which arise or result from or relate to: (1) Lincare’s breach of, or its failure to perform, any of its representations, warranties, covenants, obligations, liabilities, commitments or agreements under this Agreement (including, without limitation, any misrepresentation in, or omission from, any statement, certificate, writing, list, instrument or report or other document furnished or to be furnished pursuant to this Agreement); or (2) Company’s being required to assume or discharge any of the Accepted Liabilities or Lincare’s operation of the Business from and after the Closing. (iii) With respect to any Claim brought by a third party which may give rise to indemnification under Sections 7.1(a)(i) or (ii) of this Agreement from an indemnitor (“Indemnitor”) to an indemnified party (“Indemnified Party”), the following procedure shall be followed: (1) Promptly after the assertion of any Claim by a third party, the Indemnified Party shall notify the Indemnitor in writing of such Claim. The notice shall specify the facts then known to the Indemnified Party relating to the Claim and the amount or estimated amount of the liability claimed by such third party. Promptly after receipt of the written notice, the Indemnitor shall advise the Indemnified Party whether the Indemnitor intends to contest such Claim. Indemnitor and Indemnified Party agree that Indemnitor shall have the right to submit claims properly covered by liability insurance to the appropriate carrier of such insurance, and both parties agree to cooperate in such effort. Subject to Section 7.1(a)(iii)(2), if Lincare is the Indemnified Party, Lincare shall have the right to deduct the amount of the Claim plus reasonable attorneys’ fees, and costs pursuant to Section 7.2 hereof. (2) Indemnitor shall have the absolute right, in its sole discretion and at its sole expense, to elect to defend, contest, settle or otherwise protect against any Claim or action which may give rise to a Claim with legal counsel of its own selection; provided, however, Indemnitor shall not agree or consent to any judgment or settlement that imposes injunctive or equitable relief against the Indemnified Party without the prior written consent of the Indemnified Party. The Indemnified Party shall have the right, but not the obligation, to participate, at its own expense, in the defense thereof through counsel of its own choice and shall have the right, but not the obligation, to assert any and all cross claims and counterclaims it may have. Each party shall, and shall cause its affiliates to, at all times cooperate in all reasonable ways with, make its relevant files and records available for inspection and copying by, and make its employees available or otherwise render reasonable assistance to, the other party in its defense of any Claim. In the event the Indemnified Party shall, before notice is given to the Indemnitor, make any settlement with respect to any Claim, the Indemnitor shall not be bound to such settlement and shall not be bound to indemnify for any costs, damages, expenses or other liabilities resulting from such Claim. Once notice is given to the Indemnitor, and if the Indemnitor fails timely to accept defense of the Claim, the Indemnified Party shall have the right, but not the obligation, to defend, contest, assert cross claims or counterclaims to otherwise protect against the same and may make any compromise or settlement thereof and recover and be indemnified for the entire cost thereof from the Indemnitor including, without limitation, reasonable legal expenses, disbursements and all amounts paid as a result of such matter.   -20- -------------------------------------------------------------------------------- (b) Direct Action. (i) Company shall be liable to Lincare directly for: (1) any breach of, or failure to perform by Company of any of their respective representations, warranties, covenants, obligations, liabilities, commitments or agreements under this Agreement (including, without limitation, any misrepresentation in, or omission from, any schedule, exhibit, statement, certificate, writing, list, instrument or report or other document furnished or to be furnished pursuant to this Agreement; (2) Lincare’s being required to assume or discharge any of the Excluded Liabilities; or (3) Lincare’s being required to assume or discharge by operation of law any debt, liability or obligation of Company, including, but not limited to, any liability or obligation arising under any federal, state or local bulk sales, bulk transfer or fraudulent conveyance law. (ii) Lincare shall be liable to Company directly for any: (1) breach of, or its failure to perform, any of its representations, warranties, covenants, obligations, liabilities, commitments or agreements under this Agreement (including, without limitation, any misrepresentation in, or omission from, any statement, certificate, writing, list, instrument or report or other document furnished or to be furnished pursuant to this Agreement); or (2) Company’s being required to assume or discharge any of the Accepted Liabilities. (iii) With respect to any Claim which may give rise to indemnification under Sections 7.1(b)(i) or (ii) of this Agreement, the Indemnified Party shall provide reasonable notice to the Indemnitor. If Company is the Indemnitor and does not cure the breach or failure to perform within thirty (30) days, where feasible, of receipt of such notice, then Lincare shall have, in addition to its other rights hereunder, the right to deduct an amount equal to such damages proximately caused by such breach or failure pursuant to Section 7.2 hereof. 7.2 Lincare’s Right to Setoff. Without limiting any other rights and remedies to which Lincare may be entitled in this Agreement, or at law or in equity, Lincare shall have the right to deduct from its payment obligations under this Agreement, the amount of any Claim which Lincare has against Company pursuant to Sections 7.1 (a)(i) and 7.1(b)(i), or any other payment made by Lincare as provided for in this Agreement, subject to the requirements and limitations of Article 13 herein. If Company either satisfies or otherwise successfully contests such Claim, Lincare agrees that it shall promptly reverse such deduction or pay Company the amount of such deduction. 7.3 Cumulative Remedies. In no event shall the provisions of this Article 7 restrict or impair in any respect the rights or remedies otherwise available to the parties hereto at law or in equity, which rights and remedies shall be cumulative and in addition to any other available remedies. 7.4 Limitation of Liability. Except with respect to Excluded Liabilities for which there shall be no limitation, the liability of the Company with respect to this Agreement and the transactions contemplated hereby shall be limited in the aggregate to the sum of Thirty Five Million and no/100 Dollars ($35,000,000.00). Article 8 - CONFIDENTIALITY 8.1 Proprietary and Confidential Information. Company covenants and agrees on behalf of itself and each of its respective parents, subsidiaries and affiliates that from and after the Closing, no such person or entity shall, directly or indirectly, use or disclose to any third party any of the proprietary or confidential information of Company, except when, after, and only to the extent that: (a) such proprietary or confidential information is or becomes generally available to the public through no fault of Company or any of its parents, subsidiaries and affiliates; (b) such information is required by Company in connection with any tax returns heretofore or hereafter filed; or (c) disclosure of such information is required by court order or applicable law. As used herein, the term “proprietary and confidential information” of Company shall include all information of or relating to the Assets and the Business (including, but not limited to, present or prospective market, sales, product, customer and referral source information; prices and pricing structure; contractual arrangements including without limitation this Agreement, its exhibits and schedules, and any ancillary agreements to this transaction; operating information, policies, procedures and practices; financial information; product and process knowledge; cost and supplier information; personnel data; and any strategy or plans related to any of the foregoing) which has not been generally available or disclosed to the public by Lincare. Notwithstanding anything in this paragraph to the contrary and without limitation under this Agreement, the disclosure of the tax treatment and tax structure of this transaction shall not be barred from disclosure.   -21- -------------------------------------------------------------------------------- 8.2 No Solicitation. (a) From and after the Closing, Company shall not for a period of three (3) years from the Closing Date: (i) directly or indirectly, hire, offer to hire, or entice away, or in any other manner persuade or attempt to persuade, any officer or employee of Lincare (including, but not limited to, any former officer or employee of the Business who was employed by the Business within the last 24 months), or in any other manner persuade or attempt to persuade, any officer or employee of Lincare (including, but not limited to, any former officer or employee of the Business who was employed by the Business within 24 months of the Closing Date) to discontinue his or her employment with Lincare. It is understood and agreed that the prohibitions contained in this Section 8.2(a)(i) shall apply to all current and future officers and employees of Lincare (including, but not limited to, any former officer or employee of the Business employed by the Business 24 months of the Closing Date), whether or not any such person is then currently an officer or employee of Lincare or whether any such prohibited activity is in connection with employment or an offer of employment within or outside the Territory. Notwithstanding anything to the contrary in this Section 8.2(a)(i), Company shall have the right to hire an employee or engage as an independent contractor any employee of the Business to whom Lincare, in its sole discretion, does not extend an offer of employment; or (ii) directly or indirectly solicit, divert or take away, or attempt to solicit, divert or take away any business or customers of the Business Company had enjoyed or solicited in the Territory prior to the date hereof. (b) It is expressly understood and agreed by the parties hereto that it shall be a breach hereof for Company to assist in any way any business associate, or any other person, firm, corporation, partnership, joint venture, association, trust or other entity, to engage in any activity which is prohibited by this Section 8.2. Article 9 - COVENANT NOT TO COMPETE. 9.1 Covenant. (a) In consideration of the purchase by Lincare of the Assets and the Business pursuant to the terms and conditions of this Agreement, and for other good and valuable consideration, Company, any parents of Company, and any subsidiaries of Company (hereinafter referred to individually as a “Covenantor” and collectively as the “Covenantors”) hereby represent, warrant, covenant and agree, jointly and severally, that, commencing on the Closing Date continuing for a period of five (5) years thereafter, no Covenantor will, directly or indirectly, engage in the Business within the Territory (hereafter the “Covenant Not to Compete”). (b) Without limiting the generality of the provisions of Section 9.1(a) hereof, this Covenant Not to Compete shall be construed so that Covenantors shall also be in breach hereof if any of them is an employee, officer, director, shareholder, investor, trustee, agent, principal or partner of, or a consultant or advisor to or for, or a subcontractor or manager for, a person, firm, corporation, partnership, joint venture, association, trust or other entity which is engaged in such business in the Territory, or if any of them receives any compensation or remuneration from or owns, directly or indirectly, any outstanding stock or shares or has a beneficial or other financial interest in the stock or assets of any such person, firm, corporation, partnership, joint venture, association, trust or other entity engaged in such business in the Territory. Notwithstanding anything to the contrary contained in this Section 9.1(b), no Covenantor shall be deemed to be in breach of this Covenant Not to Compete solely by reason of owning an interest of less than one percent (1%) of the shares of any company traded on a national securities exchange or in the over the counter market. (c) It is expressly understood and agreed by Covenantors that it shall be a breach of this Covenant Not to Compete for a Covenantor to assist in any way any business associate, or any other person, firm, corporation, partnership, joint venture, association, trust or other entity, to engage in any activity which a Covenantor is prohibited from engaging in by this Covenant Not to Compete. (d) The parties acknowledge that it is foreseeable that Company and/or Covenantor will acquire in the future one or more entities or businesses that are primarily engaged in the business of home-care nursing or private duty nursing services and that, in certain instances, such entities or businesses may secondarily provide services comparable to the Business. In the event that Covenantor acquires an entity that is engaged in the Business, (i) Covenantor shall promptly notify Lincare of such event and (ii) Covenantor shall not be in breach of Section 9.1(a) hereof by reason of such acquired entity operating such Business if the revenue of the acquired entity from such Business, at the time of such acquisition, is less than thirty percent (30%) of the total revenue of the acquired entity for the twelve (12)-month period preceding the acquisition (the “Revenue Threshold”); provided, however, that if the revenue of the acquired entity from such Business, at the time of such acquisition, is less than the Revenue Threshold, then Covenantor shall proceed with the process set forth as follows: the Covenantor shall have ninety (90) days from the date of acquisition to dispose of or cease operating, directly or indirectly in any manner whatsoever, the Business of the acquired entity. Pending Covenantor’s obligation to dispose of or cease operating the Business of the   -22- -------------------------------------------------------------------------------- acquired entity, the Covenantor, including the acquired entity, shall operate such Business separately from any of the other businesses of the Covenantor and shall not use or otherwise deploy, directly or indirectly, any of the Covenantor’s rights, assets, resources, data, know how, trade secrets or information, including, without limitation (i) any trade names or trademarks of the Covenantor, (ii) any locations of the Covenantor, (iii) any employees of the Covenantor, other than customary overhead services, including but not limited to, quality management, human resources, legal, employee benefits, finance, risk management and accounting, (iv) customer, referral or patient lists, and (v) without any increased budgets or expenditures for marketing, sales, or development activities. 9.2 Remedies. Covenantors agree that the remedy at law for any breach of obligation under this Covenant Not to Compete will be inadequate and that in addition to any other rights and remedies to which it may be entitled hereunder, at law or in equity, Lincare shall be entitled to injunctive relief, and reimbursement for all reasonable attorneys’ fees and other expenses incurred in connection with the enforcement hereof. It is the intention of Covenantors and Lincare that this Covenant Not to Compete be fully enforceable in accordance with its terms and that the provisions hereof be interpreted so as to be enforceable to the maximum extent permitted by applicable law. To the extent that any obligation to refrain from competing within an area for a period of time as provided in this Covenant Not to Compete is held invalid or unenforceable, it shall, to the extent that it is invalid or unenforceable, be deemed void ab initio. The remaining obligations imposed by the provisions of this Covenant Not to Compete shall be fully enforceable as if such invalid or unenforceable provisions had not been included herein and shall be construed, to the extent possible, such that the purpose of this Covenant Not to Compete, as intended by Covenantors and Lincare, can be achieved in a lawful manner. If any portion of this Covenant Not to Compete is held to be invalid or unenforceable, then Lincare shall have, in addition to its other rights hereunder (including its right to indemnification pursuant to Article 7), the right to seek repayment from the Company or deduct from its payment obligations under this Agreement, in accordance with Section 7.2 hereof, the reasonable value of the Covenant Not to Compete as of the date it is held unenforceable or invalid. 9.3 Condition Precedent. Covenantors acknowledge and agree that their representations, warranties, covenants, agreements, commitments and obligations contained in this Covenant Not to Compete are an inducement for, and a condition precedent to, Lincare’s entering into this Asset Purchase Agreement and that Lincare is specifically relying on such representations, warranties, covenants, agreements, commitments and obligations of Covenantors in entering into and performing its obligations under this Agreement. Article 10 - EXPENSES; TAXES 10.1 Expenses. Each of the parties hereto shall bear the fees and expenses incurred by it in connection with the preparation, negotiation, execution, delivery, and performance of this Agreement and the Transaction. 10.2 Taxes. Lincare and Company shall share equally the amount of all taxes, excises and other governmental charges and/or fees payable in connection with the sale, conveyance, transfer, assignment and delivery of the Assets hereunder (including, without limitation, all sales, use, transfer, filing or recording taxes or fees). Company shall be responsible for the costs of obtaining all notices and consents and for the preparation of all necessary assignments in connection with the sale, conveyance, transfer, assignment, and delivery of the Assets to Lincare hereunder. Article 11 – BROKERS’ FEES AND COMMISSIONS Except for Raymond James & Associates, Inc., all negotiations relative to this Agreement and the transactions contemplated hereby have been carried on directly between Lincare and Company without the intervention or assistance of any party not a party to this Agreement (other than to provide accounting or legal counsel). Except for Raymond James & Associates, Inc., no party to this Agreement, nor any third party, has any right or claim to any commission, brokerage fee, finder’s fee, expenses or other compensation relative to this Agreement or the transactions contemplated hereby (other than for accounting and legal services). Each party shall indemnify, defend and hold the other parties hereto harmless from, against and in respect of all claims for commission, brokerage fee, finder’s fee, expenses or other compensation claimed by or through such party. Article 12 - GOVERNING LAW The interpretation and performance of this Agreement shall be governed by the laws of the State of Florida, without giving effect to its conflicts of law provisions. Each party hereby agrees that any claims, demands, lawsuits, proceedings and controversies arising from or relating to this Agreement may be brought and heard in federal or state courts of general   -23- -------------------------------------------------------------------------------- jurisdiction located in the State of Florida, and each party hereby consents to the subject matter and personal jurisdiction of such courts in respect thereof, though such action may also be brought in any federal or state court where jurisdiction is otherwise proper. In addition, if a Claim is brought by a third party and a claim for indemnification becomes necessary, such claim shall be brought in the court where the original Claim by the third party was filed and each party hereby consents to the subject matter and personal jurisdiction of such courts, provided jurisdiction is proper in the jurisdiction where the original Claim was brought. The laws of the State of Florida shall govern all questions concerning the construction, validity and interpretation of this Agreement and performance of the obligations hereunder. Article 13 - NOTICES Each party hereby agrees to notify promptly the other party of any liabilities, claims, misrepresentations, breaches or other matters subject to this Agreement upon discovery or receipt of notice thereof (other than from the other party). Lincare further agrees that it shall use reasonable efforts to provide such notice at least thirty (30) days, where feasible, prior to any deductions from its purchase price payment obligations specified in Sections 3.1(b) and 3.1(c) in order to allow Company to cure or contest the underlying matter within such thirty-day period; however, Company agrees that the failure by Lincare to provide such notice shall not relieve Company of any of its obligations pursuant to this Agreement. All notices, requests, demands, reports, statements or other communications required to be given hereunder or relating to this Agreement shall be in writing and shall be deemed to have been duly given on the date of service if personally served on the party to whom notice is to be given, or on the date of receipt if mailed to the party to whom notice is to be given, by first class mail, registered or certified, return receipt requested, postage prepaid, and properly addressed to any such party at the address listed for such party in this Article 13. Any party may at any time direct in writing that all communications or particular communications or particular types of communications be delivered to specific designees other than those specified herein by notifying the other parties in the manner prescribed herein. Notices hereunder shall be sent to the following:   To Company:    Pediatric Services of America, Inc.    310 Technology Parkway    Norcross, Georgia 30092-2929    Attention: James M. McNeill To Lincare:    Lincare Inc.    19387 U.S. 19 North    Clearwater, FL 33764    Attention: Legal Department Article 14 - COLLECTION OF GOVERNMENT PATIENT RECEIVABLES. Company hereby appoints Lincare, and Lincare hereby agrees to act, as Company’s collection agent with respect to the Government Patient Receivables relating to the rendering of services, equipment and supplies by Company to customers on or before the Closing Date. Company hereby assigns all such amounts received by Lincare, as collection agent, to Lincare in full satisfaction of Company’s obligation to transfer to Lincare an amount equal to the value of Company’s Government Patient Receivables. All Receivables shall be collected pursuant to the terms and conditions of that certain Collection Services Agreement between Company and Lincare effective as of the Closing Date (the “Collection Agreement”), a copy of which is attached hereto as Exhibit 14 and incorporated by reference. Article 15 – GUARANTEE RELATING TO RECEIVABLES. 15.1 The Minimum Collection Amount. Based on Company’s guarantee contained in Section 4.5(d), in the event that Lincare does not collect an amount equal to at least eighty percent (80%) of Company’s Receivables that are true and correct as of the Closing Date (the “Minimum Collection Amount”) during the Collection Period (as defined in Section 15.2 below), Lincare shall, in addition to its other rights hereunder, have the right to deduct from its post-closing payment obligations under this Agreement the amount by which the Minimum Collection Amount exceeds the amount of Receivables collected by Lincare during the Collection Period (such excess, if any, hereinafter referred to as the “Shortfall”). The parties understand and agree that in no event shall the total of the Receivables that are true and correct as of the Closing Date be less than Ten Million Eight Hundred Thousand and no/100 Dollars ($10,800,000.00). To the extent that Lincare’s then remaining post-closing payment obligations under this Agreement are not sufficient to offset any such Shortfall, Company agrees to pay to Lincare the balance of such Shortfall within ten (10) business days after Lincare’s demand therefor. In determining the amount of the Shortfall, Lincare will give the Company credit for those amounts received on the Receivables for a period beginning at the end of the Collection Period and continuing through the end of the ninth month after the Closing Date.   -24- -------------------------------------------------------------------------------- 15.2 The Collection Period. The “Collection Period” shall be defined as the period beginning on the Closing Date and continuing for six (6) months thereafter. During the Collection Period, Lincare shall use reasonable efforts to collect the Receivables; provided, however, that reasonable efforts shall not include initiating legal proceedings to collect such Receivables. 15.3 In the event that Lincare has not collected the Minimum Collection Amount during the Collection Period, and provided that: (i) Lincare has deducted in full the amount of any Shortfall from its obligations under this Agreement; or (ii) the Company has met its obligations to Lincare with respect to paying to Lincare the entire amount of any such Shortfall as set forth in Section 15.1 hereof, then Lincare shall refund to Company that portion of the Shortfall equal to the amount of Receivables collected by Lincare during the three (3) month period following the Collection Period. Article 16 – EMPLOYEE MATTERS. 16.1 Termination Bonus Plan. Lincare shall maintain a termination bonus plan (the “Termination Plan”) with respect to the Hired Employees (hereinafter defined) for the period beginning on the Closing Date and ending on the ninetieth (90th) day thereafter (the “Termination Period”). All employees of Company who are offered employment by Lincare, who are listed on Schedule 16.1, and who accept such offer of employment and actually perform services for Lincare on or after the Closing Date, shall be known as the “Hired Employees”; provided, however, the parties acknowledge and agree that, notwithstanding any hiring status designation on Schedule 16.1 or anything else to the contrary in this Section 16.1, the Company’s Regional Vice Presidents and Location Directors and those individuals set forth in Schedule 16.3 shall not be considered Hired Employees for purposes of the Termination Plan contemplated by this Section 16.1 and, as such, such Regional Vice Presidents and Location Directors shall not be entitled to participate in such Termination Plan. Lincare further acknowledges and agrees that, no later than three (3) days prior to the Closing Date, it shall provide Company with an updated Schedule 16.1, which shall clearly identify those employees to whom Lincare intends to offer employment. The Termination Plan shall provide a termination bonus for each Hired Employee identified on Schedule 16.1 whose employment with Lincare or its affiliates is terminated (other than as a result of a termination for cause by Lincare or as a result of an employee’s voluntary termination of employment) during the Termination Period. Payments under the Termination Plan shall be in the amounts provided on Schedule 16.1 (less customary deductions and withholds) which have been calculated using the payment calculation formula set forth on Schedule 16.1. Payments under the Termination Plan shall be conditioned upon the execution by the Hired Employee of a general release of claims in a form determined by Lincare. The Company hereby agrees to reimburse Lincare for payments made by Lincare and its affiliates under the Termination Plan (including any deductions and withholds). No later than twenty (20) days after each calendar month after the Closing Date during the Termination Period, Lincare shall provide the Company written notice of the termination of Hired Employees whose employment terminated during such calendar month (other than as a result of the Hired Employee’s voluntary termination of employment) (the “Termination Notices”). The Termination Notices shall include the aggregate amount of termination payments under the Termination Plan to the Hired Employees whose employment terminated during such calendar month. The Company covenants and agrees that, within five (5) business days of its receipt of each of the Termination Notices, it shall make a cash payment by wire transfer of immediately available funds to such account as Lincare shall designate in the Termination Notices in the amount of the termination payments set forth in the Termination Notices. No amounts shall be payable under the Termination Plan to any Hired Employee whose employment terminates after the end of the Termination Period. The Company and Lincare each acknowledge and agree that Lincare’s only responsibilities under this Article 16 are for the administration of the Termination Plan. The Company shall be liable for all amounts paid under the Termination Plan during the Termination Period. In addition to its other rights hereunder (including its right to indemnification pursuant to Article 7 hereof, Lincare shall have the right to deduct any termination payments from Lincare’s payment obligations under this Agreement in accordance with Section 7.2 hereof. 16.2 Employment Agreements with Covenants not to Compete. (a) As a condition precedent to the Closing, certain individuals identified in Section 16.2(b) hereof shall execute employment agreements, which shall be substantially in the form of Exhibit 16.2, and shall provide among other things an agreement by such individual not to compete with Lincare for a certain period of time as set forth in Section 16.2(b) in exchange for Lincare’s agreement to employ such individual. (b) For each of the following three (3) individuals, Mr. Jack Mosley, Mr. John Leboeuf, and Mr. Charles Leshinsky, (an “RVP Employee”), the parties hereto understand and agree that each such RVP Employee shall agree not to engage in the Business, within the state or states in which such RVP Employee had management responsibilities within the six   -25- -------------------------------------------------------------------------------- (6)-month period immediately prior to such RVP Employee’s cessation of employment with Lincare or any affiliate, for a period of one (1) year after such RVP Employee leaves the employ of Lincare or any affiliate for any reason. For each of the individuals listed on Schedule 16.2 (a “Location Director”), the parties hereto understand and agree that each such Location Director shall agree not to engage in the Business, within a one hundred fifty (150) mile radius of any Lincare or Company facility in which such Location Director had management responsibilities within the six (6)-month period immediately prior to such Location Director’s cessation of employment with Lincare or any affiliate, for a period of six (6) months after such Location Director leaves the employ of Lincare or any affiliate for any reason. (c) In addition to employment with Lincare, as additional consideration for the non-competition covenants described in this Section 16.2, Lincare shall pay each RVP Employee and Location Director as more fully described in and subject to the following: (i) For each RVP Employee whose employment with Lincare or its affiliates continues uninterrupted from the Closing Date until at least the day that is five business days immediately prior to the six (6)-month anniversary of the Closing Date, as additional consideration for the RVP Employee’s agreement not to compete, Lincare shall pay such RVP Employee Fifty Thousand and no/100 Dollars ($50,000.00) (less customary deductions and withholds) on Lincare’s then next regular employee compensation payment date. For each RVP Employee whose employment with Lincare or its affiliates continues uninterrupted from the Closing Date until at least the day that is five business days immediately prior to the one (1)-year anniversary of the Closing Date, as further additional consideration for the RVP Employee’s agreement not to compete, Lincare shall pay such RVP Employee Fifty Thousand and no/100 Dollars ($50,000.00) (less customary deductions and withholds) on Lincare’s then next regular employee compensation payment date. Notwithstanding anything in the foregoing to the contrary, the parties hereto understand and agree that, if Lincare terminates any such RVP without cause prior to the day that is five business days immediately prior to the one (1)-year anniversary of the Closing Date, such RVP shall be entitled to receive total monetary consideration of One Hundred Thousand and no/100 Dollars ($100,000.00) (less customary deductions and withholds), less payment already made to such RVP under this Section 16.2(c)(i), if any. The parties hereto understand and agree that Lincare shall not be obligated under this Section 16.2 to pay any RVP Employee total monetary consideration in excess of One Hundred Thousand and no/100 Dollars ($100,000.00) (less customary deductions and withholds). (ii) For each Location Director whose employment with Lincare or its affiliates continues uninterrupted from the Closing Date until at least the day that is five business days immediately prior to the six (6)-month anniversary of the Closing Date, as additional consideration for the Location Director’s agreement not to compete, Lincare shall pay such Location Director Twenty-Five Thousand and no/100 Dollars ($25,000.00) (less customary deductions and withholds), except as otherwise specified on Schedule 16.2, on Lincare’s then next regular employee compensation payment date. For each Location Director whose employment with Lincare or its affiliates continues uninterrupted from the Closing Date until at least the day that is five business days immediately prior to the one (1)-year anniversary of the Closing Date, as further additional consideration for the Location Director’s agreement not to compete, Lincare shall pay such Location Director Twenty-Five Thousand and no/100 Dollars ($25,000.00) (less customary deductions and withholds), except as otherwise specified on Schedule 16.2, on Lincare’s then next regular employee compensation payment date. Notwithstanding anything in the foregoing to the contrary, the parties hereto understand and agree that, if Lincare terminates any such Location Director without cause prior to the day that is five business days immediately prior to the one (1)-year anniversary of the Closing Date, such Location Director shall be entitled to receive total monetary consideration of Fifty Thousand and no/100 Dollars ($50,000.00) (less customary deductions and withholds), except as otherwise specified on Schedule 16.2, less payment already made to such Location Director under this Section 16.2(c)(ii), if any. The parties hereto understand and agree that Lincare shall not be obligated under this Section 16.2 to pay any Location Director total monetary consideration in excess of Fifty Thousand and no/100 Dollars ($50,000.00) (less customary deductions and withholds), except as otherwise specified on Schedule 16.2. (iii) On or about the day that is five business days immediately prior to the six (6)-month anniversary of the Closing Date, Lincare shall provide the Company written notice of those RVP Employees and Location Directors who are entitled to the additional consideration as set forth in Section 16.2(c)(i) and (ii). The Company covenants and agrees that, within five (5) business days of Lincare’s providing such written notice but in no event later than the date the deferred Purchase Price payment set forth in Section 3.1(b) hereof is payable, the Company shall make a cash payment to Lincare by wire transfer of immediately available funds in an amount equal to the total amount to which all RVP Employees and Location Directors are entitled (including any deductions and withholds). No amounts shall be payable under Sections 16.2(c)(i) and (ii) to any RVP Employee or Location Director whose employment with Lincare ceases before the day that is five business days immediately prior to the six (6)-month anniversary of the Closing Date, unless Lincare terminates such RVP or Location Director without cause during such period.   -26- -------------------------------------------------------------------------------- (iv) On or about the day that is five business days immediately prior to the one(1)-year anniversary of the Closing Date, Lincare shall provide the Company written notice of those RVP Employees and Location Directors who are entitled to the additional consideration as set forth in Section 16.2(c)(i) and (ii). The Company covenants and agrees that, within five (5) business days of Lincare’s providing such written notice but in no event later than the date the deferred Purchase Price payment set forth in Section 3.1(c) hereof is payable, the Company shall make a cash payment to Lincare by wire transfer of immediately available funds to such account as Lincare shall designate in the written notice in an amount equal to the total amount to which all RVP Employees and Location Directors are entitled (including any deductions and withholds). No amounts shall be payable under this Section 16.2(c)(i) and (ii) to any RVP Employee or Location Director whose employment with Lincare ceases before the day that is five business days immediately prior to the one (1)-year anniversary of the Closing Date, unless Lincare terminates such RVP or Location Director without cause during such period. (v) The Company shall be liable for all amounts paid to RVP Employees or Location Directors under this Section 16.2(c). In addition to its other rights hereunder (including its right to indemnification pursuant to Article 7 hereof), Lincare shall have the right to deduct any such payments from Lincare’s payment obligations under this Agreement in accordance with Section 7.2 hereof. 16.3 Retention Agreements. (a) As a condition precedent to the Closing, certain individuals identified in Schedule 16.3 hereof shall execute agreements, which shall provide among other things an agreement by Lincare to pay such individuals a retention bonus as more fully described in and subject to Section 16.3(b) hereof. (b) For each of the individuals identified in Schedule 16.3 whose employment with Lincare or its affiliates continues uninterrupted from the Closing Date until at least the day that is five business days immediately prior to the one (1)-year anniversary of the Closing Date, Lincare shall pay such individual in accordance with Schedule 16.3 hereof (less customary deductions and withholds) on Lincare’s then next regular employee compensation payment date. Notwithstanding anything in the foregoing to the contrary, the parties hereto understand and agree that, if Lincare terminates any such individual without cause prior to the day that is five business days immediately prior to the one (1)-year anniversary of the Closing Date, such individual shall be entitled to receive the above-referenced payment (less customary deductions and withholds). (c) The Company covenants and agrees that, within five (5) business days of Lincare’s providing such written notice but in no event later than the date the deferred Purchase Price payment set forth in Section 3.1(c) hereof is payable, the Company shall make a cash payment to Lincare by wire transfer of immediately available funds in an amount equal to the total amount to which all such individuals as described above are entitled. No amounts shall be payable under this Section 16.3 to any individual whose employment with Lincare ceases before the day that is five business days immediately prior to the one (1)-year anniversary of the Closing Date, unless Lincare terminates any such individual without cause during such period. (d) The Company shall be liable for all amounts paid under this Section 16.3 (including customary deductions and withholds). In addition to its other rights hereunder (including its right to indemnification pursuant to Article 7 hereof), Lincare shall have the right to deduct any such payments from Lincare’s payment obligations under this Agreement in accordance with Section 7.2 hereof. Article 17 – MISCELLANEOUS 17.1 Entire Agreement. The terms and conditions of this Agreement (including the exhibits and schedules hereto) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede any prior understandings, agreements or representations by or between the parties, written or oral. There are no understandings, representations or warranties of any kind whatsoever, except as expressly set forth herein. The exhibits and schedules attached to this Agreement constitute an integral part hereof for all purposes, including, without limitation, the construction and interpretation of the respective rights and obligations of the parties hereto. 17.2 Amendment. No amendment or modification of this Agreement or waiver of the terms or conditions hereof shall be binding upon any party unless approved in writing by, such party or by an authorized representative of such party. 17.3 Non-Waiver. The failure of any party hereto to enforce at any time any of the provisions of this Agreement shall not be construed to be a waiver of any such provisions, nor in any way affect the validity of this Agreement or any part hereof or the right of any party thereafter to enforce any such provisions. No waiver of any breach of this Agreement shall be deemed a waiver of any other or subsequent breach, whether of the same provision or otherwise.   -27- -------------------------------------------------------------------------------- 17.4 Assignment. This Agreement shall inure to the benefit of and be binding on the parties hereto and their respective successors, assigns, legal representatives and heirs. This Agreement shall not be assigned by any party without the prior written consent of the other parties. Any attempted assignment without such consent shall be void. Notwithstanding anything to the contrary contained in the foregoing, Lincare shall have the right at any time, and from time to time, to assign this Agreement to its parent or any affiliate or subsidiary or any successor to its business, without the consent of the other parties to this Agreement; provided that, notwithstanding any such assignment by Lincare, Lincare shall remain primarily liable for the payment and performance of its obligations under this Agreement. 17.5 No Third Party Beneficiaries. This Agreement is intended for the sole and exclusive benefit of the parties hereto, and no third party or person is intended as a third party beneficiary of this Agreement or any part hereof in any respect (including, but not limited to, any employee of Company) and no third party or person shall obtain any rights, claims, benefits or privileges under or by virtue of this Agreement whatsoever. 17.6 Construction. This Agreement has been negotiated at arm’s length among the parties, and each of the parties has been represented by legal counsel. Accordingly, each of the parties shall be deemed to have participated in the preparation of this Agreement and this Agreement shall not be construed more strictly against one party than the other. 17.7 Counterparts and Facsimile. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by each of the parties and delivered to the other parties. Facsimile signatures shall be deemed original signatures for purposes of the Closing. 17.8 Number. In this Agreement, where applicable, references to the singular shall include the plural and references to the plural shall include the singular. 17.9 Gender. In this Agreement, where applicable, references to the male, female or neuter gender shall include reference to all other such genders where the context so requires. 17.10 Headings. The subject headings of the articles, Sections and Subsections of this Agreement are included for purposes of convenience and reference only, and shall not affect the construction or interpretation of any of its provisions. [The balance of this page has been intentionally left blank. The signature page follows.]   -28- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties to this Agreement have duly executed it as of the day and year first above written.   LINCARE INC., a Delaware corporation By:   /s/ Paul Tripp   Paul Tripp Its:   Acquisitions Attorney PEDIATRIC SERVICES OF AMERICA, INC. d/b/a PSA HEALTHCARE, a Delaware corporation By:   /s/ Daniel J. Kohl   Daniel J. Kohl Its:   President and CEO PEDIATRIC SERVICES OF AMERICA, INC., a Georgia corporation By:   /s/ Daniel J. Kohl   Daniel J. Kohl Its:   President and CEO PSA CAPITAL CORPORATION, a Delaware corporation By:   /s/ Daniel J. Kohl   Daniel J. Kohl Its:   President   -29- -------------------------------------------------------------------------------- AMENDMENT TO ASSET PURCHASE AGREEMENT This Amendment to Asset Purchase Agreement (the “Amendment”), is made as of this 29th day of September, 2006, by and among LINCARE INC., a corporation duly organized and existing under the laws of the State of Delaware, having its principal place of business at 19387 U.S. 19 North, Clearwater, Florida 33764 (hereinafter referred to as “Lincare”); PEDIATRIC SERVICES OF AMERICA, INC., a corporation duly organized and existing under the laws of the State of Delaware, having its principal place of business at 310 Technology Parkway, Norcross, Georgia 30092-2929 and certain of Pediatric Services of America, Inc.’s affiliates listed on the signature page hereto (hereinafter collectively referred to as the “Company”). W I T N E S S E T H: WHEREAS, on August 25, 2006, Lincare and Company entered into a certain asset purchase agreement for the purchase and sale of substantially all of Company’s Respiratory Therapy and Equipment Services Division (the “Agreement”); and WHEREAS, in Section 6.4(a)(iii) of the Agreement, the parties agreed that the Agreement may be terminated if the transaction did not occur on or before September 30, 2006, unless the parties mutually agree to extend the time period; WHEREAS, the parties to the Agreement wish to extend the time period set forth in Section 6.4(a)(iii) of the Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the parties hereto agree and contract as follows: 1 Lincare and Company agree to replace the language in Section 6.4(a)(iii) of the Agreement with the following language: “if the closing of the Transaction shall not have occurred on or before October 31, 2006, unless the parties mutually agree to extend the time period; or” 2. Unless expressly modified in this Amendment, all terms and conditions of the Agreement and its side letter agreement shall remain in full force and effect. 3. There are no understandings, representations or warranties of any kind whatsoever regarding the subject matter of this Amendment, except as expressly set forth herein. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by each of the parties and delivered to the other parties. Facsimile signatures shall be deemed original signatures for purposes of the execution. [The balance of this page has been intentionally left blank. The signature page follows.]   -1- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties to this Amendment have duly executed it as of the day and year first above written.   LINCARE INC., a Delaware corporation By:   /s/ Paul Tripp   Paul Tripp Its:   Acquisitions Attorney PEDIATRIC SERVICES OF AMERICA, INC. d/b/a PSA HEALTHCARE, a Delaware corporation By:   /s/ Daniel J. Kohl   Daniel J. Kohl Its:   President and CEO PEDIATRIC SERVICES OF AMERICA, INC., a Georgia corporation By:   /s/ Daniel J. Kohl   Daniel J. Kohl Its:   President and CEO PSA CAPITAL CORPORATION, a Delaware corporation By:   /s/ Daniel J. Kohl   Daniel J. Kohl Its:   President   -2- -------------------------------------------------------------------------------- SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT This Second Amendment to Asset Purchase Agreement (the “Amendment”), is made as of this 30th day of October, 2006, by and among LINCARE INC., a corporation duly organized and existing under the laws of the State of Delaware, having its principal place of business at 19387 U.S. 19 North, Clearwater, Florida 33764 (hereinafter referred to as “Lincare”); PEDIATRIC SERVICES OF AMERICA, INC., a corporation duly organized and existing under the laws of the State of Delaware, having its principal place of business at 310 Technology Parkway, Norcross, Georgia 30092-2929 and certain of Pediatric Services of America, Inc.’s affiliates listed on the signature page hereto (hereinafter collectively referred to as the “Company”). W I T N E S S E T H: WHEREAS, on August 25, 2006, Lincare and Company entered into a certain asset purchase agreement for the purchase and sale of substantially all of Company’s Respiratory Therapy and Equipment Services Division (the “Agreement”); and WHEREAS, on September 29, 2006, Lincare and Company entered into a certain amendment of the Agreement, providing for replacement of the language in Section 6.4(a)(iii) of the Agreement; WHEREAS, in Section 6.4(a)(iii) of the Agreement, as amended, the parties agreed that the Agreement may be terminated if the transaction did not occur on or before October 31, 2006, unless the parties mutually agree to extend the time period; WHEREAS, the parties to the Agreement wish to extend the time period set forth in Section 6.4(a)(iii) of the Agreement, as amended. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the parties hereto agree and contract as follows: 1 Lincare and Company agree to replace the language in Section 6.4(a)(iii) of the Agreement, as amended, with the following language: “if the closing of the Transaction shall not have occurred on or before November 6, 2006, unless the parties mutually agree to extend the time period; or” 2. Unless expressly modified in this Amendment, all terms and conditions of the Agreement, as amended, and its side letter agreement shall remain in full force and effect. 3. There are no understandings, representations or warranties of any kind whatsoever regarding the subject matter of this Amendment, except as expressly set forth herein. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by each of the parties and delivered to the other parties. Facsimile signatures shall be deemed original signatures for purposes of the execution. [The balance of this page has been intentionally left blank. The signature page follows.]   -1- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties to this Amendment have duly executed it as of the day and year first above written.   LINCARE INC., a Delaware corporation By:   /s/ Paul Tripp   Paul Tripp Its:   Acquisitions Attorney PEDIATRIC SERVICES OF AMERICA, INC. d/b/a PSA HEALTHCARE, a Delaware corporation By:   /s/ Daniel J. Kohl   Daniel J. Kohl Its:   President and CEO PEDIATRIC SERVICES OF AMERICA, INC., a Georgia corporation By:   /s/ Daniel J. Kohl   Daniel J. Kohl Its:   President and CEO PSA CAPITAL CORPORATION, a Delaware corporation By:   /s/ Daniel J. Kohl   Daniel J. Kohl Its:   President   -2- -------------------------------------------------------------------------------- THIRD AMENDMENT TO ASSET PURCHASE AGREEMENT This Third Amendment and Supplement to Asset Purchase Agreement (the “Amendment”), is made as of this 6th day of November, 2006, by and among LINCARE INC., a corporation duly organized and existing under the laws of the State of Delaware, having its principal place of business at 19387 U.S. 19 North, Clearwater, Florida 33764 (hereinafter referred to as “Lincare”); PEDIATRIC SERVICES OF AMERICA, INC., a corporation duly organized and existing under the laws of the State of Delaware, having its principal place of business at 310 Technology Parkway, Norcross, Georgia 30092-2929 and certain of Pediatric Services of America, Inc.’s affiliates listed on the signature page hereto (hereinafter collectively referred to as the “Company”). W I T N E S S E T H: WHEREAS, on August 25, 2006, Lincare and Company entered into a certain asset purchase agreement for the purchase and sale of substantially all of Company’s Respiratory Therapy and Equipment Services Division, and such purchase agreement was amended on September 29, 2006 and on October 30, 2006 (the purchase agreement with its amendments together hereinafter called the “Agreement”); and WHEREAS, Lincare and Company desire to memorialize certain agreements among the parties made after the execution of the Agreement and related to the transaction contemplated therein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the parties hereto agree and contract as follows: (1) Subject to the terms and conditions of the Agreement, side letter agreement, and this Amendment, Lincare and Company agree to close the transaction contemplated in the Agreement, as amended, its side letter, ancillary agreements, and this Amendment contemporaneously on the day first set forth above, which is the Closing Date as defined in the Agreement. (2) The parties hereby agree to amend Article 1 of the Agreement by replacing the language in Section 1.1(c)(viii) of the Agreement with the following language: (viii) any security deposit related to either real estate and/or a real estate lease where such real estate or real estate lease is (a) designated as a shared location on Schedule 4.5(a) hereof and Lincare has not agreed to take such shared location by assignment or (b) where such real estate or real estate lease is not assumed by or otherwise assigned to Lincare; and (3) The parties hereby agree that the Purchase Price and method of payment set forth in Article 3 of the Agreement at the time of execution shall be amended as follows: (a) Pursuant to Paragraph 6 of the Side Letter dated August 25, 2006 and in consideration of Lincare’s occupancy of certain Shared Locations, executed on even date with the Agreement, the Purchase Price shall be increased by Forty-Eight Thousand and no/100 Dollars ($48,000.00). The parties hereto agree that such increase shall be paid at the Closing. (b) In consideration of that certain matter relating to the Aetna Agreement, the matter being more particularly described in Section 4 hereof and Aetna Agreement being defined in the same Section hereof, the parties hereto agree as follows: (1) the portion of the Purchase Price to be paid at Closing pursuant to Section 3.1(a) of the Agreement is hereby reduced by One Million Two Hundred Thousand and no/100 Dollars ($1,200,000.00) and (2) the portion of the Purchase Price to be paid 12 months after the Closing Date pursuant to Section 3.1(c) of the Agreement (the “Twelve-Month Date”) is hereby increased by One Million Two Hundred Thousand and no/100 Dollars ($1,200,000.00); provided,   -1- -------------------------------------------------------------------------------- however, the parties acknowledge and agree that such the moneys contemplated in this Section 3(c) may only be deducted in accordance with the provisions of Section 4.5(b)(iv) of the Agreement (as set forth in Section 4 hereof) and for no other purpose. It is the parties’ intent in this Section 3(c) that the total Purchase Price remain unchanged. (d) The parties agree that, with the amendments set forth in Section 3(a), and (b) hereof to the Purchase Price set forth in the Agreement at the time of its execution, terms and conditions in Section 3.1 of the Agreement shall be replaced with the following terms and conditions: 3.1 Purchase Price and Method of Payment. The aggregate purchase price (hereinafter referred to as the “Purchase Price”) for the Assets and the Business shall be Thirty-Five Million Two Hundred Forty-Eight Thousand and no/100 Dollars ($35,248,000.00), payable to Company, or its designees, as follows: (a) Thirty Million Forty-Eight Thousand and no/100 Dollars ($30,048,000.00) shall be paid by wire transfer at the Closing (as such term is defined in Section 6.1 hereof), less any obligations set forth in that certain Second Side Letter Agreement executed contemporaneously with the Third Amendment to the Agreement; (b) Two Million Five Hundred Thousand and no/100 Dollars ($2,500,000.00) shall be payable, without interest, six (6) months after the Closing Date, subject to the terms and conditions of this Agreement; and (c) Two Million Seven Hundred Thousand and no/100 Dollars ($2,700,000.00) shall be payable, without interest, twelve (12) months after the Closing Date, subject to the terms and conditions of this Agreement; provided, however, the parties acknowledge and agree that One Million Two Hundred Thousand and no/100 Dollars ($1,200,000.00) of those moneys contemplated in this Section 3.1(c) may only be deducted in accordance with the provisions of Section 4.5(b)(iv) of the Agreement and for no other purpose. (4)(a) The parties acknowledge that, under the Agreement and pursuant to its Schedule 4.5(b), Company is obligated to obtain the consent to the assignment of certain payor agreements (the “Payor Agreements”), including the Company’s HMO national and non-HMO national agreement with Aetna (the “Aetna Agreement”), and is liable to Lincare for Company’s failure in such obligation; (b) The parties acknowledge that certain payors may refuse or have refused to consent to the assignment of their respective Payor Agreements to Lincare; and (c) While the parties acknowledge that Aetna has agreed to allow for the transition of Aetna members for a period after the Closing Date under a certain Assignment and Consent Agreement effective as of the Closing Date and executed by and among Lincare, Company, and Aetna, the parties hereto understand that Aetna has refused to consent to the assignment of the Aetna Agreements to Lincare. (d) The parties hereby agree to amend Article 4 of the Agreement by adding the following paragraph under Section 4.5(b) of the Agreement: (iv) The parties hereby agree that the damages due and owing to Lincare as a result of Company’s failure to obtain consent to the assignment of the Company’s HMO national and non-HMO national agreement with Aetna (the “Aetna Agreement”) shall be calculated as follows: if Lincare’s total net billed and reimbursable revenue from Aetna in connection with Lincare’s operation of the Business from the Closing Date until the Twelve-Month Date (the “Total Net Revenue”) is less than $2,664,612.00, Company agrees that, by the Twelve-Month Date, Lincare may deduct from its payment obligations under the Agreement damages equal to the product of 0.6 multiplied by the difference between $2,664,612.00 and the Total   -2- -------------------------------------------------------------------------------- Net Revenue (the “Aetna Damages”); provided, however, the parties expressly agree that, in no event, shall Company be obligated to pay, nor shall Lincare be entitled to deduct or seek indemnification for, more than $1,200,000.00 in Aetna Damages. This subsection 4.5(b)(iv) shall not affect or limit any other rights or remedies Lincare has with respect to the delivery of consents to assignment of any contract or agreement other than the Aetna Agreement and in no way otherwise affects or limits Lincare’s rights under Article 7 of the Agreement for claims or damages other than the Aetna Damages, including but not limited to any claims related to Aetna or the Aetna Agreement other than those giving rise to the Aetna Damages. Notwithstanding anything else to the contrary in the Agreement, the parties understand and agree that, with respect to the Aetna Damages, Lincare may only deduct such Aetna Damages from its payment obligations under the Agreement in accordance with Section 7.2 of the Agreement. (e) The parties hereby agree to amend Article 4 of the Agreement by adding the following paragraph under Section 4.5(b) of the Agreement: (v) Except as otherwise specified in Section 4.5(b)(iv) herein with respect to the Aetna Agreements and the Aetna Damages, the parties agree that if Company fails to obtain the consent to assignment of any payor agreement designated on Schedule 4.5(b) as requiring such consent effective as of the Closing Date whether or not Lincare knows such consent was not obtained by the Closing Date (the “Payor Agreements” and, in such instances, the payor being the “Payor”), then the damages due and owing to Lincare as a result thereof shall be calculated as the total of the following (the “Payor Damages”): (a) if Lincare’s total net billed and reimbursable revenue from the Payor in connection with Lincare’s operation of the Business from the Closing Date until the day six months after the Closing Date (the “Total First Six-Month Net Revenue”) is less than fifty percent (50%) of the total net billed and reimbursable revenue amount related to the Business and specified on Schedule 4.5(b) with respect to such Payor (the “Payor Revenue”), which Company hereby represents and warrants is Company’s total net billed and reimbursable revenue for the Business from such Payor during the twelve-month period immediately prior to the Closing Date, Company agrees that, by the day six months after the Closing Date, Lincare may deduct from its payment obligations under the Agreement, subject to Section 1 of the Third Amendment to the Agreement, damages equal to the product of 0.6 multiplied by the difference between the fifty percent (50%) of the Payor Revenue and the Total First Six-Month Net Revenue and (b) if Lincare’s total net billed and reimbursable revenue from the Payor in connection with Lincare’s operation of the Business from the day six months after the Closing Date until the Twelve-Month Date (the “Total Second Six-Month Net Revenue”) is less than fifty percent (50%) of the Payor Revenue, Company agrees that, by the Twelve-Month Date, Lincare may deduct from its payment obligations under the Agreement, subject to Section 1 of the Third Amendment to the Agreement, damages equal to the product of 0.6 multiplied by the difference between fifty percent (50%) of the Payor Revenue and the Total Second Six-Month Net Revenue. Notwithstanding anything in this Section 4.5(b)(v) to the contrary, (x) in the event Company or a Payor delivers to Lincare an agreement executed by the Payor, the form of which is acceptable to Lincare, by the Closing or within 45 days after the Closing, where such signed agreement is effective as of the Closing, for purposes of this Section 4.5(b)(v), consent to the assignment of such Payor’s Payor Agreement shall be deemed by Lincare as having been delivered to Lincare and (y) in the event a Payor agrees to make payment to Lincare pursuant to an existing agreement between Lincare and Payor within 45 days after the Closing, where such payment terms are acceptable to Lincare in connection with the Business and where such payment is in reimbursement for services provided under contract to Customers and are for rental dates of service from and after the Closing Date, for purpose of this Section 4.5(b)(v), consent to the assignment of such Payor’s Payor Agreement shall be deemed by Lincare as having been delivered to Lincare. This subsection 4.5(b)(v) shall not affect or limit any other rights or remedies Lincare has with respect to the delivery of consents to assignment related to any contract or agreement other than the Payor   -3- -------------------------------------------------------------------------------- Agreements and does not otherwise affect or limit the rights to indemnification that are afforded Lincare under the Agreement, including without limitation its right to deduct such damages from its payment obligations under the Agreement in accordance with Section 7.2 of the Agreement. (f) The parties hereby agree to amend Article 4 of the Agreement by adding the following paragraph under Section 4.5(b) of the Agreement: (vi)(1) In the event Lincare puts Company on notice of the existence of Aetna Damages, the parties agree that, within 30-days after the Twelve-Month Date and upon reasonable notice to Lincare, Company shall be entitled to review Lincare’s books and records relating to Lincare’s calculation of the Aetna Damages for the purpose of verifying such Aetna Damages. Lincare agrees that it shall make such books and records available to Company for such verification. If as a result of such verification Company disputes Lincare’s calculation of the Aetna Damages, Company shall provide Lincare with written notice of such dispute within 45 days of the Twelve-Month Date (the “Dispute Deadline”). If Company fails to provide Lincare with written notice of such dispute by the Dispute Deadline, then such failure shall constitute acceptance by Company of Lincare’s calculation of the Aetna Damages, and any deductions previously made by Lincare in such regard shall become final and binding. If Company properly disputes Lincare’s calculation of the Aetna Damages by the Dispute Deadline, then Lincare and Company shall have until the 75th day after the Twelve-Month Date to negotiate in good faith the dispute. If the parties do not reach a mutual resolution from such negotiations, then the dispute shall be submitted to a national recognized public accounting firm agreeable to each such party and with whom neither such Party (or any of its affiliates) has had a relationship within the past two years. Such accounting firm shall be given reasonable access to all relevant records to calculate the actual Aetna Damages, which calculation shall be submitted by the accounting firm to Company and Lincare within 30 days. Company and Lincare shall have 20 days thereafter to submit to each other and the accounting firm written comments on such calculation and an additional 15 days to similarly submit to each other and the accounting firm written rebuttal comments to each other’s initial comments. Within 15 days after the rebuttal comment period, the accounting firm shall submit its final calculation to each of the parties, which shall be final and binding on the parties hereto. Company shall be liable for any fees and expenses of such accounting firm, except that, in the event such final calculation requires the release by Lincare to Company of any moneys Lincare deducted in connection with the Aetna Damages from Lincare’s payment obligation on the Twelve-Month Date, Lincare shall be responsible for a percentage of the total fees and expenses of such accounting firm, such percentage being equal to the quotient of the moneys required to be released by Lincare to Company consistent with the final calculation submitted by the accounting firm divided by the total moneys originally deducted by Lincare at the Twelve-Month Date in connection with the Aetna Damages; and (2) In the event Lincare puts Company on notice of the existence of damages related to a Payor pursuant to the terms and conditions set forth in Section 4.5(b)(v) hereof and in the event the damages exceed One Hundred Thousand and no/100 Dollars ($100,000.00) for such Payor from the Closing Date until the Twelve-Month Date, the parties agree that, within 30-days after the Twelve-Month Date and upon reasonable notice to Lincare, regardless of whether Lincare deducted moneys from the six-month deferred Purchase Price payment or from the twelve-month deferred Purchaser Price payment, or both, Company shall be entitled to review Lincare’s books and records relating to Lincare’s calculation of such damages for the purpose of verifying such damages. Lincare agrees that it shall make such books and records available to Company for such verification. If as a result of such verification Company disputes Lincare’s calculation of the damages relating to such Payor, Company shall provide Lincare with written notice of such dispute within 45 days after the Twelve-Month Date (the “Dispute Deadline”). If Company fails to provide Lincare with written notice of such dispute by the Dispute Deadline, then such failure shall constitute acceptance   -4- -------------------------------------------------------------------------------- by Company of Lincare’s calculation of the damages, and any deductions previously made by Lincare in such regard shall become final and binding. If Company properly disputes Lincare’s calculation of the damages by the Dispute Deadline, then Lincare and Company shall have until the 75th day after the Twelve-Month Date to negotiate in good faith the dispute. If the parties do not reach a mutual resolution from such negotiations, then Company may seek recourse in accordance with Article 12 of the Agreement with the party substantially prevailing being entitled to its attorneys’ fees and reasonable costs associated with any such recourse. (5) The parties hereby agree to amend Article 4 of the Agreement by replacing the language in the Section 4.5(c)(i) of the Agreement with the following language: (i) The Schedule 4.5(c)(i) delivered by Company to Lincare on the Closing Date lists, in summary form, the oxygen equipment, respiratory therapy equipment, and pharmacy equipment and other items of durable medical equipment and other tangible personal property owned, leased, rented, used or otherwise possessed by Company in the operation of the Business as of October 31, 2006 (including, but not limited to, all of such items currently located with customers in their homes or alternative site care facilities). Within ten (10) days immediately after the Closing, Company shall deliver to Lincare Schedule 4.5(c)(i), listing, in summary form, the oxygen equipment, respiratory therapy equipment, and pharmacy equipment and other items of durable medical equipment and other tangible personal property owned, leased, rented, used or otherwise possessed by Company in the operation of the Business true and correct as of the Closing Date (including, but not limited to, all of such items currently located with customers in their homes or alternative site care facilities). The schedule delivered within ten (10) days immediately after the Closing Date shall be substantially similar to the schedule delivered on the Closing Date, any differences arising solely from Company’s operations in the normal course of business between October 31, 2006 and the Closing Date. (6) The parties hereby agree to amend Article 6 of the Agreement by, (a) replacing the language in Section 6.2 of the Agreement with the following language: Date, Time and Place. The closing under this Agreement (herein referred to as the “Closing”) shall take place via telecopy on the second business day after the conditions set forth in Section 6.3 hereof shall have been satisfied or waived or at such other time and date as shall be fixed by agreement by the parties hereto (said date shall herein be referred to as the “Closing Date”) with the original counterparts to be exchanged by the parties via overnight delivery service for delivery on the next business day following the Closing Date. All transactions at the Closing shall be deemed to have taken place simultaneously at 11:59 p.m. (EST) on the Closing Date, and no transaction shall be deemed to have been completed and no document, instrument or certificate shall be deemed to have been delivered until all transactions are completed and all documents delivered; (b) replacing the language in Section 6.5(c) of the Agreement with the following language: competent written evidence that each automobile, truck, or other vehicle included in the Assets has been delivered free and clear of Encumbrances at the Closing (notwithstanding the foregoing, the parties agree that Company may deliver those eight (8) vehicles leased through EMKAY free and clear of Encumbrances after Closing but in any event on or before ten (10) business days after the Closing (c) replacing the language in Section 6.5(k) of the Agreement with the following language: “an executed sublease agreement in substantially the form attached hereto as Exhibit 6.5(k) (the “Facilities Lease”)”; and   -5- -------------------------------------------------------------------------------- (d) replacing the language in the second paragraph of Section 6.8(h) of the Agreement with the following language: Company agrees that the Encumbered Cylinders are being delivered free and clear of Encumbrances on the Closing Date. Company represents and warrants that the following cylinder or tank providers have refused to sell the following number of cylinders to Company so same will not be free and clear of Encumbrances: Airgas and National Welders with respect to 371 M tanks (also known as 125 tanks) and Techair with respect to 600 oxygen tanks. Company further represents and warrants that, with respect to the 600 oxygen tanks on lease with Techair, Company has purchased cylinders of equal number and type from another provider. With respect to the 371 M tanks, Lincare agrees to purchase 371 M tanks for replacement as set forth below and acknowledges payment in consideration of such purchase. With respect to the 371 M tanks and 600 oxygen tanks, after the Closing, Lincare shall reasonably cooperate with Company in replacing the 371 M tanks and 600 oxygen tanks, such cooperation including aiding Company in replacing the tanks as appropriate and communicating with Lincare cylinder vendors as appropriate. Notwithstanding anything in this Section 6.8(h) to the contrary, the parties understand and agree that the Company shall remain solely liable for rental payments relating to and returning the 371 M tanks and 600 oxygen tanks and that Lincare shall have no liability in respect of any claim by a cylinder vendor or lessor relating to the purchase of cylinders, rental charges associated with cylinders, shortfall of the number of cylinders from the number represented by Company above, or otherwise. To the extent that there is a shortfall in the number of cylinders rented or leased by Company, such shortfall shall not be setoff against any cylinders owned by Company. (7) The parties hereby agree to amend Article 17 of the Agreement by replacing the language in Section 17.1 of the Agreement with the following language: Entire Agreement. The terms and conditions of this Agreement (including the exhibits, schedules, and amendments (and any amendment’s attachment, schedules and exhibits) hereto and any side letter agreement and amendments thereto, if any) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede any prior understandings, agreements or representations by or between the parties, written or oral. There are no understandings, representations or warranties of any kind whatsoever, except as expressly set forth herein. The exhibits and schedules attached to this Agreement, as amended, constitute an integral part hereof for all purposes, including, without limitation, the construction and interpretation of the respective rights and obligations of the parties hereto. (8) The parties hereby agree to amend Article 17 of the Agreement by adding the following Section under Article 17: Section 17.11 Without limiting the scope of Article 4 of the Agreement, for the calendar month of November 2006, Company represents and warrants that Company has prepaid those rental obligations associated with the facilities, in which Lincare has agreed to take a leasehold interest as set forth in Schedule 4.5(a) hereof. Lincare agrees to reimburse Company for such prepayments on even date herewith, such prepayments, which relate to the leasehold interests Lincare has agreed to take and which have been pro-rated, totaling $86,987.90. (9) The parties hereby agree to amend Article 17 of the Agreement by adding the following Section under Article 17: Section 17.12 Notwithstanding anything in the Agreement, as amended, to the contrary, Company understands and agrees that, because Company has elected to deliver Schedule   -6- -------------------------------------------------------------------------------- 4.5(d) within ten days after the Closing Date, the parties agree that Lincare may amend Exhibit 3.5 of the Agreement within a reasonable time after the expiration of ten days after the Closing Date by adjusting the Purchase Price allocation to reflect the information provided by Company in Schedule 4.5(d) after Closing. The parties further understand and agree that the election of Company to deliver Schedule 4.5(d) within ten days after the Closing Date in no way limits or otherwise modifies Company’s obligation as contemplated in Section 15.1 of the Agreement to guarantee the collection of either eighty percent (80%) of the Receivables or eighty percent (80%) of $10,800,000.00, whichever is greater. (10) The parties hereby agree to amend Article 17 of the Agreement by adding the following Section under Article 17: Section 17.13 Notwithstanding anything in the Agreement, as amended, to the contrary, Company understands and agrees that, because Company may deliver within ten (10) days after the Closing Date Schedule 4.5(c)(i), which shall be true and correct as of the Closing Date, the parties agree that Lincare may amend Exhibit 3.5 of the Agreement within a reasonable time after the expiration of ten days after the Closing Date by adjusting the Purchase Price allocation to reflect the information provided by Company in Schedule 4.5(c)(i) after Closing. (11) The parties hereby agree to amend Article 17 of the Agreement by adding the following Section under Article 17: Section 17.14 Notwithstanding anything in the Agreement to the contrary, for a period of sixty (60) days from and after the Closing Date, Company agrees to keep active celluar phone service for those cellular telephones used in the Business. For such sixty (60)-day period, Lincare agrees to reimburse Company for any fees associated with Lincare’s usage of such cellular telephone service. The parties understand and agree that, during such sixty (60)-day period, Lincare shall replace Company’s cellular telephones with other cellular phones owned or leased by Lincare. As Lincare replaces such cellular phones, Lincare shall return to Company any Company cellular telephone Lincare locates after a good faith and reasonable search. Lincare shall not be liable for any claims associated with Company’s cellular telephones, except for any fees associated with Lincare’s usage of the phones as described above. (12) The parties hereby agree to amend Article 17 of the Agreement by adding the following Section under Article 17: Section 17.15 Notwithstanding anything in the Agreement to the contrary, for a period of fourteen (14) days from and after the Closing Date, Company agrees to keep those gas credit cards used in the Business active. For such fourteen (14)-day period, Lincare agrees to reimburse Company for any fees associated with Lincare’s usage of such gas credit cards. The parties understand and agree that, during such fourteen (14)-day period, Lincare shall replace Company’s gas credit cards with other gas credits cards. As Lincare replaces such gas credit cards, Lincare shall return to Company any Company gas credit cards Lincare locates after a good faith and reasonable search. Lincare shall not be liable for any claims associated with Company’s gas credit cards, except for any fees associated with Lincare’s usage of the gas credit cards as described above and except for any claims that may arise from Lincare’s possession or use of the gas credit cards during such fourteen (14)-day period. (13) The parties hereby agree to amend Article 17 of the Agreement by adding the following Section under Article 17: Section 17.16(a) Notwithstanding anything in the Agreement to the contrary, after Closing Company may retain as employees those eight (8) individuals referenced in Company’s   -7- -------------------------------------------------------------------------------- “corporate” listing of Schedule 16.1 of the Agreement who have the designation of “Y**” in the column indicating whether Lincare intends to offer employment in said schedule (the “Cash Collectors” and singly the “Cash Collector”), subject to the following terms and conditions: (1) within the period from sixty (60) days after the Closing Date and one hundred eighty (180) days after the Closing Date, Company shall make the Cash Collectors available for employment by Lincare. If Lincare offers employment to any of the Cash Collectors, Company shall terminate such individual’s employment with Company; (2) without limiting the scope of Lincare’s rights under the Agreement, Company shall indemnify Lincare for any employment-related claims, including without limitation claims of co-employment, by any of the Cash Collectors during their employment with Company; and (3) notwithstanding anything in the Section 16.3 of the Agreement to the contrary, Company agrees that, for purposes of its obligations under Section 16.3(c) of the Agreement, the Cash Collectors who become employed with Lincare shall be deemed to have begun their employment on the Closing Date. (b) Company and Lincare shall cooperate in good faith in the transitioning of the Cash Collectors from Company employees to Lincare employees. (c) For a period not to exceed six (6) months after the Closing Date, within ten (10) business days after monthly receipt of an invoice from Company, Lincare agrees to pay to the Company an amount equal to fifty percent (50%) of the pay associated with the Cash Collectors; provided, such Cash Collectors’ activities at the Company relate to the collection of the Receivables. (14) The parties hereby agree to amend Article 17 of the Agreement by adding the following Section under Article 17: Section 17.17 Notwithstanding anything in the Agreement to the contrary, for a period of eight (8) weeks from and after the Closing Date, Company agrees to keep its rental uniforms from Cintas used in the Business in an active rental status. For such eight (8)-week period, Lincare agrees to reimburse Company for Company’s rental fees associated with Lincare’s usage of uniforms. The parties understand and agree that, during such period, Lincare shall replace Company’s uniforms with other uniforms owned or leased by Lincare. As Lincare replaces such uniforms, Lincare shall return to Company any Company uniforms Lincare locates after a good faith and reasonable search. Lincare shall not be liable for any claims associated with Company’s uniforms (including without limitation any claim that Lincare breached the Agreement or otherwise violated Company’s legal or equitable rights regarding the use of a Company name or mark during the period contemplated herein), except for any fees associated with Lincare’s usage of the uniforms as described above. (15) The parties hereby agree to amend Article 17 of the Agreement by adding the following Section under Article 17: Section 17.18 Notwithstanding anything in the Agreement to the contrary, after Closing the continued employment of Company’s Pharmacist in Charge located in Pensacola, Florida shall be subject to the following terms and conditions: (a) for a period of thirty (30) days from and after the Closing Date, Company shall continue to employ said Pharmacist in Charge at the same rate of pay he enjoyed immediately prior to the Closing Date. Upon the conclusion of the thirty-day period, Company shall terminate said Pharmacist in Charge’s employment; and   -8- -------------------------------------------------------------------------------- (b) For a period not to exceed thirty (30) days after the Closing Date, within ten (10) business days after monthly receipt of an invoice from Company, Lincare agrees to pay to the Company an amount equal to the pay associated with and earned by said Pharmacist in Charge. (16) The parties hereby agree to amend Article 17 of the Agreement by adding the following Section under Article 17: Section 17.19 Company and Lincare agree to execute and to deliver to each other at Closing that certain Consulting Agreement, which is attached to this Amendment as “Attachment A,” such agreement being incorporated herein by this reference (the “Consulting Agreement”). The Consulting Agreement is hereby also deemed an Asset, and Lincare’s remedial rights as set forth in Article 7 of the Agreement, including without limitation its rights under Section 7.2 of the Agreement, shall apply equally to Company’s performance under the Consulting Agreement as if the Consulting Agreement were part of the Agreement. (17) The parties hereby agree to amend Article 17 of the Agreement by adding the following Section under Article 17: Section 17.20 The parties hereto understand and agree that, with respect to any obligation of Company under the Agreement, as amended, or side letter agreement (the “Transaction Documents”), Lincare’s consummation of the transaction contemplated herein, with the knowledge that certain obligations are not yet, or might not be, satisfied by Company as required by the Transaction Documents, shall in no event constitute a waiver of Lincare’s right to be made whole from a failure or inability of Company to perform such obligation if it is required by the Transaction Documents. In no event shall Lincare’s prior belief or knowledge of any actual or potential failure on the part of the Company to satisfy its obligations form a basis for Company to either affirmatively seek to estop, cause to be waived, or assert any other like claim or defense against rights possessed by Lincare under contract, at law, or in equity. (18) Lincare and Company agree to the Exhibits and Schedules attached to this Amendment, which are incorporated herein by this reference. Same shall be deemed the Exhibits and Schedules of the Agreement as of the Closing Date of the transaction. The attached Exhibits and Schedules are all the Exhibits and Schedules of the Agreement and include Exhibits 3.5, 6.5(k), 14, and 16.2 and Schedules 1.1(a)(xi), 1.1.(a)(xiii), 1.1(c), 1.1(c)(iv), 4.2, 4.3(a), 4.3(d), 4.4(a), 4.4(b), 4.4(c), 4.4(d), 4.4(e), 4.5(a), 4.5(b), 4.5(c)(i), 4.5(c)(ii), 4.5(c)(iii), 4.5(d), 4.5(e), 4.5(f)(i), 4.5(f)(ii), 4.5(f)(iii), 4.5(f)(iv), 4.5(f)(v), 4.5(g), 4.5(h), 4.5(i), 4.5(j), 4.5(k), 4.5(l), 4.5(m), 6.8(h), 16.1, 16.2, and 16.3. (19) Unless expressly amended or supplemented by this Amendment, all terms and conditions of the Agreement, including but not limited to the side letter agreement shall remain in full force and effect. [The balance of this page has been intentionally left blank. The signature page follows.]   -9- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties to this Amendment have duly executed it as of the day and year first above written.   LINCARE INC., a Delaware corporation By:   /s/ Paul Tripp   Paul Tripp Its:   Acquisitions Attorney PEDIATRIC SERVICES OF AMERICA, INC. d/b/a PSA HEALTHCARE, a Delaware corporation By:   /s/ Daniel J. Kohl   Daniel J. Kohl Its:   President and CEO PEDIATRIC SERVICES OF AMERICA, INC., a Georgia corporation By:   /s/ Daniel J. Kohl   Daniel J. Kohl Its:   President and CEO PSA CAPITAL CORPORATION, a Delaware corporation By:   /s/ Daniel J. Kohl   Daniel J. Kohl Its:   President   -10-

Exhibit 10.72   -------------------------------------------------------------------------------- ASSET PURCHASE AGREEMENT by and between SPANSION JAPAN LIMITED and FUJITSU LIMITED   September 28, 2006   -------------------------------------------------------------------------------- CONFIDENTIAL -------------------------------------------------------------------------------- TABLE OF CONTENTS        Page ARTICLE 1 THE TRANSACTION    1 1.1    Purchased Assets    1 1.2    Final Determination of Tangible Assets    2 1.3    Excluded Assets    3 1.4    Assumed Liabilities    3 1.5    Excluded Liabilities    3 ARTICLE 2 PURCHASE PRICE; CLOSING    3 2.1    Purchase Price    3 2.2    Transfer Taxes; Other Taxes    4 2.3    The Closing    4 2.4    Deliveries by Seller    5 2.5    Deliveries by Purchaser    5 2.6    Transfer of Title; Risk of Loss    5 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER    6 3.1      Organization and Standing    6 3.2      Authority; Enforceability    6 3.3      Tangible Assets    6 3.4      JV1/JV2 Facilities    6 3.5      No Conflict    6 3.6      Litigation    7 3.7      Insurance    7 3.8      Brokers’ or Finders’ Fees    7 3.9      Permits    7 3.10    Assigned Leases and Assigned Contracts    7 3.11    Environmental Matters    8 3.12    No Other Agreements    8 3.13    Absence of Changes    9 3.14    Warranty Claims    9 3.15    Value of Assets    9 3.16    Disclosure    9   -i- -------------------------------------------------------------------------------- TABLE OF CONTENTS (continued)             Page ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER    9 4.1      Organization and Standing    9 4.2      Authority; Enforceability    9 4.3      No Conflict    9 4.4      Brokers’ or Finders’ Fees    10 4.5      Litigation    10 ARTICLE 5 COVENANTS    10 5.1      Operation of the Business    10 5.2      Equipment Leases    10 5.3      Other Agreements    11 5.4      Access    11 5.5      Approvals and Consents    12 5.6      Insurance    12 5.7      Inventory    12 5.8      Further Assurances    12 5.9      Lease Financing    12 5.10    Other Ancillary Agreements    13 ARTICLE 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER    13 6.1      Assignment and Assumption Agreement    13 6.2      No Legal Action    13 6.3      Accuracy of Representations and Warranties    13 6.4      Performance of Obligations    13 6.5      Governmental Approvals    13 6.6      Compliance Certificate    13 6.7      Consents and Waivers    14 6.8      Ancillary Agreements    14 6.9      Agreements to be Terminated    14 ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER    14 7.1      Conveyance    14 7.2      No Legal Action    14 7.3      Accuracy of Representations and Warranties    14   -ii- -------------------------------------------------------------------------------- TABLE OF CONTENTS (continued)             Page 7.4      Performance of Obligations    14 7.5      Consents and Waivers    14 7.6      Governmental Approvals    14 7.7      Compliance Certificate    15 7.8      Ancillary Agreements    15 7.9      Material Adverse Effect    15 7.10    Inventory    15 7.11    Equipment Leases    15 7.12    Agreements to be Terminated    15 7.13    Seconded Employees    15 ARTICLE 8 CONFIDENTIAL INFORMATION; PUBLIC COMMUNICATIONS    15 8.1      Non-Disclosure    15 8.2      Public Communications    15 ARTICLE 9 INDEMNIFICATION    15 9.1      Survival of Representations and Covenants    15 9.2      Indemnification by Seller    16 9.3      Indemnification by Purchaser    17 9.4      Defense of Third-party claims    17 9.5      Insurance Proceeds    18 9.6      Sole Remedy    19 ARTICLE 10 TERMINATION OF THIS AGREEMENT    19 10.1      Termination    19 ARTICLE 11 GENERAL PROVISIONS    20 11.1    Payment of Expenses    20 11.2    Relationship of the Parties    20 11.3    Notices    20 11.4    Governing Law; Dispute Resolution    21 11.5    Assignability; Third-Party Rights    21 11.6    Remedies Cumulative; Specific Performance    21 11.7    Waiver    22 11.8    Amendments    22   -iii- -------------------------------------------------------------------------------- TABLE OF CONTENTS (continued)             Page 11.9      Headings    22 11.10    Interpretation    22 11.11    Preparation of this Agreement    22 11.12    Severability    22 11.13    Entire Agreement    22 11.14    Counterparts    23 11.15    No Representations or Warranties    23 11.16    Spansion Guaranties    23 11.17    Purchaser Subsidiary    23   -iv- -------------------------------------------------------------------------------- List of Exhibits and Schedules Schedule A    Definitions Schedule B    Existing Dispute Resolution Procedures Schedule 1.1(a)    Tangible Assets Schedule 1.1(c)    JV1/JV2 Facilities Schedule 1.1(e)    Assigned Contracts Schedule 2.1    Inventory Price Calculation Schedule 5.2    Assigned Leases Schedule 5.3    Other Agreements Schedule 5.5    Material Consents Schedule 5.7    Raw Material Vendors Schedule 6.9    Agreements to be Terminated Seller’s Disclosure Schedule Exhibit A    Form of Bill of Sale Exhibit B    Form of Assignment and Assumption Agreement Exhibit C    Form of Master Lease Agreement Exhibit D    Form of Foundry Agreement Exhibit E    Form of Secondment and Transfer Agreement   -v- -------------------------------------------------------------------------------- ASSET PURCHASE AGREEMENT This ASSET PURCHASE AGREEMENT is made as of this 28th day of September, 2006 (the “Agreement”) by and between Spansion Japan Limited, a corporation organized under the laws of Japan (“Seller”), Spansion Inc., a corporation organized under the laws of the State of Delaware (“Spansion U.S.”), Spansion Technology Inc., a corporation organized under the laws of the State of Delaware (“STI”), and Spansion LLC, a Delaware limited liability company, solely in their capacities as guarantors of Seller’s obligations hereunder (collectively “Guarantors”), and Fujitsu Limited, a corporation organized under the laws of Japan (“Purchaser”). RECITALS Seller owns the semiconductor fabrication facilities described on Schedule 1.1(c) hereto (the “JV1/JV2 Facilities”). Purchaser desires to purchase from Seller and Seller desires to sell to Purchaser the JV1/JV2 Facilities as well as certain assets located in the JV1/JV2 Facilities, and Purchaser will agree to assume certain obligations and liabilities in connection therewith upon the terms and conditions set forth below. Capitalized terms used herein that are not otherwise defined shall have the respective meanings set forth in Schedule A attached hereto. NOW, THEREFORE, in consideration of the premises, representations, warranties, covenants and agreements hereinafter set forth, and for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser hereby agree as follows: AGREEMENT ARTICLE 1 THE TRANSACTION 1.1 Purchased Assets. Subject to the terms and conditions of this Agreement, and on the basis of the representations, warranties, covenants and agreements set forth herein, at the Closing, Seller shall sell, transfer, convey, assign and deliver to Purchaser, and Purchaser shall purchase from Seller, all right, title and interest in and to the following assets (collectively, the “Purchased Assets”): (a) Tangible Assets. The machinery, equipment and other tangible assets specifically listed on Schedule 1.1(a) attached hereto and the Inventory (collectively, the “Tangible Assets”); it being understood and agreed that Schedule 1.1(a) is subject to adjustment in accordance with Section 1.2 below; (b) Equipment Leases. All rights and obligations in, to and under the Assigned Leases; (c) Real Property. The JV1/JV2 Facilities;   -1- -------------------------------------------------------------------------------- (d) Documents. All books, records and papers in the possession or control of Seller and that are reasonably necessary for Purchaser to operate the JV1/JV2 Facilities and the Tangible Assets, and to perform the obligations under the Assigned Leases, in substantially the same manner as operated and performed by Seller as of the date of this Agreement (subject to changes in the ordinary course of business) and as of the Closing Date, including real property title documents, user manuals, operating guides, bills of materials, records, maintenance schedules and records, supplier and other vendor ordering information and records, warranties for both materials and equipment purchased and products sold, listings of equipment utilized in the JV1/JV2 Facilities, and all other operational, commercial or technical information solely related to the JV1/JV2 Facilities, the Tangible Assets and the Assigned Leases, it being understood that Seller shall be entitled to retain a copy of all such books, records and papers, but excluding any books, records and papers related to information technology that is provided pursuant to the Services Agreement; and (e) Assigned Contracts. All rights and obligations in, to and under the contracts (the “Assigned Contracts”) set forth on Schedule 1.1(e). 1.2 Final Determination of Tangible Assets. (a) During the 30-day period immediately following the date of this Agreement, Purchaser may, upon reasonable prior notice to Seller, send its employees and representatives to visit the JV1/JV2 Facilities to inspect the equipment, machinery and other Tangible Assets at such location solely for the purpose of confirming that such Tangible Assets, as applicable, meet the qualification standards of Purchaser’s customers and Seller’s customers. Such visits shall be conducted during Seller’s normal working hours. While visiting in the JV1/JV2 Facilities, Purchaser shall at all times fully comply with Seller’s plant rules and regulations provided to Purchaser as well as all reasonable instructions that may be issued by Seller’s employees or personnel accompanying such employees or representatives of Purchaser. Each party shall, at its own expense, indemnify and hold harmless the other party and its employees from and against any and all direct losses or damages without limitation to any of the other party’s property or loss of personal health or life, caused by the indemnifying party’s representatives during any such visit. Seller shall use commercially reasonable efforts to locate and provide any of the information requested by Purchaser in connection with such visits, and Purchaser shall use its commercially reasonable efforts to minimize any disruption to Seller’s business in connection with the conduct of the process contemplated herein. The foregoing 30-day period shall be extended by the amount of time necessary to remedy any failure by Seller to provide access to the JV1/JV2 Facilities and/or to cooperate with Purchaser’s inspection and requests for information as provided above. (b) At the expiration of the period provided for in subsection (a) above, Schedule 1.1(a) shall be amended as requested by Purchaser, it being understood that any deletions from Schedule 1.1(a) shall be made only as necessary in order for the Tangible Assets to meet qualification standards of Purchaser’s customers and Seller’s customers, and the Parties agree that any such equipment deleted from Schedule 1.1(a) shall be added to the equipment schedule in the Master Lease Agreement and a substantially similar item listed on the equipment schedule in the Master Lease Agreement shall be deleted from such equipment schedule and added to Schedule 1.1(a), as requested by Purchaser. The Purchase Price provided for in Section 2.1 shall be appropriately adjusted to reflect any such deletions and additions, based on any differences in net book values of the applicable equipment.   -2- -------------------------------------------------------------------------------- 1.3 Excluded Assets. Any provision of this Agreement to the contrary notwithstanding, except for the Purchased Assets, Seller is not transferring and shall not transfer any assets of Seller not identified above (such assets, the “Excluded Assets”), which Excluded Assets are retained by Seller. 1.4 Assumed Liabilities. Subject to the terms and conditions of this Agreement, at the Closing, Seller shall assign, and Purchaser shall assume, the Assumed Liabilities. Thereafter, Purchaser shall pay and discharge all such Assumed Liabilities as and when such Assumed Liabilities become due and owing. For the purposes of this Agreement, the “Assumed Liabilities” shall mean only Liabilities which relate to, arise out of or are incurred in connection with the Purchased Assets on or after the Closing, including the Assigned Leases and the Assigned Contracts, but not including any Excluded Liabilities. 1.5 Excluded Liabilities. Notwithstanding anything to the contrary set forth in this Agreement, except for the Assumed Liabilities, Purchaser is not assuming or agreeing to pay, perform or discharge, and Purchaser shall not be liable for, any contracts, agreements, commitments or Liabilities of Seller whatsoever, including any of the following (collectively, the “Excluded Liabilities”): (a) except as expressly provided for in Section 2.2(a) below, any Taxes or similar charges that may become payable by Seller by reason of the sale and transfer of the Purchased Assets under any taxing authority or that may be imposed on Seller by reason of Seller’s receipt of the Purchase Price or relief from any of the Assumed Liabilities; (b) any trade accounts payable, accrued Liabilities or other Liabilities of Seller as of the Closing, whether or not such amounts are known or payable prior to the Closing; (c) any Liabilities which relate to, arise out of or are incurred in connection with the Purchased Assets, or use, operation or possession thereof, prior to the Closing; and (d) any Liabilities which relate to, arise out of or are incurred in connection with any claim, litigation or other proceeding threatened or pending before the Closing or initiated after the Closing but based on an act or omission of Seller or any current or former officer, director, employee or agent of Seller acting on Seller’s behalf, or the use, operation or possession of the Purchased Assets, occurring before the Closing. ARTICLE 2 PURCHASE PRICE; CLOSING 2.1 Purchase Price. Subject to the terms and conditions of this Agreement, as full consideration for the sale, assignment, transfer and delivery of the Purchased Assets by Seller to Purchaser and the execution and delivery of the Transaction Agreements by Seller, Purchaser shall deliver to Seller at the Closing an amount equal to [seventeen billion seventy million three hundred ninety-seven thousand six hundred eighty (17,070,397,680)] Japanese Yen plus the Japanese Yen amount payable by Purchaser to Seller for the Inventory (which shall be calculated as set forth on Schedule 2.1) (together, the “Purchase Price”), payable by wire transfer of immediately available funds to Seller’s account as specified by written notice to Purchaser prior to the Closing (“Seller’s Account”).   -3- -------------------------------------------------------------------------------- 2.2 Transfer Taxes; Other Taxes. (a) Purchaser and Seller shall each be responsible for and shall pay one-half (1/2) of any and all Stamp Tax when due and shall provide each other with documentation of such filings and payments upon written request by the other party. Purchaser shall be responsible for any other Transfer Taxes. (b) After the Closing, upon reasonable written notice, Seller and Purchaser agree to furnish or cause to be furnished to each other and their Representatives access, during normal business hours, to such information and assistance relating to the Purchased Assets as are reasonably necessary for financial reporting and accounting matters relating to the Purchased Assets, the preparation and filing of any Tax Returns, reports or forms relating to the Purchased Assets, the defense of any Tax or other claim or assessment relating to the Purchased Assets or, in the case of Seller, relating to the operation of the Purchased Assets prior to the Closing, provided, however, that such access and assistance do not unreasonably disrupt the normal operations of Purchaser, in the case of access and assistance given to Seller, or Seller, in the case of access and assistance given to Purchaser. (c) To the extent not allocated in this Agreement, Seller shall be responsible for and shall promptly pay when due all Taxes levied with respect to the Purchased Assets attributable to the Pre-Closing Period. To the extent not allocated in this Agreement, Purchaser shall be responsible for and shall promptly pay when due all Taxes levied with respect to the Purchased Assets attributable to the Post-Closing Period. All such Taxes levied with respect to the Purchased Assets for a taxable period which includes (but does not end on) the Closing Date (collectively, the “Apportioned Obligations”) shall be apportioned between Purchaser and Seller based on the number of days of such taxable period included in the Pre-Closing Period and the number of days of such taxable period included in the Post-Closing Period. Seller shall be liable for the proportionate amount of such Taxes attributable to the Purchased Assets that is attributable to the Pre-Closing Period, and Purchaser shall be liable for the proportionate amount of such Taxes that is attributable to the Post-Closing Period. Upon receipt of any bill for such Taxes relating to the Purchased Assets, Purchaser and Seller shall each present a statement to the other setting forth the amount of reimbursement to which each is entitled under this Section 2.2 together with such supporting evidence as is reasonably necessary to calculate the proration amount. The proration amount shall be paid by the party owing it to the other within 30 days after delivery of such statement. In the event that Purchaser or Seller shall make any payment for which it is entitled to reimbursement under this Section, the applicable party shall make such reimbursement promptly but in no event later than thirty (30) days after the presentation of a statement setting forth the amount of reimbursement to which the presenting party is entitled along with such supporting evidence as is reasonably necessary to calculate the amount of reimbursement. 2.3 The Closing. The consummation of the Transactions (the “Closing”) will take place at a location to be agreed upon by Purchaser and Seller on April 2, 2007 (Tokyo time), provided all the closing conditions have been met or waived in writing by the Parties, or at such other place, date and time as the Parties mutually agree (the “Closing Date”).   -4- -------------------------------------------------------------------------------- 2.4 Deliveries by Seller. At the Closing, Seller shall (i) take all reasonable steps necessary to place Purchaser in actual possession and operating control of the Purchased Assets and (ii) deliver the following items, duly executed by Seller (and which shall be countersigned by Purchaser, as applicable) all of which shall be in a form and substance reasonably acceptable to Purchaser and Purchaser’s counsel: (a) Bill of Sale and Assignment and Assumption Agreement. The Bill of Sale and Assignment and Assumption Agreement executed by Seller covering all of the applicable Purchased Assets, substantially in the forms attached hereto as Exhibit A and Exhibit B, respectively. (b) Ancillary Agreements. The Ancillary Agreements executed by Seller. (c) Other Conveyance Instruments. Such other specific instruments of sale, transfer, conveyance and assignment, if any, as may be necessary or useful to transfer all right, title and interest in and to the Purchased Assets to Purchaser. (d) Closing Condition Documents. All the documents provided for in Article 7 below. 2.5 Deliveries by Purchaser. At the Closing, Purchaser shall deliver the following items, duly executed by Purchaser (and which shall be countersigned by Seller, as applicable), all of which shall be in a form and substance reasonably acceptable to Seller and Seller’s counsel: (a) Wire Transfer. A wire transfer in the amount of the Purchase Price into Seller’s Account. (b) Ancillary Agreements. The Ancillary Agreements executed by Purchaser. (c) Assumption Instruments. Such other specific instruments of assumption, if any, as may be necessary for Purchaser to assume the Assumed Liabilities, including the Assignment and Assumption Agreement. (d) Closing Condition Documents. All other documents provided for in Article 6 below. 2.6 Transfer of Title; Risk of Loss. Legal and equitable title and risk of loss with respect to all of the Purchased Assets shall pass to Purchaser from Seller on transfer of the Purchased Assets on the Closing Date pursuant to, and in accordance with, the terms of this Agreement. Seller’s insurance coverage, if any, for the Purchased Assets will cease as of the Closing.   -5- -------------------------------------------------------------------------------- ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Purchaser that the following are true and correct as of the date hereof, except as set forth on Seller’s Disclosure Schedule: 3.1 Organization and Standing. Seller is a corporation duly organized, validly existing and in good standing under the laws of Japan. 3.2 Authority; Enforceability. Seller has the requisite corporate power and corporate authority to conduct its business relating to the Purchased Assets as now conducted, to own, lease and operate the Purchased Assets as now owned, leased and operated, and to enter into the Transaction Agreements and to carry out the Transaction. All corporate proceedings required to be taken by Seller to authorize the execution, delivery and performance of the Transaction Agreements and the consummation of the Transaction have been or will be as of the Closing properly taken. This Agreement has been duly and validly executed and delivered by Seller and constitutes, and each of the Ancillary Agreements as of the Closing will have been duly and validly executed and delivered by Seller and will constitute, a valid and binding obligation of Seller, enforceable against it in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency, and the relief of debtors and other laws of general application affecting enforcement of creditors’ rights generally and rules of law governing specific performance, injunctive relief and other equitable remedies. 3.3 Tangible Assets. Seller holds good and marketable title to all of the Tangible Assets, free and clear of any Liens, except for Permitted Liens. The Tangible Assets are in good operating condition and repair, subject only to ordinary wear and tear, except where the failure to be in such condition would not have, or would not be reasonably expected to have, a Material Adverse Effect. As of the Closing, the Inventory, and to the Knowledge of Seller the raw materials on hand, shall be usable in the ordinary course of business in all material respects. To the Knowledge of Seller, the current use and operation of the Tangible Assets are in compliance in all material respects with all Applicable Laws. Seller has not received any notice of material non-compliance with any Applicable Laws with respect to the possession or operation of the Tangible Assets. 3.4 JV1/JV2 Facilities. Seller holds good and marketable title to, and is in possession of, the JV1/JV2 Facilities, free and clear of any Liens, except for Permitted Title Exceptions. No part of the JV1/JV2 Facilities is subject to any real property lease. To the Knowledge of Seller, the current use and operation of the JV1/JV2 Facilities are in compliance in all material respects with all Applicable Laws (including Environmental Laws and Laws relating to zoning and land use) and public and private covenants and restrictions. Seller has not received any notice of material non-compliance with any Applicable Laws with respect to the possession or operation of the JV1/JV2 Facilities. There is no pending or, to the Knowledge of Seller, threatened condemnation, expropriation, taking or other form of eminent domain proceeding against all or any portion of the JV1/JV2 Facilities. As of the Closing Date, Seller shall have provided to Purchaser true and complete copies of all documents in Seller’s possession or control that evidence title to and ownership of the JV1/JV2 Facilities. 3.5 No Conflict. The execution, delivery and performance of this Agreement and the Ancillary Agreements by Seller do not and will not (a) breach, violate or conflict with any provision   -6- -------------------------------------------------------------------------------- of the charter documents of Seller, as amended to date, (b) conflict with or violate any material law, rule, regulation, order, writ, judgment, injunction, decree, determination or award applicable to Seller or the Purchased Assets, (c) result in the creation or imposition of any Lien on any of the Purchased Assets or (d) prohibit consummation by Seller of the transactions contemplated by the Transaction Agreements. No consent, approval or authorization of or filing with any Governmental Authority, or any other Person, is required to be made or obtained by Seller in connection with the execution, delivery and performance of this Agreement or the Ancillary Agreements, and the consummation of the transactions contemplated hereby and thereby. 3.6 Litigation. There is no Action pending or, to the Knowledge of Seller, threatened against, relating to or affecting (i) the Purchased Assets or (ii) the transactions contemplated by this Agreement and the Ancillary Agreements. There is no judgment, order, writ or decree that relates to or affects the Purchased Assets or Seller’s ability to consummate the Transaction. 3.7 Insurance. Set forth on Section 3.7 of the Seller’s Disclosure Schedule is a list of Seller’s material policies of insurance which insure the Purchased Assets. To the Knowledge of Seller, there are no material claims by Seller pending or threatened with respect to the Purchased Assets under said policies or disputes with underwriters, and all premiums due and payable have been paid and all such policies are in full force and effect in accordance with their respective terms. 3.8 Brokers’ or Finders’ Fees. Seller has not incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders’ fees or agents’ commissions or any similar charges in connection with the Transaction Agreements or any transaction contemplated by the Transaction Agreements. Seller has not taken any action or entered into any agreement or understanding that will cause Purchaser to incur any of the foregoing liabilities. 3.9 Permits. Seller has obtained all material permits and other authorizations (collectively, “Permits”) necessary for the ownership, operation and use of the Purchased Assets in substantially the same manner as currently owned, operated and used and each Permit is valid and remains in full force and effect. Seller is not in default (nor has Seller failed to comply), nor has Seller received any notice of any claim of default or failure to comply, with respect to any Permit. 3.10 Assigned Leases and Assigned Contracts. Each of the Assigned Leases and Assigned Contracts is in full force and effect and each constitutes a legal, valid and binding agreement of Seller and, to Seller’s Knowledge, of each other party thereto, enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency, and the relief of debtors and other laws of general application affecting enforcement of creditor’ rights generally and rules of law governing specific performance, injunctive relief and other equitable remedies, and no term or condition thereof has been amended from the form provided to Purchaser. There are no material defaults by Seller under any of its obligations under any of the Assigned Leases or Assigned Contracts and no events have occurred that with the lapse of time or action or inaction by any party thereto would result in any material violations thereof or any material defaults thereunder. There is no action to which Seller is a party in which relief is sought involving, affecting or relating in any manner to any of the Assigned Leases or Assigned Contracts and, to the Knowledge of Seller, there is no litigation, action, suit, proceeding or governmental investigation pending or threatened against Seller involving , affecting or relating to any of the Assigned Leases or Assigned Contracts. None of Seller’s rights under any of the Assigned Leases or Assigned Contracts will be materially impaired by the consummation of the transactions contemplated by this Agreement, and all such rights will inure to and be enforceable by Purchaser after the Closing Date without any authorization, approval, permission or license of, or filing with, any other Person.   -7- -------------------------------------------------------------------------------- 3.11 Environmental Matters. To the Knowledge of Seller, since June 30, 2003: (a) Seller has not Handled or Released any Hazardous Substances at, on, under, to or from the JV1/JV2 Facilities in violation of any applicable Environmental Law, or that has resulted in, or could reasonably be expected to result in, any Liability or potential Liability under any Environmental Law. (b) No Release of any Hazardous Substance has occurred, or is occurring, at, on, under, from or to the JV1/JV2 Facilities, and no Hazardous Substances are present on, in or under the JV1/JV2 Facilities, regardless of how the Hazardous Substance(s) came to rest there, in violation of any applicable Environmental Law or that could reasonably be expected to result in any Liability under any Environmental Law. (c) No underground tanks are or have been owned or operated by Seller at the JV1/JV2 Facilities. No underground storage tanks, landfills, surface impoundments, waste piles or other land treatment, land storage or disposal areas are or have been located on, in or under any of the JV1/JV2 Facilities, and no PCBs or asbestos-containing materials are located on, in or under any of the JV1/JV2 Facilities. (d) Seller has not received written notice of any assertion by any Governmental Authority or other Person that any of them may be a potentially responsible party in connection with the JV1/JV2 Facilities. There are no proceedings that are pending or threatened by any Governmental Authority or Person relating to the JV1/JV2 Facilities arising under or pursuant to any Environmental Law. Seller has not received any written notice from any Governmental Authority or Person that is outstanding or has not been resolved and no condition or circumstance exists, that (with or without notice or lapse of time or both) would reasonably be likely to give rise to, or serve as a basis for, the commencement of any such proceeding. Seller has not entered into or received, nor is Seller in default under, any judgment, writ order or decree of any Governmental Authority under any Environmental Law relating to the JV1/JV2 Facilities. (e) There are no closures or substantial modifications to any equipment or facilities used in connection with the Handling or Release of Hazardous Substances (including wastewater) at the JV1/JV2 Facilities currently planned by Seller in order to avoid any violation of any applicable Environmental Law; there are no operational changes at the JV1/JV2 Facilities currently planned by Seller that could reasonably be expected to require any such closures or modifications; and no such closures or modifications are required to effect the transactions contemplated hereby. (f) No Lien has arisen or is threatened on or against any of the Purchased Assets under or as a result of a violation of, or any other Liability under, any Environmental Laws. 3.12 No Other Agreements. Seller does not have any legal obligation, absolute or contingent, to any Person other than Purchaser to sell, assign, lease or sublease or otherwise transfer, convey or place any Lien on any of the Purchased Assets, other than dispositions of Inventory in the ordinary course of business.   -8- -------------------------------------------------------------------------------- 3.13 Absence of Changes. Since March 31, 2006, (a) the Purchased Assets have been owned and operated in all material respects in the ordinary course consistent with past practice and (b) there has been no change or event relating to the Purchased Assets which, individually or in the aggregate, is reasonably likely to have a Material Adverse Effect. 3.14 Warranty Claims. Since June 30, 2003, product warranty claims made with respect to products fabricated at the JV1/JV2 Facilities have not exceeded an aggregate of five million dollars (US$5,000,000) for any particular product. 3.15 Value of Assets. Section 3.15 of the Seller’s Disclosure Schedule sets forth the net book value of the tangible Purchased Assets (other than Inventory) as of the end of the Seller’s fiscal year immediately preceding the date of this Agreement; provided, however, that with respect to any Purchased Assets acquired by Seller subsequent to that date, Section 3.15 of Seller’s Disclosure Schedule sets forth (i) the net book value of such Purchased Assets as of the end of the Seller fiscal quarter immediately preceding the date of this Agreement or (ii) if acquired subsequent to such date, the net book value of such Purchased Assts as of the date of their acquisition. 3.16 Disclosure. Seller has provided Purchaser true and complete copies of all documents and information possessed by it requested in writing by Purchaser relating to the Purchased Assets. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser represents and warrants to Seller that the following are true and correct as of the date hereof: 4.1 Organization and Standing. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of Japan. 4.2 Authority; Enforceability. Purchaser has the requisite corporate power and corporate authority to enter into the Transaction Agreements and to carry out the Transaction. All corporate proceedings required to be taken by Purchaser to authorize the execution, delivery and performance of the Transaction Agreements and the consummation of the Transaction have been or will be as of the Closing properly taken. This Agreement has been duly and validly executed and delivered by Purchaser and constitutes, and each of the Ancillary Agreements after the Closing will have been duly and validly executed and delivered by Purchaser and will constitute, a valid and binding obligation of Purchaser, enforceable against it in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency, and the relief of debtors and other laws of general application affecting enforcement of creditors’ rights generally and rules of law governing specific performance, injunctive relief and other equitable remedies. 4.3 No Conflict. The execution, delivery and performance of this Agreement and the Ancillary Agreements by Purchaser do not and will not (a) breach, violate or conflict with any provision of the charter documents of Purchaser, as amended to date, (b) conflict with or violate any material law, rule, regulation, order, writ, judgment, injunction, decree, determination or award   -9- -------------------------------------------------------------------------------- applicable to Purchaser or (c) prohibit consummation by Purchaser of the transactions contemplated by the Transaction Agreements. No consent, approval or authorization of or filing with any Governmental Authority, or any other Person, is required to be made or obtained by Purchaser in connection with the execution, delivery and performance of this Agreement or the Ancillary Agreements, and the consummation of the transactions contemplated hereby and thereby. 4.4 Brokers’ or Finders’ Fees. Purchaser has not incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders’ fees or agents’ commissions or any similar charges in connection with the Transaction Agreements or any transaction contemplated by the Transaction Agreements. Purchaser has not taken any action or entered into any agreement or understanding that will cause Seller to incur any of the foregoing liabilities. 4.5 Litigation. There is no Action pending or, to the Knowledge of Purchaser, threatened against, relating to or affecting the transactions contemplated by this Agreement and the Ancillary Agreements. ARTICLE 5 COVENANTS 5.1 Operation of the Business. Seller agrees, prior to the Closing, to operate the Purchased Assets in the ordinary course of business and, without the prior written consent of Purchaser, such consent to not be unreasonably withheld or delayed, shall not: (a) mortgage, pledge or allow any Lien (other than Permitted Liens) on any of the Purchased Assets; (b) except for dispositions of Inventory in the ordinary course of business, sell, license, assign or transfer any of the Purchased Assets; or (c) enter into any agreement or commitment to do any of the actions set forth in (a) or (b) above. Seller further agrees, prior to Closing, to use its commercially reasonable efforts (i) to maintain the Tangible Assets in good operating condition, subject only to ordinary wear and tear, (ii) to maintain the Inventory in usable and saleable condition, and (iii) to promptly inform Purchaser of any destruction, damage to or loss of any of the Purchased Assets that would have, or would be reasonably expected to have, a Material Adverse Effect. Seller further agrees, prior to the Closing, to transfer or otherwise make available to Purchaser, at Purchaser’s sole expense, the benefit of all warranties and similar protections applicable to the Tangible Assets, to the extent such warranties and protections may be transferred or otherwise made available to Purchaser. As soon as possible following the execution of this Agreement, Purchaser and Seller will establish a manufacturing transition team, which will meet and confer at mutually agreed times and as necessary or appropriate with the goal of ensuring that the manufacturing and related operations at the JV1/JV2 Facilities can be effectively and efficiently transitioned to Purchaser’s operation and control at the Closing. 5.2 Equipment Leases. With respect to the equipment used in the JV1/JV2 Facilities up to the date of this Agreement, which equipment is leased or rented by Seller pursuant to agreements which expire more than six (6) months after the Closing Date, as set forth on Schedule 5.2 attached hereto, Seller shall assign such leases (the “Assigned Leases”) to Purchaser and Purchaser shall accept such assignment and assume all obligations thereunder. Seller shall be responsible for obtaining any consents required for the foregoing assignments. With respect to equipment leases that expire less than six (6) months after the Closing Date, as set forth on Schedule 5.2 attached hereto, Seller shall use commercially reasonable efforts to extend the term of the applicable agreement through the date which is six (6) months after the Closing Date, as requested by Purchaser. Purchaser shall use its commercially reasonable efforts to renegotiate the terms of such agreement or   -10- -------------------------------------------------------------------------------- enter into new lease agreement with the lessor. To the extent Purchaser is unable to execute new leases at the Closing Date, Seller shall assign such extended leases to Purchaser (such leases also being “Assigned Leases”) and Purchaser shall accept such assignment and assume all obligations under such Assigned Leases. Seller shall be responsible for obtaining any consents required for the foregoing assignments. 5.3 Other Agreements. Seller shall use commercially reasonable efforts to assign the Assigned Contracts to Purchaser. Such Assigned Contracts, together with the agreements set forth on Schedule 5.3, represent all software license agreements, equipment maintenance agreements or other agreements for products or services that are reasonably necessary for Purchaser to operate the JV1/JV2 Facilities and the Tangible Assets in substantially the same manner as operated by Seller as of the date of this Agreement and as of the Closing (other than with respect to rights or services provided to Purchaser by Seller (or an Affiliate of Seller) pursuant to agreements between the parties or the Ancillary Agreements). 5.4 Access. (a) Prior to the Closing, Seller shall provide Purchaser with reasonable access during normal business hours to the Purchased Assets and information reasonably related thereto and to the Transaction as Purchaser may reasonably request. While visiting in the JV1/JV2 Facilities, Purchaser shall at all times fully comply with Seller’s plant rules and regulations provided to Purchaser as well as all reasonable instructions that may be issued by Seller’s employees or personnel accompanying such employees or representatives of Purchaser. Each party shall, at its own expense, indemnify and hold harmless the other party and its employees from and against any and all direct losses or damages without limitation to any of the other party’s property or loss of personal health or life, caused by the indemnifying party’s representatives during any such visit. Without limiting the generality of the foregoing, Purchaser shall perform a final due diligence review of the Purchased Assets within five (5) business days prior to the Closing, solely for the purpose of confirming (i) the condition and existence of the Purchased Assets at the time of Closing, (ii) that there has been no Material Adverse Effect and (iii) the amounts of Inventory (including work-in-process) and raw materials located at the JV1/JV2 Facilities. Seller shall use commercially reasonable efforts to locate and provide any of the information requested by Purchaser, and Purchaser shall use its commercially reasonable efforts to minimize any disruption to Seller’s business in connection with the conduct of the process contemplated herein. Seller shall receive reasonable advance notice of and shall have the right to participate in, any discussions Purchaser might have with any foreign, federal or state Governmental Authorities about Seller or the Purchased Assets. (b) Following the Closing, upon Purchaser’s reasonable request and at Purchaser’s expense, Seller shall use commercially reasonable efforts to provide to Purchaser copies of any books, records and/or documents that are not Purchased Assets but that are useful for Purchaser to operate the JV1/JV2 Facilities and the Tangible Assets, and to perform the Assigned Leases, in substantially the same manner as operated by Seller as of the date of this Agreement and as of the Closing Date. (c) Notwithstanding anything in this Section to the contrary, under no circumstances shall Seller be required to provide to Purchaser or its Representatives access to any privileged attorney-client communications or work product of Seller. With respect to   -11- -------------------------------------------------------------------------------- information covered by existing confidentiality agreements between Seller and third parties, Seller and Purchaser will make commercially reasonable efforts to obtain waivers or otherwise allow for Seller to disclose such information to Purchaser. 5.5 Approvals and Consents. The Parties agree to use commercially reasonable efforts to take promptly, or cause to be taken, all actions, and to do promptly, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the Transaction, to obtain all necessary waivers, consents and approvals and to effect all necessary registrations and filings and to remove any injunctions or other impediments or delays, legal or otherwise, in order to consummate and make effective the Transaction for the purpose of securing to the Parties hereto the benefits contemplated by this Agreement. Such waivers, consents and approvals that are necessary to avoid a Material Adverse Effect are listed on Schedule 5.5 attached hereto (the “Material Consents”). 5.6 Insurance. Seller shall maintain the insurance policies listed in Section 3.7 of Seller’s Disclosure Schedule in full force and effect, including the full and timely payment of all applicable premiums, through the Closing. 5.7 Inventory. Seller shall have on hand at the JV1/JV2 Facilities and, other than with respect to raw materials, transfer to Purchaser hereunder at the Closing, sufficient Inventory and raw materials to permit Purchaser to fabricate products so as to satisfy (i) that portion of Seller’s initial purchase order under the Foundry Agreement to be delivered within forty-five (45) days after the Closing and (ii) that portion of Purchaser’s then-current purchase order under the Foundry Agreement dated as of March 31, 2005 between Purchaser and Seller to be delivered within forty-five (45) days after the Closing. Schedule 5.7 attached hereto lists the vendors of the raw materials utilized at the JV1/JV2 Facilities as of the date of this Agreement and the raw materials supplied by each such vendor. The manufacturing transition team referenced in Section 5.1 above will meet periodically, but no less than monthly, to review and address any issues with respect to the foregoing Inventory, work-in-process and raw materials with the goal of ensuring that Seller complies with the covenants contained in this Section 5.7. Without limiting the generality of the foregoing, the manufacturing transition team will discuss and determine whether, in light of the applicable lead times for ordering raw materials, any additional raw materials are required for the effective and efficient transition of manufacturing and related operations at the JV1/JV2 Facilities to Purchaser’s operation and control at the Closing. 5.8 Further Assurances. After the Closing, each Party will, at the reasonable request of the other Party, and without further consideration, execute and deliver such other instruments of sale, transfer, conveyance, assignment and confirmation, and take such other action, as the other Party may reasonably deem necessary in order to transfer, convey and assign the Purchased Assets to Purchaser and to assign the Assumed Liabilities to Purchaser. 5.9 Lease Financing. Purchaser and Seller shall, as promptly as reasonably practicable and in no event later than December 31, 2006, use their commercially reasonable efforts to obtain alternate lease financing in form reasonably acceptable to Purchaser for the equipment that is currently leased pursuant to the Master Rental Agreement (Contract No. LFLEAA05), dated July 16, 2003, by and between GE Capital Leasing K.K. and Spansion Japan. (the “GE Lease”), which equipment is listed in Part B of Exhibit 1 to Exhibit C to the Master Lease Agreement, such that Purchaser shall have the right to lease such equipment for a Monthly Rental amount (as defined in the Master Lease Agreement) equal to the Japan GAAP depreciation amount. In the event that such   -12- -------------------------------------------------------------------------------- financing cannot be obtained as provided above, Seller shall purchase the foregoing equipment no later than December 31, 2006 and lease such equipment to Purchase under Schedule No. 1 to the Master Lease Agreement for a Monthly Rental amount (as defined therein) equal to the Japan GAAP depreciation amount. 5.10 Other Ancillary Agreements. Purchaser and Seller shall use their commercially reasonable efforts to finalize forms of a Services Agreement, Sort Services Agreement and Wafer Processing Services Agreement within thirty (30) days from the date of this Agreement that are reasonably acceptable to Purchaser and Seller. ARTICLE 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER The obligations of Seller to be discharged under this Agreement on or prior to the Closing are subject to satisfaction of the following conditions at or prior to the Closing (unless expressly waived in writing by Seller at or prior to the Closing). 6.1 Assignment and Assumption Agreement. Purchaser shall have executed the Assignment and Assumption Agreement and any other certificates, instruments or documents required pursuant to the provisions of this Agreement or otherwise necessary to transfer the Assumed Liabilities to Purchaser in accordance with the terms hereof and consummate the Transaction. 6.2 No Legal Action. No Action relating to the Transaction will have been instituted or threatened before any court or by any Governmental Authority which presents a substantial risk of the restraint or prohibition of the Transaction or the obtaining of material damages or other material relief in connection therewith. 6.3 Accuracy of Representations and Warranties. Each of the representations and warranties of Purchaser contained in this Agreement or in any other document or agreement referenced in this Agreement and signed or delivered by or on behalf of Purchaser shall be true and correct in all material respects as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date. 6.4 Performance of Obligations. Purchaser shall have in all material respects performed and complied with all of the agreements, covenants and obligations required under this Agreement (including each of the Exhibits hereto attached) to be performed or complied with by Purchaser prior to or at the Closing. 6.5 Governmental Approvals. All filings that are required, if any, to have been made by the Parties with any Governmental Authority in order to carry out this Agreement shall have been made and all authorizations, consents and approvals from any Governmental Authority required to carry out this Agreement shall have been received and any applicable waiting periods shall have expired. 6.6 Compliance Certificate. Purchaser shall have delivered to Seller a certificate, executed by the appropriate officers of Purchaser, certifying that the conditions specified in Sections 6.3 through 6.5 (insofar as they are to be performed by Purchaser) have been fulfilled.   -13- -------------------------------------------------------------------------------- 6.7 Consents and Waivers. Seller shall have obtained the Material Consents. 6.8 Ancillary Agreements. Purchaser shall have executed the Ancillary Agreements, including a Services Agreement, Sort Services Agreement and Wafer Processing Services Agreement in forms reasonably acceptable to Seller. 6.9 Agreements to be Terminated. The agreements set forth on Schedule 6.9 shall be terminated and shall be of no further force and effect. ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER The obligations of Purchaser to be discharged under this Agreement on or prior to the Closing are subject to satisfaction of the following conditions at or prior to the Closing (unless expressly waived in writing by Purchaser at or prior to the Closing). 7.1 Conveyance. Seller will have executed and delivered to Purchaser the Bill of Sale and any other certificates, instruments or documents required pursuant to the provisions of this Agreement or otherwise necessary to transfer the Purchased Assets to Purchaser in accordance with the terms hereof and consummation of the Transaction. 7.2 No Legal Action. No Action relating to the Transaction will have been instituted or threatened before any court or by any Governmental Authority which presents a substantial risk of the restraint or prohibition of the Transaction or the obtaining of material damages or other material relief in connection therewith or which could materially adversely affect the ability of Purchaser to own and operate the Purchased Assets. 7.3 Accuracy of Representations and Warranties. Each of the representations and warranties of Seller contained in this Agreement or in any other document or agreement referenced in this Agreement and signed or delivered by or on behalf of Seller shall be true and correct in all material respects as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date. 7.4 Performance of Obligations. Seller shall have in all material respects performed and complied with all of the agreements, covenants and obligations required under this Agreement (including each of the Exhibits hereto attached) to be performed or complied with by Seller prior to or at the Closing. 7.5 Consents and Waivers. Seller shall have obtained all Material Consents. 7.6 Governmental Approvals. All filings that are required, if any, to have been made by the Parties with any Governmental Authority in order to carry out this Agreement shall have been made and all authorizations, consents and approvals from any Governmental Authority required to carry out this Agreement shall have been received and any applicable waiting periods shall have expired.   -14- -------------------------------------------------------------------------------- 7.7 Compliance Certificate. Seller shall have delivered to Purchaser a certificate, executed by the appropriate officers of Seller, certifying that the conditions specified in Sections 7.3 and 7.6 (insofar as they are to be performed by Seller) have been fulfilled. 7.8 Ancillary Agreements. Seller shall have executed the Ancillary Agreements, including a Services Agreement, Sort Services Agreement and Wafer Processing Services Agreement in forms reasonably acceptable to Purchaser. 7.9 Material Adverse Effect. There shall not have been a Material Adverse Effect. 7.10 Inventory. The Inventory, work-in-process and raw materials on hand at the JV1/JV2 Facilities and transferred to Purchaser hereunder shall conform to the description thereof set forth in Section 5.7 above in all material respects. 7.11 Equipment Leases. The expiration date of each of the Assigned Leases, other than the GE Lease, shall occur no less than six (6) months following the Closing Date. 7.12 Agreements to be Terminated. The agreements set forth on Schedule 6.9 shall be terminated and shall be of no further force and effect. 7.13 Seconded Employees. At least ninety-five percent (95%) of the employees set forth on Schedule 2.1.3 of the Secondment and Transfer Agreement in the form attached as Exhibit E as to each of (i) Engineers/Staff and (ii) Operator/Maintainer/Technician/Engineering Assistant (or in either case their comparable replacements) shall be available for secondment to Purchaser on the Closing Date. ARTICLE 8 CONFIDENTIAL INFORMATION; PUBLIC COMMUNICATIONS 8.1 Non-Disclosure. The Parties acknowledge that Seller and Purchaser have previously executed a non-disclosure agreement dated January 25, 2006 (the “Confidentiality Agreement”), which Confidentiality Agreement is hereby incorporated herein by reference and shall continue in full force and effect in accordance with its terms. 8.2 Public Communications. The initial press releases with respect to the execution of this Agreement shall be reasonably acceptable to Seller and Purchaser. ARTICLE 9 INDEMNIFICATION 9.1 Survival of Representations and Covenants. (a) The representations and warranties of the Parties in this Agreement shall survive the Closing: (a) indefinitely, with respect to Sections 3.2 and 4.2; (b) for a period of five (5) years, with respect to Section 3.11; and (c) for a period of eighteen (18) months, with respect to all other representations and warranties.   -15- -------------------------------------------------------------------------------- (b) The representations, warranties, covenants and obligations of the respective Parties, and the rights and remedies that may be exercised by any of them, shall not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by, or the knowledge of, any of the Parties or any of their Representatives. 9.2 Indemnification by Seller. (a) Subject to the provisions of this Section 9.2 and Sections 9.1 and 9.5, Seller shall hold harmless and indemnify Purchaser from and against, and shall compensate and reimburse Purchaser for, any Damages which are suffered or incurred by Purchaser (regardless of whether or not such Damages relate to any third-party claim) arising or resulting from: (i) any breach of any representation or warranty made by Seller in this Agreement or any other Transaction Agreement (except for the Foundry Agreement); (ii) any breach of any covenant or obligation of Seller contained in this Agreement or any other Transaction Agreement (except for the Foundry Agreement); and (iii) any Liabilities that are not Assumed Liabilities, including (without limitation) all Excluded Liabilities (provided that Seller shall have no obligation to indemnify Purchaser with respect to any Excluded Liabilities that arise from violations of Environmental Laws that relate to, arise out of or are incurred in connection with Seller’s use, operation or possession of the JV1/JV2 Facilities or the Purchased Assets prior to June 30, 2003 or after the Closing). (b) Seller’s maximum liability under this Section 9 for breaches of representations and warranties under this Agreement and under any other Transaction Agreement (other than the Foundry Agreement) shall be limited to four billion two hundred sixty-seven million five hundred ninety-nine thousand four hundred twenty (4,267,599,420) Japanese Yen; provided, however, that the foregoing limitation shall not apply to (i) any Excluded Liabilities (provided that Seller shall have no obligation to indemnify Purchaser with respect to any Excluded Liabilities that arise from violations of Environmental Laws that relate to, arise out of or are incurred in connection with Seller’s use, operation or possession of the JV1/JV2 Facilities or the Purchased Assets prior to June 30, 2003 or after the Closing) or (ii) any Damages arising from Seller’s fraud. (c) Seller is not required to make any indemnification payment hereunder for breaches of representations and warranties unless a claim is initiated prior to expiration of the applicable survival period set forth in Section 9.1(a). (d) Seller shall not be required to make any indemnification payment hereunder for breaches of representations and warranties in this Agreement or any other Transaction Agreement unless the Damages for all such breaches exceed, in the aggregate, at least twenty-five million (25,000,000) Japanese Yen, in which event Seller shall be required to pay all such Damages.   -16- -------------------------------------------------------------------------------- 9.3 Indemnification by Purchaser. (a) Subject to the provisions of this Section 9.3 and Sections 9.1 and 9.5, Purchaser shall hold harmless and indemnify Seller from and against, and shall compensate and reimburse Seller for, any Damages which are suffered or incurred by Seller (regardless of whether such Damages relate to any third-party claim), arising or resulting from: (i) any breach of any representation or warranty made by Purchaser in this Agreement or any other Transaction Agreement (except for the Foundry Agreement); (ii) the Assumed Liabilities; and (iii) any breach of any covenant or obligation of Purchaser contained in this Agreement or any other Transaction Agreement (except for the Foundry Agreement). (b) Purchaser’s maximum liability under this Section 9 for breaches of representations and warranties in this Agreement and under any other Transaction Agreement (other than the Foundry Agreement), shall be limited to four billion two hundred sixty-seven million five hundred ninety-nine thousand four hundred twenty (4,267,599,420) Japanese Yen; provided, however, that the foregoing limitation shall not apply to (i) any Assumed Liabilities or (ii) any Damages arising from Purchaser’s fraud. (c) Purchaser is not required to make any indemnification payment hereunder for breaches of representations and warranties unless a claim is initiated prior to expiration of the applicable survival period set forth in Section 9.1(a). (d) Purchaser shall not be required to make any indemnification payment hereunder for breaches of representations and warranties in this Agreement or any other Transaction Agreement unless the Damages for all such breaches exceed, in the aggregate, at least twenty-five million (25,000,000) Japanese Yen, in which event Purchaser shall be required to pay all such Damages. 9.4 Defense of Third-party claims. In the event of the assertion or commencement by any Person of any Action (whether against Purchaser, Seller or any other Person) with respect to which a Party hereto is obligated hereunder to indemnify, hold harmless, compensate or reimburse any Person pursuant to this Section 9, the party to be indemnified (the “Indemnified Party”) shall reasonably promptly, but in any event within fifteen (15) days following the Indemnified Party’s actual knowledge thereof, notify the Person providing the indemnification hereunder (the “Indemnifying Party”) of such Action by providing notice to the Indemnifying Party; provided, however, the failure to give such notice shall not affect the obligations of the Indemnifying Party hereunder except to the extent the Indemnifying Party was materially prejudiced thereby. The Indemnifying Party shall have the right, at its election, to assume the defense of such Action at its sole expense. In the absence of any such election, the Indemnified Party may proceed with the defense of such Action, and the Indemnifying Party shall bear and pay all costs and expenses (including reasonable attorneys’ fees and costs) in connection with the Indemnified Party’s defense of any such Action (whether or not incurred by the Indemnified Party).   -17- -------------------------------------------------------------------------------- (a) If the Indemnifying Party assumes the defense of any such Action as provided for above: (i) the Indemnifying Party shall proceed to defend such Action in a diligent manner with counsel reasonably satisfactory to the Indemnified Party; (ii) the Indemnifying Party shall keep the Indemnified Party reasonably informed of all material developments and events relating to such Action; (iii) the Indemnified Party shall make available to the Indemnifying Party any documents and materials in the possession or control of the Indemnified Party that may be necessary to the defense of such Action; (iv) the Indemnified Party shall have the right to participate in the defense of such Action at its own expense; and (v) unless the settlement involves solely cash payments, the Indemnifying Party shall not settle, adjust or compromise such Action without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld or delayed. (b) If the Indemnified Party proceeds with the defense of any such Action: (i) all expenses reasonably incurred by or on behalf of the Indemnified Party and relating to the defense of such Action shall be borne and paid exclusively by the Indemnifying Party; (ii) the Indemnifying Party shall make available to the Indemnified Party any documents and materials in the possession or control of the Indemnifying Party that may be necessary to the defense of such Action; (iii) the Indemnified Party shall keep the Indemnifying Party reasonably informed of all material developments and events relating to such Action; and (iv) the Indemnified Party shall not settle, adjust or compromise such Action without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. 9.5 Insurance Proceeds. To the extent any claim is covered by insurance held by the Indemnified Party, such Indemnified Party shall be entitled to indemnification pursuant to Article 11 only with respect to the amount of Damages that are in excess of the cash proceeds received by such Indemnified Party pursuant to such insurance. If such Indemnified Party receives such cash insurance proceeds prior to the time such claim is paid, then the amount payable by the Indemnifying Party pursuant to such claim shall be reduced by the amount of such insurance proceeds covering the claim. If such Indemnified Party receives such cash insurance proceeds after such claim is paid, then upon receipt by the Indemnified Party of any cash proceeds of such insurance with respect to such claim, such Indemnified Party shall repay any portion of such amount which was previously paid by the Indemnifying Party to the Indemnified Party in satisfaction of such claim.   -18- -------------------------------------------------------------------------------- 9.6 Sole Remedy. Other than rights to equitable relief and, to the extent available under applicable law, claims for fraud, the sole remedy available to any Indemnified Party for breaches of this Agreement shall be limited to the rights set forth in this Article 9. In no event will any other Person except the named Indemnified Parties have any rights to any payments whatsoever. ARTICLE 10 TERMINATION OF THIS AGREEMENT 10.1 Termination. This Agreement and the Transaction may be terminated at any time prior to the Closing: (a) by mutual written consent of Seller and Purchaser; (b) by Seller if it is not in material breach of its respective representations, warranties, covenants and agreements under this Agreement and there has been a material breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of Purchaser and (i) Purchaser has not cured such breach within thirty (30) days after notice of such breach to Purchaser (provided however, that, no cure period shall be required for a breach which by its nature cannot be cured) and (ii) as a result of such breach any of the conditions set forth in Article 6 would not be satisfied prior to the Closing Date; (c) by Purchaser if it is not in material breach of its respective representations, warranties, covenants and agreements under this Agreement and there has been a material breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of Seller and (i) Seller has not cured such breach within thirty (30) days after notice of such breach to Seller (provided however, that, no cure period shall be required for a breach which by its nature cannot be cured) and (ii) as a result of such breach any of the conditions set forth in Article 7 would not be satisfied prior to the Closing Date; (d) by either party by written notice after July 31, 2007; provided, however, that the right to terminate this Agreement under this Section 10.1(d) shall not be available to any Party whose willful failure to fulfill any obligation hereunder has been the cause of, or resulted in, the failure of the Closing to occur on or before such date; (e) by either Party by written notice if there shall be a final nonappealable order of a federal or state court of competent jurisdiction in effect preventing consummation of the Transaction; or (f) by either Party by written notice if there shall be any statute, rule, regulation or order enacted, promulgated or issued or deemed applicable to the Transaction by any Governmental Authority that would make consummation of such transactions illegal.   -19- -------------------------------------------------------------------------------- ARTICLE 11 GENERAL PROVISIONS 11.1 Payment of Expenses. Except as otherwise provided in this Agreement, Seller and Purchaser will each bear its own expenses incurred in connection with this Agreement and the consummation of the Transaction, including the fees and expenses of attorneys, accountants, brokers, finders and any other advisors engaged by each Party. 11.2 Relationship of the Parties. Seller and Purchaser will at all times be independent contractors, and nothing in this Agreement will be construed as creating a joint venture, partnership or agency relationship between the Parties. 11.3 Notices. Any notice or other communication required or permitted to be delivered to any party under this Agreement shall be in writing and shall be deemed properly delivered, given and received when delivered (by hand, by registered mail, by courier or express delivery service or by telecopier) to the address or telecopier or facsimile number set forth beneath the name of such Party below (or to such other address or telecopier number as such Party shall have specified in a written notice given to the other Party hereto): if to Purchaser, to: Fujitsu Limited 1-1, Kamikodanaka 4-chome Nakahara-ku Kawasaki 211-8588 Japan Attention: President Telephone: (042) 532-1400 Facsimile: (042) 532-2400 with a copy (which shall not constitute notice) to: Morrison & Foerster, LLP Attention: Kenneth A. Siegel AIG Building, 11F 1-1-3 Marunouchi Chiyoda-ku, Tokyo 100-0005 Japan Telephone: (03) 3214-6522 Facsimile: (03) 3214-6512 if to Seller, to: Spansion Japan Limited 1-14 Nisshin-Cho Kawasaki-ku, Kawasaki-shi Kanagawa 210-0024   -20- -------------------------------------------------------------------------------- Japan Attention: President Telephone: +81-44-223-1716 Facsimile: +81-44-223-1800 with a copy (which shall not constitute notice) to: Spansion Inc. (for Spansion Inc., Spansion Technology Inc. and Spansion LLC) Attention: General Counsel 915 DeGuigne Drive PO Box 3453, M/S 251 Sunnyvale, California 94088 USA Telephone: (408) 962-2500 Facsimile: (408) 616-6659 and with a copy (which shall not constitute notice) to: Latham & Watkins LLP Attention: Tad J. Freese 140 Scott Drive Menlo Park, California 94025 USA Telephone: (650) 328-4600 Facsimile: (650) 463-2800 11.4 Governing Law; Dispute Resolution. This Agreement will be governed by and construed, and the rights and obligations of the Parties shall be determined, in accordance with the laws of Japan without giving effect to principles of conflict of laws. If any Party to a dispute or controversy concerning the rights, benefits or obligations set forth in this Agreement determines that a reasonable attempt at settlement has failed, binding arbitration conducted in accordance with the dispute resolution procedure set forth in Schedule B attached hereto shall be the exclusive and final forum for settling any disagreement, dispute, controversy or claim arising out of or in any way related to this Agreement or the subject matter thereof or the interpretation hereof or any arrangements relating hereto or contemplated herein or the breach, termination or invalidity hereof. 11.5 Assignability; Third-Party Rights. This Agreement shall be binding upon Seller and its successors and permitted assigns (if any) and Purchaser and its successors and permitted assigns (if any). This Agreement shall inure to the benefit of Seller and Purchaser and their respective successors and permitted assigns (if any). Subject to Section 11.17 below, this Agreement may not be assigned by either Party without the prior written consent of the other Party. Nothing in this Agreement, express or implied, will be deemed to confer upon any other Person, any rights or remedies under, or by reason of, this Agreement. 11.6 Remedies Cumulative; Specific Performance. Except as otherwise provided in this Agreement, the rights and remedies of the parties hereto shall be cumulative (and not alternative). The Parties agree that, in the event of breach or threatened breach of the provisions of this Agreement, the damage or imminent damage to the value and the goodwill of the non-breaching   -21- -------------------------------------------------------------------------------- Party and such Party’s business will be irreparable and extremely difficult to estimate, making any remedy at law or in damages inadequate. Accordingly, the Parties agree that the non-breaching Party shall be entitled to seek injunctive relief against the breaching Party in the event of any breach or threatened breach of such provisions and to enforce specifically this Agreement, in addition to any other relief (including damages) available to a Party under this Agreement or under applicable law. 11.7 Waiver. No failure or delay on the part of any Party hereto to exercise any right or remedy under this Agreement shall operate as a waiver of such right or remedy, and no single or partial exercise of any such right or remedy shall preclude any other or further exercise thereof. No Party shall be deemed to have waived any claim arising out of this Agreement, or any right or remedy under this Agreement, unless the waiver of such claim, right or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such Party. 11.8 Amendments. This Agreement may not be amended, modified or supplemented other than by a written instrument duly executed and delivered by a duly authorized officer on behalf of Purchaser and Seller, respectively. 11.9 Headings. The section and other headings contained in this Agreement are for reference purposes only and will not in any way affect the meaning or interpretation of this Agreement. 11.10 Interpretation. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed, as the context indicates, to be followed by the words “but (is/are) not limited to.” Wherever in this Agreement words indicating the plural number appear, such words will be considered as words indicating the singular number and vice versa where the context indicates the propriety of such use. 11.11 Preparation of this Agreement. Each of the Parties hereby acknowledges and agrees that (a) Purchaser and Seller jointly and equally participated in the drafting of this Agreement and all other agreements contemplated hereby, (b) both Purchaser and Seller have been adequately represented and advised by legal counsel with respect to this Agreement and the Transaction and (c) no presumption shall be made that any provision of this Agreement shall be construed against either Party by reason of such role in the drafting of this Agreement and any other agreement contemplated hereby. 11.12 Severability. If any provision of this Agreement or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the Parties hereto. The Parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. 11.13 Entire Agreement. The schedules and exhibits attached hereto are incorporated into this Agreement by reference. This Agreement, the Confidentiality Agreement, the Ancillary Agreements and the schedules and exhibits hereto constitute the entire agreement between the Parties with respect to the subject matter hereof and supersede all prior agreements and understandings both written and oral between the Parties with respect to the subject matter hereof. If there is any discrepancy or inconsistency between the terms of this Agreement and any other agreement executed   -22- -------------------------------------------------------------------------------- by or on behalf of Seller to transfer any of the Purchased Assets or assign any of the Assumed Liabilities, the terms of this Agreement will supersede and replace the terms of any such other agreement with respect to any such discrepancy or inconsistency. 11.14 Counterparts. This Agreement may be executed in counterparts, each of which when so executed will be deemed to be an original, and all such counterparts will together constitute but one and the same instrument. Execution and delivery of this Agreement by exchange of facsimile copies bearing the facsimile signature of a Party shall constitute a valid and binding execution and delivery of this Agreement by such Party. 11.15 No Representations or Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES REGARDING THE STATUS OR CONDITION OF THE PURCHASED ASSETS, WHETHER EXPRESS OR IMPLIED, AND NO WARRANTY OF MERCHANTABILITY, FITNESS FOR INTENDED OR PARTICULAR USE OR OTHERWISE. 11.16 Spansion Guaranties. Spansion U.S., as the sole stockholder of STI and the owner of a sixty percent (60%) membership interest in Spansion LLC, STI, as the owner of a forty percent (40%) membership interest in Spansion LLC, and Spansion LLC, as the sole stockholder of Seller, are parties to this Agreement solely in their capacities as Guarantors. Spansion LLC hereby agrees to take all actions necessary to cause Seller to comply with the terms and conditions of this Agreement. Spansion LLC further hereby guarantees, and shall be fully liable for, Seller’s performance of all of Seller’s obligations hereunder. Spansion U.S. and STI each hereby agrees to take all actions necessary to cause Spansion LLC to comply with the terms of this Section 11.16. Spansion U.S. hereby agrees to take all actions necessary to cause STI to comply with the terms of this Section 11.16. 11.17 Purchaser Subsidiary. At any time prior to the Closing, Purchaser shall have the right, upon prior written notice to Seller, to substitute a majority-owned subsidiary of Purchaser as a party to this Agreement in place of Purchaser, provided that such substitution shall not reliever Purchaser of its obligations under this Agreement. Except as set forth in the preceding sentence, upon any such substitution, such subsidiary shall immediately be deemed to the Purchaser for all purposes of this Agreement. [Remainder of page intentionally left blank.]   -23- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, Purchaser and Seller have each caused this Agreement to be executed as of the date first written above.   “SELLER”   SPANSION JAPAN LIMITED By   /s/ Kazunori Imaoka     Name   Kazunori Imaoka Title   President   “PURCHASER”   FUJITSU LIMITED By   /s/ Hiroaki Kurokawa     Name   Hiroaki Kurokawa Title   President   S-1 -------------------------------------------------------------------------------- Solely for purposes of Section 11.16:   SPANSION INC. By   /s/ Robert C. Melendres     Name   Robert C. Melendres Title   Executive Vice President and General Counsel SPANSION TECHNOLOGY INC. By   /s/ Robert C. Melendres     Name   Robert C. Melendres Title   Executive Vice President and General Counsel SPANSION LLC By   /s/ Robert C. Melendres Name   Robert C. Melendres Title   Executive Vice President and General Counsel   S-2 -------------------------------------------------------------------------------- SCHEDULE A DEFINITIONS As used in this Agreement, the following terms have the following meanings unless the context otherwise requires: (1) “Action” means any suit, litigation, arbitration or administrative proceeding before any Governmental Authority. (2) “Agreement” is defined in the Preamble. (3) “Ancillary Agreements” means the Master Lease Agreement in the form attached as Exhibit C, the Foundry Agreement in the form attached as Exhibit D, the Secondment and Transfer Agreement in the form attached as Exhibit E, and a Services Agreement, a Sort Services Agreement and a Wafer Processing Services Agreement, each in forms reasonably acceptable to Seller and Purchaser. (4) “Applicable Law” means, with respect to a Person, any domestic or foreign, national, federal, territorial, state or local constitution, statute, law (including principles of common law), treaty, ordinance, rule, administrative interpretation, regulation, order, writ, injunction, legally binding directive, judgment, decree or other requirement or restriction of any arbitrator or Government Authority applicable to such Person or any of its affiliates or any of their respective properties, assets, officers, directors, employees, consultants or agents (in connection with such officer’s, director’s, employee’s, consultant’s or agent’s activities on behalf of such Person or any of its affiliates). (5) “Apportioned Obligations” is defined in Section 2.2(c). (6) “Assigned Contracts” is defined in Section 1.1(e). (7) “Assigned Leases” is defined in Section 5.2. (8) “Assumed Liabilities” is defined in Section 1.4. (9) “Closing” is defined in Section 2.3. (10) “Closing Date” is defined in Section 2.3. (11) “Confidentiality Agreement” is defined in Section 8.1. (12) “Damages” means and includes any loss, damage, injury, Liability, claim, demand, settlement, judgment, award, fine, penalty, Tax, fee (including any reasonable legal fee, accounting fee, expert fee or advisory fee), charge, cost (including any cost of investigation) or expense of any nature, provided, however, that in the event of any third-party claims or Action, indemnification for fees and expenses that constitute Damages shall be subject to the limitations in Article 11, and further provided that Damages may arise in connection with either a threatened or pending claim or other Action.   A-1 -------------------------------------------------------------------------------- (13) “Environmental Law” means all Applicable Laws and applicable trade association rules (including the rules of JEITA) which regulate or relate to the protection or clean-up of the environment, the Handling or Release of Hazardous Substances, waste or materials, or other dangerous substances, wastes, pollution or materials (whether gas, liquid or solid), the health and safety of employees, or the preservation or protection of waterways, groundwater, drinking water, air, wildlife, plants or other natural resources. (14) “Excluded Assets” is defined in Section 1.3. (15) “Excluded Liabilities” is defined in Section 1.5. (16) “GE Lease” is defined in Section 5.9. (17) “Governmental Authority” means any court, tribunal, arbitrator or any government or political subdivision thereof, whether foreign, federal, state or county, or any agency, authority, official or instrumentality of any such government or political subdivision. (18) “Guarantors” is defined in the Preamble. (19) “Handling” means any use, generation, storage, treatment, processing, transportation, recycling, disposal, or other handling or disposition of any kind, including the arrangement by contract, agreement or otherwise for such handling or disposition by any other Person. (20) “Hazardous Substance” means any pollutants, contaminants, chemicals, waste; any toxic, infectious, carcinogenic, reactive, corrosive, ignitable or flammable chemical or chemical compound; or any hazardous substance, material or waste, whether solid, liquid or gas, that is subject to regulation, control or remediation under, or which may form the basis of Liability under, any Environmental Laws. “Hazardous Substance” includes, without limitation, any quantity of asbestos in any form, urea formaldehyde, PCB’s, radon gas, crude oil or any fraction thereof, all forms of natural gas, petroleum products, fractions or by-products, radioactive substances, sludges and slag. (21) “Indemnified Party” is defined in Section 9.4. (22) “Indemnifying Party” is defined in Section 9.4. (23) “Inventory” shall mean (i) all work-in-process inventory and (ii) all spare parts, miscellaneous consumables and miscellaneous tangible assets related solely to the JV1/JV2 Facilities or the Tangible Assets. (24) “Japan GAAP” shall mean generally accepted accounting principles as applied in Japan. (25) “JV1/JV2 Facilities” is defined in the Recitals.   A-2 -------------------------------------------------------------------------------- (26) “Knowledge”, with respect to any Person, means the actual knowledge of the executive officers of such Person after reasonable inquiry. (27) “Law” or “law” means any law, statute, rule, regulation, ordinance and other pronouncement having the effect of law of Japan, the United States or any other nation, or any state, county, city or other political subdivision thereof or of any Governmental Authority. (28) “Liability” means any direct or indirect obligation, indebtedness, liability, claim, loss, damage (including punitive or exemplary damages and fines or penalties or interest thereon), deficiency, obligation or responsibility, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise. (29) “Lien” means any lien, including any lien, pledge, hypothecation, mortgage, security interest, claim, lease, charge, option, right of first refusal, easement, servitude, transfer restriction under any stockholder or similar agreement, encumbrance or any other restriction or limitation whatsoever. (30) “Material Adverse Effect” means any change or changes or effect or effects (including work stoppages) that individually or in the aggregate are or may reasonably be expected to be materially adverse to the Purchased Assets or the ownership, possession or use thereof or to Purchaser’s ability to operate the JV1/JV2 Facilities or the Tangible Assets and perform the Assigned Leases and the Assigned Contracts in substantially the same manner as operated and performed by Seller as of the date of this Agreement (excluding any changes in the ordinary course of business) or as of the Closing Date. (31) “Party” means each of Seller and Purchaser. (32) “Permits” is defined in Section 3.9. (33) “Permitted Liens” means (a) Liens for Taxes or charges or claims by a Governmental Authority (i) not yet due and payable, or (ii) being contested in good faith in appropriate Actions, (b) statutory Liens of landlords, Liens of carriers, workmen, repairmen, warehousepersons, mechanics and materialpersons and other similar Liens imposed by law incurred in the ordinary course of business for sums (i) not yet due and payable, or (ii) being contested in good faith in appropriate Actions, (c) Liens incurred or deposits made in connection with workers’ compensation, unemployment insurance and other similar types of social security programs or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return of money bonds and similar obligations, in each case incurred or made in the ordinary course of business, consistent with past practice, (d) easements, covenants, restrictions, rights of way, and other non-monetary imperfections of title or encumbrances that are a matter of public record and do not, individually or in the aggregate, materially affect the marketability of the property subject thereto or materially interfere with the present or proposed use of such property, (e) other encumbrances or minor matters that individually or in the aggregate are not material in amount and do not materially detract from or interfere with the value or the present or intended use of the property to which such encumbrance(s) relate(s), (f) zoning, building or similar restrictions relating to or affecting property which would not, individually or in the aggregate, materially interfere with the   A-3 -------------------------------------------------------------------------------- present use or intended use of the affected property or (g) conditions which would be disclosed by a survey or physical inspection which, in either case, would not individually or in the aggregate materially interfere with the present use or intended use of the affected property. (34) “Permitted Title Exceptions” means (a) Liens for Taxes not yet due and payable or for Taxes being contested in good faith in appropriate Actions; (b) easements, covenants, conditions, restrictions, rights of way, non-monetary encumbrances and non-monetary title defects which do not, individually or in the aggregate, materially interfere with the right or ability of Seller or Purchaser to use or operate the affected property; (c) workmen’s, repairmen’s, mechanics’, carriers’ or other similar Liens arising or incurred in the ordinary course of business for sums (i) not yet due and payable or (ii) being contested in good faith in appropriate actions; (d) zoning, building, or similar restrictions relating to or affecting property which do not, individually or in the aggregate, materially interfere with the right or ability of Seller to use or operate the affected property, (e) Liens affecting the interest of the owner of the land underlying any right of way or easement benefiting the JV1/JV2 Facilities; or (f) conditions which would be disclosed by a current, accurate survey or physical inspection which, in either case, do not individually or in the aggregate materially interfere with the right or ability of Seller to use and operate the affected property in the conduct of Seller’s business. (35) “Person” means any individual, corporation, partnership, limited liability company, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Authority or other entity. (36) “Post-Closing Period” means any taxable period beginning on the day immediately following Closing Date or, in the case of any tax period which commences on the Closing Date, the portion of such period beginning on the Closing Date. (37) “Pre-Closing Period” means the taxable period ending on the day immediately preceding the Closing Date. (38) “Purchased Assets” is defined in Section 1.1. (39) “Purchase Price” is defined in Section 2.1. (40) “Purchaser” is defined in the Preamble. (41) “Release” means any release, threatened release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the environment. (42) “Representatives” means officers, directors, employees, managers, agents, attorneys, accountants, advisors and representatives. (43) “Seller” is defined in the Preamble. (44) “Seller’s Account” is defined in Section 2.1.   A-4 -------------------------------------------------------------------------------- (45) “Seller’s Disclosure Schedule” means a schedule attached hereto and delivered to Purchaser which sets forth exceptions to the representations and warranties contained in Article 3 of this Agreement. (46) “Tangible Assets” is defined in Section 1.1(a). (47) “Tax” (and, with correlative meaning, “Taxes” and “Taxable”) means any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount and any interest on such penalty, addition to tax or additional amount, imposed by any Tax Authority. (48) “Tax Authority” means Governmental Authority responsible for the imposition, assessment or collection of any Tax (domestic or foreign). (49) “Tax Return” shall mean any return, statement, declaration, notice, certificate or other document that is or has been filed with or submitted to, or required to be filed with or submitted to, any Governmental Authority in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Law related to any Tax. (50) “Transaction” shall mean, collectively, the transactions contemplated by this Agreement. (51) “Transaction Agreements” shall mean this Agreement and all other agreements, certificates and instruments executed or contemplated to be executed by Purchaser and/or Seller in connection with the Transaction, including the Ancillary Agreements. (52) “Transfer Taxes” means all federal, state, local or foreign sales, use, transfer, real property transfer, mortgage recording, stamp duty, value-added or similar Taxes that may be imposed in connection with the transfer of Purchased Assets or assumption of Assumed Liabilities, together with any interest, additions to Tax or penalties with respect thereto and any interest in respect of such additions to Tax or penalties.   A-5

Exhibit 10.1 NB&T FINANCIAL GROUP, INC. 2006 EQUITY PLAN (as amended April 25, 2006) 1.00 PURPOSE AND EFFECTIVE DATE 1.01 Purpose. This Plan is intended to foster and promote the long-term financial success of the Company and Related Entities and to increase shareholder value by [1] providing Employees and Directors an opportunity to acquire an ownership interest in the Company and [2] enabling the Company and Related Entities to attract and retain the services of outstanding Employees and Directors upon whose judgment, interest and special efforts the successful conduct of the Group’s business is largely dependent. 1.02 Effective Date. The Plan will be effective upon its adoption by the Board and approval by the affirmative vote of the Company’s shareholders under applicable rules and procedures, including those prescribed under Code §§162(m) and 422. Any Award granted before shareholder approval will be null and void if the shareholders do not approve the Plan within the period just described. Subject to Sections 10.00 and 11.00, the Plan will continue until the tenth anniversary of the date it is adopted by the Board or approved by the Company’s shareholders, whichever is earliest. 2.00 DEFINITIONS When used in this Plan, the following words, terms and phrases have the meanings given to them in this section unless another meaning is expressly provided elsewhere in this document or clearly required by the context. When applying these definitions and any other word, term or phrase used in this Plan, the form of any word, term or phrase will include any and all of its other forms. Act. The Securities Exchange Act of 1934, as amended, or any successor statute of similar effect, even if the Company is not subject to the Act. Annual Meeting. The annual meeting of the Company’s shareholders. Award. Any Incentive Stock Option, Nonqualified Stock Option, Restricted Stock and Stock Appreciation Right granted under the Plan. Award Agreement. The written or electronic agreement between the Company and each Participant that describes the terms and conditions of each Award and the manner in which it will or may be settled if earned. If there is a conflict between the terms of this Plan and the terms of the Award Agreement, the terms of this Plan will govern. Beneficiary. The person a Participant designates to receive (or to exercise) any Plan benefit (or right) that is unpaid (or unexercised) when the Participant dies. A Beneficiary may be designated only by following the procedures described in Section 12.02; neither the Company nor the Committee is required to infer a Beneficiary from any other source. Board. The Company’s board of directors. Cause. As defined in any written agreement between the Employee and the Company or any Related Entity or, if there is no written agreement, one or more of the following acts of the Employee: personal dishonesty; incompetence; willful misconduct; breach of fiduciary duty involving personal profit; intentional failure or refusal to perform assigned duties and responsibilities consistent with the Employee’s position; willful violation of any law, rule, regulation (other than traffic violations or similar offenses) or final cease-and-desist order; conviction of a felony or for fraud or embezzlement; or material breach of any written agreement between the Employee and the Company or any Related Entity. However, Cause will not arise solely because the Employee is absent from active employment during periods of vacation, consistent with the Employer’s applicable policy, sickness or illness or while suffering from an incapacity due to physical or mental illness, including a condition that does or may result in a Disability or other period of absence initiated by the Employee and approved by the Employer. Confidential Information. Any and all information (other than information in the public domain) related to the Company’s or any Related Entity’s business, including all processes, inventions, trade secrets, computer programs, technical data, drawings or designs, information concerning pricing and pricing policies, marketing techniques, plans and forecasts, new product information, information concerning methods and manner of operations and information relating to the identity and location of all past, present and prospective customers and suppliers. Change in Control. As defined in any written agreement between the Employee and the Company or any Related Entity or, if there is no written agreement, the occurrence of the earliest to occur of any one of the following events on or after the Effective Date: [1] any one person, or more than one person acting as a group, acquired ownership of stock of the Company that, together with stock held by such person or group, possesses more than 50% of the total fair market value or total voting -------------------------------------------------------------------------------- power of the stock of the Company. However, if any one person or more than one person acting as a group is considered to own more than 50% of the total market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons is not considered to cause a change in control. Any increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of the transaction in which the Company acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of this section; or [2] any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total market value equal to or more than one-third of the total fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. Notwithstanding any other provision of this Agreement, the Employee will not be entitled to any amount under this Agreement if he or she acted in concert with any person or group (as defined above) to effect a Change in Control, other than at the specific direction of the Board and in his/her capacity as an employee of the Company or any Subsidiary. Change in Control Price. The highest price per share of Stock offered in conjunction with any transaction resulting in a Change in Control (as determined in good faith by the Committee if any part of the offered price is payable other than in cash) or, in the case of a Change in Control occurring solely by reason of events not related to a transfer of Stock, the highest Fair Market Value of a share of Stock on any of the 30 consecutive trading days ending on the last trading day before the Change in Control occurs. Code. The Internal Revenue Code of 1986, as amended or superseded after the Effective Date and any applicable rulings or regulations issued under the Code. Committee. The Board’s Compensation Committee, which also constitutes a “compensation committee” within the meaning of Treas. Reg. §1.162-27(c)(4). The Committee will be comprised of at least three persons [1] each of whom is [a] an outside director, as defined in Treas. Reg. §1.162-27(e)(3)(i) and [b] a “non-employee” director within the meaning of Rule 16b-3 under the Act and [2] none of whom may receive remuneration from the Company or any Related Entity in any capacity other than as a director, except as permitted under Treas. Reg. §1.162-27(e)(3)(ii). Company. NB&T Financial Group, Inc., an Ohio corporation, and any and all successors to it. Covered Officer. Those Employees whose compensation is (or likely will be) subject to limited deductibility under Code §162(m) as of the last day of any calendar year. Director. A person who, on an applicable Grant Date [1] is an elected member of the Board or of a Related Board (or has been appointed to the Board or to a Related Board to fill an unexpired term and will continue to serve at the expiration of that term only if elected by shareholders) and [2] is not an Employee. For purposes of applying this definition, a Director’s status will be determined as of the Grant Date applicable to each affected Award. Director Options. Nonqualified Options issued to Directors under Section 6.00. Disability. Unless the Committee specifies otherwise in the Award Agreement: [1] With respect to an Incentive Stock Option, as defined in Code §22(e)(3). [2] With respect to any Award subject to Code §409A, as defined under Code §409A; and [3] With respect to any Award not described in subpart [1] or [2] of this definition, as defined in any disability insurance policy provided by the Company or a Related Entity and in which the Employee is eligible to participate at the Grant Date. Employee. Any person who, on any applicable date, is a common law employee of the Company or any Related Entity. A worker who is classified as other than a common law employee but who is subsequently reclassified as a common law employee of the Company for any reason and on any basis will be treated as a common law employee only from the date that reclassification occurs and will not retroactively be reclassified as an Employee for any purpose of this Plan. Exercise Price. The amount, if any, a Participant must pay to exercise an Award. Fair Market Value. The value of one share of Stock on any relevant date, determined under the following rules: [1] if the Stock is traded on an exchange, the reported “closing price” on the relevant date, if it is a trading day, otherwise on the next trading day; [2] if the Stock is traded over-the-counter, the reported “closing price,” if reported, or if there is no reported “closing price,” the mean between the highest bid and the lowest asked prices on that quotation system on the relevant date if it is a trading day, otherwise on the next trading day; or [3] if neither subparts [1] or [2] of this definition apply, the fair market value as determined by the Committee in good faith and, with respect to Incentive Stock Options, consistent with rules prescribed under Code §422. -------------------------------------------------------------------------------- Full-Value Award. Restricted Stock Awards that, by the terms of the Award Agreement through which they are issued, are to be settled in shares of Stock. Grant Date. The date an Award is granted. Group. The Company and all Related Entities. The composition of the Group will be determined as of any relevant date. Incentive Stock Option. Any Option that, on the Grant Date, meets the conditions imposed under Code §422 and is not subsequently modified in a manner inconsistent with Code §422. Nonqualified Stock Option. Any Option that is not an Incentive Stock Option. Option. The right granted under Section 6.00 to a Participant to purchase a share of Stock at a stated price for a specified period of time. An Option may be either [1] an Incentive Stock Option or [2] a Nonqualified Stock Option. Participant. Any Employee or Director to whom an Award has been granted and which is still outstanding. Plan. The NB&T Financial Group, Inc., 2006 Equity Plan. Plan Year. The Company’s fiscal year. Related Board. The board of directors of any incorporated Related Entity or the governing body of any unincorporated Related Entity. Related Entity. Any corporation, partnership or other form of unincorporated entity of which the Company owns, directly or indirectly, 50 percent or more of the total combined voting power of all classes of stock, if the entity is a corporation, or of the capital or profits interest, if the entity is a partnership or another form of unincorporated entity. Restricted Stock. A share of Stock issued to a Participant contingent upon satisfaction of conditions described in Section 7.00. Restriction Period. The period over which the Committee will determine if a Participant has met conditions placed on Restricted Stock. Retirement. Unless the Committee specifies otherwise in the Award Agreement, the date an Employee Terminates on or after reaching age 55 and qualifying to receive benefits under any tax-qualified deferred compensation plan then maintained by his or her Employer. Stock. The common shares, without par value, issued by the Company or any security issued by the Company in substitution, exchange or in place of these shares. Stock Appreciation Right (or “SAR”). An Award granted under Section 8.00 and consisting of the potential appreciation of the shares of Stock underlying the Award. Terminate. A “separation from service” as defined under Code §409A. 3.00 PARTICIPATION 3.01 Awards to Employees. [1] Consistent with the terms of the Plan and subject to Section 3.03, the Board, upon recommendation of the Committee, will [a] decide which Employees will be granted Awards; and [b] specify the type of Award to be granted to Employees and the terms upon which those Awards will be granted and may be earned. [2] The Board, upon the Committee’s recommendation, may establish different terms and conditions [a] for each type of Award granted to an Employee, [b] for each Employee receiving the same type of Award; and [c] for the same Employee for each Award the Employee receives, whether or not those Awards are granted at different times. 3.02 Awards to Directors. Consistent with the terms of the Plan and subject to Section 3.03, the Board will grant to Directors the Awards described in Section 6.01[2]. 3.03 Conditions of Participation. By accepting an Award, each Employee and Director agrees: [1] To be bound by the terms of the Award Agreement and the Plan and to comply with other conditions imposed by the Board; and -------------------------------------------------------------------------------- [2] That the Committee (or the Board, as appropriate) may amend the Plan and the Award Agreements without any additional consideration to the extent necessary to avoid penalties arising under Code §409A, even if those amendments reduce, restrict or eliminate rights that were granted under the Plan or Award Agreement (or both) before those amendments. 4.00 ADMINISTRATION 4.01 Duties. The Committee is responsible for administering the Plan and has all powers appropriate and necessary to that purpose, although the Board has final authority to grant Awards as described in Section 3.00. Consistent with the Plan’s objectives, the Board and the Committee may adopt, amend and rescind rules and regulations relating to the Plan, to the extent appropriate to protect the Company’s and the Group’s interests, and has complete discretion to make all other decisions necessary or advisable for the administration and interpretation of the Plan. Any action by the Board and the Committee will be final, binding and conclusive for all purposes and upon all persons. 4.02 Delegation of Duties. In its sole discretion, the Committee may delegate any ministerial duties associated with the Plan to any person (including Employees) that it deems appropriate. However, the Committee may not delegate any duties it is required to discharge to comply with Code §162(m). 4.03 Award Agreement. As soon as administratively feasible after the Grant Date, the Committee will prepare and deliver an Award Agreement to each affected Participant. The Award Agreement: [1] Will describe [a] the type of Award and when and how it may be exercised or earned, [b] any Exercise Price associated with that Award and [c] how the Award will or may be settled. [2] To the extent different from the terms of the Plan, will describe [a] any conditions that must be met before the Award may be exercised or earned, [b] any objective restrictions placed on Awards and any performance-related conditions and Performance Criteria that must be met before those restrictions will be released and [c] any other applicable terms and conditions affecting the Award. 4.04 Restriction on Repricing. Regardless of any other provision of this Plan, neither the Company nor the Committee may “reprice” (as defined under rules issued by the exchange on which the Stock is then traded) any Award without the prior approval of the shareholders. 5.00 LIMITS ON STOCK SUBJECT TO AWARDS 5.01 Number of Authorized Shares of Stock. Subject to Section 5.03, the number of shares of Stock issued under the Plan may not be larger than 270,000 shares, all of which may be issued through Incentive Stock Options. The full number of shares underlying an SAR shall be deemed “issued” for purposes of counting the number of shares authorized for issuance pursuant to the Plan. Subject to the aggregate limitation set for in this Section 5.01 and with the exception of equity awards to Directors as determined in Section 6.01, the Board, in its discretion, may determine the number of Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, and Restricted Stock to be granted at Grant Date to employees. The shares of Stock to be delivered under the Plan may consist, in whole or in part, of treasury Stock or authorized but unissued Stock not reserved for any other purpose. 5.02 Share Accounting. The limits imposed under Section 5.01: [1] Will be conditionally reduced by the number of shares of Stock subject to any outstanding Award, including the full number of shares underlying SARs; and [2] Will be absolutely reduced by [a] the number of shares of Stock issued pursuant to the exercise of an Option, [b] the number of shares of Stock issued because the terms of a Full-Value Award Agreement have been met and [c] by the full number of shares of Stock underlying an SAR that has been earned and exercised; but [3] Will be increased by the number of shares of Stock subject to any Award that, for any reason, is forfeited, cancelled, terminated, relinquished, exchanged or otherwise settled without the issuance of Stock or without payment of cash equal to the difference between the Award’s Fair Market Value and its Exercise Price (if any). In addition, the number of authorized shares of Stock specified in Section 5.01 will be reduced by the number of shares of Stock surrendered by a Participant or withheld by the Company to pay the Exercise Price of an Option or the taxes associated with an Award. Any decision by the Committee under this section will be final and binding on all Participants. 5.03 Adjustment in Capitalization. If, after the Effective Date, there is a Stock dividend or Stock split, recapitalization (including payment of an extraordinary dividend), merger, consolidation, combination, spin-off, distribution of assets to shareholders, -------------------------------------------------------------------------------- exchange of shares, or other similar corporate change affecting Stock, the Committee will appropriately adjust [1] the number of Awards that may or will be granted to Participants during a Plan Year, [2] the aggregate number of shares of Stock available for Awards under Sections 5.01 or subject to outstanding Awards (as well as any share-based limits imposed under this Plan), [3] the respective Exercise Price, number of shares and other limitations applicable to outstanding or subsequently granted Awards and [4] any other factors, limits or terms affecting any outstanding or subsequently granted Awards. 5.04 Limits on Awards to Covered Officers. During any Plan Year, no Covered Officer may receive [1] Options and SARs covering more than 12,000 shares in the aggregate (adjusted as provided in Section 5.03), including Awards that are cancelled [or deemed to have been cancelled under Treas. Reg. §1.162-27(e)(2)(vi)(B)] during each Plan Year granted or [2] Restricted Stock Awards covering more than 2,000 shares in the aggregate (adjusted as provided in Section 5.03), including Awards that are cancelled [or deemed to have been cancelled under Treas. Reg. §1.162-27(e)(2)(vi)(B)] during each Plan Year granted. 6.00 OPTIONS 6.01 Grant of Options. Subject to Section 10.00 and the terms of the Plan and the associated Award Agreement: [1] At any time during the term of this Plan, the Board may grant Incentive Stock Options and Nonqualified Stock Options to employees [2] The Board will grant, subject to adjustment as provided in Section 5.03, [a] 1,000 Director Options to each Director on the date immediately after the Director first becomes a Director, and [b] 1,000 shares of Director Options on the date following each subsequent Annual Meeting during which the Director serves as a Director. 6.02 Exercise Price. Except as required to implement Section 6.06, each Option will bear an Exercise Price at least equal to Fair Market Value on the Grant Date. However, the Exercise Price associated with an Incentive Stock Option will be at least 110 percent of the Fair Market Value of a share of Stock on the Grant Date with respect to any Incentive Stock Options issued to an Employee who, on the Grant Date, owns [as defined in Code §424(d)] Stock possessing more than 10 percent of the total combined voting power of all classes of Stock (or the combined voting power of any Related Entity), determined under rules issued under Code §422. 6.03 Exercise of Options. Subject to Section 9.00 and any terms, restrictions and conditions specified in the Plan: [1] Employee Options will be exercisable according to a vesting schedule determined by the Board at the Grant Date; provided, however, that no Employee Option will become exercisable at a rate of less than one third each year beginning on and after the Grant Date. [2] Director Options will be exercisable according to the following schedule:   Number of Full Years Beginning After Grant Date    Cumulative Percentage Vested Less than 1    0 percent 1 but fewer than 2    33 1/3 percent 2 but fewer than 3    66 2/3 percent 3 or more    100 percent [3] However: [a] Any Option to purchase a fraction of a share of Stock will automatically be converted to an Option to purchase a whole share. [b] No Incentive Stock Option may be exercised more than ten years after it is granted (five years in the case of an Incentive Stock Option granted to an Employee who owns [as defined in Code §424(d)] on the Grant Date Stock possessing more than 10 percent of the total combined voting power of all classes of Stock or the combined voting power of any Related Entity, determined under rules issued under Code §422). [c] No Director Option will be exercisable more than ten years after it is granted. [d] Nonqualified Stock Options (other than Director Options) will be exercisable for the period specified in the Award Agreement. -------------------------------------------------------------------------------- 6.04 Incentive Stock Options. Notwithstanding anything in the Plan to the contrary: [1] No provision of this Plan relating to Incentive Stock Options will be interpreted, amended or altered, nor will any discretion or authority granted under the Plan be exercised, in a manner that is inconsistent with Code §422 or, without the consent of any affected Participant, to cause any Incentive Stock Option to fail to qualify for the federal income tax treatment afforded under Code §421. [2] The aggregate Fair Market Value of the Stock (determined as of the Grant Date) with respect to which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all option plans of the Company and all Related Entities of the Company) will not exceed $100,000 [or other amount specified in Code §422(d)], determined under rules issued under Code §422. [3] No Incentive Stock Option will be granted to any person who is not an Employee on the Grant Date. 6.05 Exercise Procedures and Payment for Options. Unless the Committee specifies otherwise in the Award Agreement, the Exercise Price associated with each Option must be paid under procedures described in the Award Agreement. These procedures may include payment in cash, a cashless exercise and allowing a Participant to tender Stock he or she already has owned for at least six months before the exercise date, either by actual delivery of the previously owned Stock or by attestation, valued at its Fair Market Value on the exercise date, as partial or full payment of the Exercise Price or any combination of those procedures. A Participant may exercise an Option only by sending to the Committee a completed exercise notice (in the form prescribed by the Committee) along with payment (or designation of an approved payment procedure) of the Exercise Price. As soon as administratively feasible after those steps are taken, the Committee will issue to the Participant the appropriate share certificates. 6.06 Substitution of Options. In the Committee’s discretion, persons who become Employees as a result of a transaction described in Code §424(a) may receive Options in exchange for options granted by their former employer or the former Related Entity subject to the rules and procedures prescribed under Code §424. 6.07 Rights Associated With Options. [1] A Participant to whom an unexercised Option has been granted will have no voting or dividend rights with respect to the shares underlying that unexercised Option and the Option will be transferable only to the extent provided in Section 12.01. [2] Unless the Committee specifies otherwise in the Award Agreement or as otherwise specifically provided in the Plan, Stock acquired through an Option [a] will bear all dividend and voting rights associated with Stock and [b] will be transferable, subject to applicable federal securities laws, the requirements of any national securities exchange or system on which shares of Stock are then listed or traded or any blue sky or state securities laws. 7.00 RESTRICTED STOCK 7.01 Grant of Restricted Stock. The restrictions contained in the Restricted Stock Awards shall be based on the passage of time. Subject to Section 9.00 and the terms of the Plan and the associated Award Agreement, at any time during the term of this Plan, the Board may grant shares of Restricted Stock to Employees. 7.02 Earning Restricted Stock. Subject to Section 9.00, any terms, restrictions and conditions specified in the Plan or the associated Award Agreement, and unless specified otherwise in the Award Agreement: [1] Restrictions imposed on Restricted Stock granted to Employees will lapse no later than three years after the Grant Date. [2] During the Restriction Period, Restricted Stock will be held by the Company as escrow agent. After the end of the Restriction Period, the Restricted Stock will be: [a] Forfeited, if all restrictions described in the Award Agreement have not been met; or [b] Released from escrow and distributed to the Participant as soon as practicable after the last day of the Restriction Period, if all restrictions specified in the Award Agreement have been met. [3] Any Restricted Stock Award relating to a fractional share of Stock will be rounded to the next whole share when settled. 7.03 Rights Associated With Restricted Stock. During the Restriction Period and unless the associated Award Agreement specifies otherwise: [1] Restricted Stock may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated; but -------------------------------------------------------------------------------- [2] Each Participant to whom Restricted Stock has been issued: [a] May exercise full voting rights associated with that Restricted Stock; and [b] Will be entitled to receive all dividends and other distributions paid with respect to that Restricted Stock; provided, however, that if any dividends or other distributions are paid in shares of Stock, those shares will be subject to the same restrictions on transferability and forfeitability as the shares of Restricted Stock with respect to which they were issued. 8.00 STOCK APPRECIATION RIGHTS 8.01 SAR Grants. Subject to the terms of the Plan, the Committee may grant SARs to Employees at any time during the term of this Plan. 8.02 Exercise Price. The Exercise Price specified in the Award Agreement will not be less than 100 percent of the Fair Market Value of a share of Stock on the Grant Date. 8.03 Exercise and Settling of SARs. [1] SARs will be exercisable subject to the terms specified in the Award Agreement. [2] A Participant exercising a SAR will receive, as set forth in the Award Agreement, cash or a number of whole shares of Stock equal to: [a] The difference between the Fair Market Value of a share of Stock on the exercise date and the Exercise Price multiplied by [b] The number of shares of Stock with respect to which the SAR is being exercised. The value of any fractional share of Stock produced under this formula will be settled in cash. 9.00 TERMINATION/BUY-OUT 9.01 Retirement. Unless otherwise specified in the Award Agreement or this Plan: [1] All Nonqualified Stock Options and SARs then held by a Retiring Employee that are not exercisable when the Employee Retires will become fully exercisable upon Retirement, and all of the Employee’s Options and SARs may be exercised at any time before the earlier of [a] the expiration date specified in the Award Agreement or [b] one year after the Retirement date (or any shorter period specified in the Award Agreement). [2] All Incentive Stock Options then held by a Retiring Employee that are not exercisable when the Employee Retires will become fully exercisable upon Retirement, and all of the Employee’s Incentive Stock Options may be exercised at any time before the earlier of [a] the expiration date specified in the Award Agreement or [b] three months after the Retirement date (or any shorter period specified in the Award Agreement). However, an Incentive Stock Option that is not exercised within three months after the Retirement date will be treated as a Nonqualified Stock Option and may be exercised within the period described in Section 9.01[1]. [3] All Restricted Stock granted to a Retiring Participant that is unvested when the Participant Retires will be fully vested upon the Participant’s Retirement. 9.02 Death or Disability. Unless otherwise specified in the Award Agreement or this Plan: [1] All Nonqualified Stock Options and SARs then held by a Participant who dies or becomes Disabled (whether or not then exercisable) will be fully exercisable when the Participant dies or becomes Disabled and may be exercised at any time before the earlier of [a] the expiration date specified in the Award Agreement or [b] one year after the date of death or Disability (or any shorter period specified in the Award Agreement). [2] All Incentive Stock Options then held by a Disabled or dead Participant will be fully exercisable when the Participant dies or becomes Disabled and may be exercised at any time before the earlier of [a] the expiration date specified in the Award Agreement or [b] one year after the Termination date (or any shorter period specified in the Award Agreement). However, an Incentive Stock Option that is not exercised within three months after the Termination date will be treated as a Nonqualified Stock Option and may be exercised within the period described in Section 9.02[1]. -------------------------------------------------------------------------------- [3] All Restricted Stock granted to a Participant who dies or becomes Disabled that is unvested when the Participant dies or becomes Disabled will be fully vested when the Participant dies or becomes Disabled. 9.03 Termination for Cause. Unless otherwise specified in the Award Agreement or this Plan, all Awards that are outstanding (whether or not then exercisable) will be forfeited when and if a Participant Terminates (or is deemed to have been Terminated) for Cause. 9.04 Termination for any Other Reason. Unless otherwise specified in the Award Agreement or this Plan or subsequently, any Awards that are outstanding when a Participant Terminates for any reason not described in Sections 9.01 through 9.03 and which are then exercisable may be exercised at any time before the earlier of [1] the expiration date specified in the Award Agreement or [2] 90 days after the Termination date (or any shorter period specified in the Award Agreement), and all Awards that are not then exercisable will terminate on the Termination date. 9.05 Buy-out of Awards. At any time before a Change in Control or the commencement of activity that may reasonably be expected to result in a Change in Control, the Committee, in its sole discretion, may offer to buy for cash or by substitution of another Award (but only to the extent that offer and the terms of the offer do not and, on their face are not likely to, generate penalties under Code §409A) any or all outstanding Awards held by any Participant, whether or not exercisable, by providing to that Participant written notice (“Buy-out Offer”) of its intention to exercise the rights reserved in this section and other information, if any, required to be included under applicable security laws. If a Buy-out Offer is given, the Company also will transfer to each Participant accepting the offer the value (determined under procedures adopted by the Committee) of the Award to be purchased or exchanged. The Company will complete any buy-out made under this section as soon as administratively possible after the date of the Buy-out Offer. 10.00 CHANGE IN CONTROL 10.01 Accelerated Vesting and Settlement. Upon a Change in Control, all of a Participant’s Awards will be treated as provided in a separate written change in control or similar agreement between the Participant and the Company or any Related Entity or, if there is no such agreement between a Participant and the Company or any Related Entity, subject to Section 10.02, on the date of any Change in Control the Participant and the Company agree that: [1] Each Option and SAR outstanding on the date of a Change in Control (whether or not exercisable) will be cancelled in exchange [a] for cash equal to the excess of the Change in Control Price over the Exercise Price associated with the cancelled Option or SAR or, [b] at the Committee’s discretion, for whole shares of Stock with a Fair Market Value equal to the excess of the Change in Control Price over the Exercise Price associated with the cancelled Option and SAR and the Fair Market Value of any fractional share of Stock will be distributed in cash; and [2] All restrictions then imposed on Restricted Stock will lapse and all outstanding Restricted Stock (including those subject to the acceleration described in this subpart) will be distributed in a single lump sum cash payment or, at the Committee’s discretion, in whole shares of Stock and all dividends then held in escrow will be distributed in cash. As a condition of receiving an Award, each Participant agrees to the terms described in this section and to cooperate fully in the application and completion of the procedures described in this section. 10.02 Effect of Code §280G. Unless otherwise specified in the Award Agreement or in another written agreement between the Participant and the Company or a Related Entity executed simultaneously with or before any Change in Control, if the sum (or value) of the payments described in Section 10.01 constitute an “excess parachute payment” as defined in Code §280G(b)(1) when combined with all other parachute payments attributable to the same Change in Control, the Company or other entity making the payment (“Payor”) will reduce the Participant’s benefits under this Plan so that the Participant’s total “parachute payment” as defined in Code §280G(b)(2)(A) under this Plan, an Award Agreement and all other agreements will be $1.00 less than the amount that otherwise would generate an excise tax under Code §4999. If the reduction described in the preceding sentence applies, within 10 business days of the effective date of the event generating the payments (or, if later, the date of the Change in Control), the Payor will apprise the Participant of the amount of the reduction (“Notice of Reduction”). Within 10 business days of receiving that information, the Participant may specify how and against which benefit or payment source, (including benefits and payment sources other than this Plan) the reduction is to be applied (“Notice of Allocation”). The Payor will be required to implement these directions within 10 business days of receiving the Notice of Allocation. If the Payor has not received a Notice of Allocation from the Participant within 10 business days of the date of the Notice of Reduction or if the allocation provided in the Notice of Allocation is not sufficient to fully implement the reduction described in this section, the Payor will apply the reduction described in this section proportionately based on the amounts otherwise payable under Section 10.01 or, if a Notice of Allocation has been returned that does not sufficiently implement the reduction described in this section, on the basis of the reductions specified in the Notice of Allocation. 11.00 AMENDMENT, MODIFICATION AND TERMINATION OF PLAN The Board or the Committee may terminate, suspend or amend the Plan at any time without shareholder approval except to the extent that shareholder approval is required to satisfy applicable requirements imposed by [1] Rule 16b-3 under the Act, or any successor rule or regulation, [2] applicable requirements of the Code or [3] any securities exchange, market or other quotation system on or through which the Company’s securities are listed or traded. Also, no Plan amendment may [4] result in the loss of a Committee -------------------------------------------------------------------------------- member’s status as a “non-employee director” as defined in Rule 16b-3 under the Act, or any successor rule or regulation, with respect to any employee benefit plan of the Company, [5] cause the Plan to fail to meet requirements imposed by Rule 16b-3 or [6] without the consent of the affected Participant (and except as specifically provided otherwise in this Plan or the Award Agreement), adversely affect any Award granted before the amendment, modification or termination. However, nothing in this section will restrict the Committee’s right to amend the Plan and any Award Agreements without any additional consideration to affected Participants to the extent necessary to avoid penalties arising under Code §409A, even if those amendments reduce, restrict or eliminate rights granted under the Plan or Award Agreement (or both) before those amendments. 12.00 MISCELLANEOUS 12.01 Assignability. Except as described in this section or as provided in Section 12.02, an Award may not be transferred except by will or the laws of descent and distribution and, during the Participant’s lifetime, may be exercised only by the Participant or the Participant’s guardian or legal representative. 12.02 Beneficiary Designation. Each Participant may name a Beneficiary or Beneficiaries (who may be named contingently or successively) to receive or to exercise any vested Award that is unpaid or unexercised at the Participant’s death. Unless otherwise provided in the Beneficiary designation, each designation made will revoke all prior designations made by the same Participant, must be made on a form prescribed by the Committee and will be effective only when filed in writing with the Committee. If a Participant has not made an effective Beneficiary designation, the deceased Participant’s Beneficiary will be his or her surviving spouse or, if none, the deceased Participant’s estate. The identity of a Participant’s designated Beneficiary will be based only on the information included in the latest beneficiary designation form completed by the Participant and will not be inferred from any other evidence. 12.03 No Guarantee of Continuing Services. Except as specifically provided elsewhere in the Plan, nothing in the Plan may be construed as: [1] Interfering with or limiting the right of the Company or any Related Entity to Terminate any Employee’s employment at any time; [2] Conferring on any Participant any right to continue as an Employee or director of the Company or any Related Entity; [3] Guaranteeing that any Employee will be selected to be a Participant; or [4] Guaranteeing that any Participant will receive any future Awards. 12.04 Tax Withholding. [1] The Company will withhold from other amounts owed to the Participant, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state and local withholding tax requirements on any Award, exercise or cancellation of an Award or purchase of Stock. If these amounts are not to be withheld from other payments due to the Participant (or if there are no other payments due to the Participant), the Company will defer payment of cash or issuance of shares of Stock until the earlier of: [a] Thirty days after the settlement date; or [b] The date the Participant remits the required amount. [2] If the Participant has not remitted the required amount within 30 days after the settlement date, the Company will permanently withhold from the value of the Awards to be distributed the minimum amount required to be withheld to comply with applicable federal, state and local income, wage and employment taxes and distribute the balance to the Participant. [3] In its sole discretion, which may be withheld for any reason or for no reason, the Committee may permit a Participant to elect, subject to conditions the Committee establishes, to reimburse the Company for this tax withholding obligation through one or more of the following methods: [a] By having shares of Stock otherwise issuable under the Plan withheld by the Company (but only to the extent of the minimum amount that must be withheld to comply with applicable state, federal and local income, employment and wage tax laws); [b] By delivering to the Company previously acquired shares of Stock that the Participant has owned for at least six months; [c] By remitting cash to the Company; or [d] By remitting a personal check immediately payable to the Company. -------------------------------------------------------------------------------- 12.05 Indemnification. Each individual who is or was a member of the Committee or of the Board will be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit or proceeding to which he or she may be made a party or in which he or she may be involved by reason of any action taken or not taken under the Plan as a Committee or Board member and against and from any and all amounts paid, with the Company’s approval, by him or her in settlement of any matter related to or arising from the Plan as a Committee or Board member or paid by him or her in satisfaction of any judgment in any action, suit or proceeding relating to or arising from the Plan against him or her as a Committee or Board member, but only if he or she gives the Company an opportunity, at its own expense, to handle and defend the matter before he or she undertakes to handle and defend it in his or her own behalf. The right of indemnification described in this section is not exclusive and is independent of any other rights of indemnification to which the individual may be entitled under the Company’s organizational documents, by contract, as a matter of law or otherwise. 12.06 No Limitation on Compensation. Nothing in the Plan is to be construed to limit the right of the Company to establish other plans or to pay compensation to its employees or directors, in cash or property, in a manner not expressly authorized under the Plan. 12.07 Requirements of Law. The grant of Awards and the issuance of shares of Stock will be subject to all applicable laws, rules and regulations and to all required approvals of any governmental agencies or national securities exchange, market or other quotation system. Also, no shares of Stock will be issued under the Plan unless the Company is satisfied that the issuance of those shares of Stock will comply with applicable federal and state securities laws. Certificates for shares of Stock delivered under the Plan may be subject to any stock transfer orders and other restrictions that the Committee believes to be advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange or other recognized market or quotation system upon which the Stock is then listed or traded, or any other applicable federal or state securities law. The Committee may cause a legend or legends to be placed on any certificates issued under the Plan to make appropriate reference to restrictions within the scope of this section. 12.08 Governing Law. The Plan, and all agreements hereunder, will be construed in accordance with and governed by the laws (other than laws governing conflicts of laws) of the State of Ohio. 12.09 No Impact on Benefits. Plan Awards are not compensation for purposes of calculating a Participant’s rights under any employee benefit plan that does not specifically require the inclusion of Awards in calculating benefits.

EXHIBIT 10.64 INVESTMENT BANKING AND ADVISORY SERVICES AGREEMENT THIS AGREEMENT, made and entered into this 31st day of May, 2006 by and between FAE Holdings, Inc. (“FAEH”) hereinafter also referred to as “Investment Banker or IB”, and Cord Blood America, Inc. (“hereinafter also referred to as the “Company”), collectively known as the “Parties”. WHEREAS, the Company desires to retain and IB desires to provide services more further described as consulting and other general services to be provided to the Company and; WHEREAS, the Company and IB desire to clarify their respective rights and responsibilities in writing and to be confirmed by same.   NOW, THEREFORE, it is agreed upon as follows: Retention The Company hereby retains IB to perform non-exclusive consulting services related to Company acquisitions, Company restructuring, merger candidates, corporate finance, mergers, and other matters as related to the above transactions, as needed.  IB hereby accepts such retention and shall undertake reasonable efforts to perform for the Company the duties described herein.  In this regard, subject to the terms hereof, IB shall devote such time and attention to the business of the Company, as shall be determined by IB. IB agrees to the extent reasonably required in the conduct of the business of the Company, and at the Company’ request, to place at the disposal of the Company its 1 -------------------------------------------------------------------------------- judgement and experience and to provide business development services to the Company, including, without limitation, the following: · Assist in providing eligible merger candidates in accordance with the needs and investment objectives of Company; · Assist in potential financing and requirements, including private placements or equity capital transactions; · Assist in potential mergers and acquisitions; · Provide qualified merger candidates to the Company; · Provide advice with respect to corporate finance matters including, without limitation, changes in capitalization and corporate structure. Term/Renewal/Termination The term of this agreement shall be for a period of twelve months (12) beginning on the mutual signing of this agreement and terminating on the twelfth month anniversary, unless extended in writing.  Both parties reserve the right to render this Agreement canceled, null and void with thirty (30) days written notice to the other party, provided all costs and compensation associated with this Agreement have been paid current to IB. Expenses & Costs IB shall be compensated for pre-approved standard out-of-pocket costs, such as travel, lodging, shipping, photocopies, etc., upon presentation to the Company, and only after the Company’s pre-approval on any scheduled trips, meetings, expenses, etc. 2 -------------------------------------------------------------------------------- Compensation It is agreed upon by the parties that IB acting on behalf of the Company will endeavor to provide the Company with financing as needed by the Company, and at the Company’ direction. In the event that the IB secures any type of financing for the company, the IB shall be entitled to a fee equal to three and a half (3.5%) of the gross amount of funds provided to the company.  IB’s fees will be independent of any other type of fees imposed, if any, by any third party performing the financing, i.e. closing fees, transaction fees, doc. stamps, etc. In addition, IB shall be entitled to a fee equal to Two Percent (2%) of any equity transaction introduced by the IB or any third parties introduced by IB.  Such fee shall be payable in the form of equity, such equity in the form of restricted shares of the company, with full registration rights. Notice All notices must be in writing and sent to the following addresses: For the Company to: Cord Blood America, Inc. 9000 W. Sunset Blvd. Suite 400 Los Angeles, CA 90069 For IB to: FAE Holdings, Inc. 611 S. Ft. Harrison, #317 Clearwater, FL 33756 Miscellaneous Further Assurance.  Each of the parties shall hereafter execute all documents and do all acts reasonably necessary to effect the provisions of this Agreement. 3 -------------------------------------------------------------------------------- Successors.  The provisions of this Agreement shall be deemed to obligate, extend to and inure to the benefit of the successors, assigns, transferees, grantees and indemnitees of each of the parties of this Agreement. Independent Counsel.  Each of the parties to this Agreement acknowledges and agrees that it has independent counsel of its own choice, and each has executed this Agreement fully understanding the provisions of this Agreement, its terms and conditions, and executes this Agreement of its own free choice without reference to any representations, promises or expectations not set forth herein. Integration.  This Agreement, after full execution, acknowledgment and delivery, memorializes and constitutes the entire agreement and understanding between the parties and supersedes and replaces all prior negotiations and agreements of the parties, whether written or unwritten.  Each of the parties to this Agreement acknowledges that no other party, nor any agent and attorney of any other party has made any promises, representations, or warranty whatsoever, express or implied, which is not expressly contained in this Agreement; and each party further acknowledges that he or it has not executed this Agreement in reliance upon any belief as to any fact not expressly recited herein above. Attorneys Fees.  In the event of a dispute between the parties concerning the enforcement or interpretation of this Agreement, the prevailing party in such dispute, whether by legal proceedings or otherwise, shall be reimbursed immediately for the reasonably incurred attorneys’ fees and other costs and expenses by the other parties to this dispute. 4 -------------------------------------------------------------------------------- Context.  Wherever the context so requires:  the singular number shall include the plural;  the plural shall include the singular. Captions.  The captions by which the sections and subsections of this Agreement are identified are for convenience only, and shall have no effect whatsoever upon its interpretation. Severance.  If any provision of this Agreement is held to be illegal or invalid by a court of competent jurisdiction, such provision shall be deemed to be severed and deleted; and neither shall provision, nor its severance and deletion, shall affect the validity of the remaining provisions. Counterparts.  This Agreement may be executed in any number of counterparts. Expenses Associated with any dispute arising out of this Agreement.  Each of the parties hereto agrees to bear its own costs, attorneys’ fees and related expenses associated with any dispute arising out of this Agreement. Arbitration.  Any dispute or claim arising to or in any way related to this Agreement shall be settled by arbitration in Clearwater, Florida.  All arbitration shall be conducted in accordance with the rules and regulations of the American Arbitration Association (“AAA”).  AAA shall designate a panel of three arbitrators from an approved list of arbitrators following both parties’ review and deletion of those arbitrators on the approved list having a conflict of interest with either party.  Each party shall pay its own expenses associated with such arbitration (except as set forth in Section “Attorneys” above).  A demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter has arisen and in no event shall such demand be made after the date when institution of legal or equitable proceedings based on such claim, dispute or 5 -------------------------------------------------------------------------------- other matter in question would be barred by the applicable statutes of limitations.  The decision of the arbitrators shall be rendered within sixty (60) days of submission of any claim or dispute, shall be in writing and mailed to all the parties included in the arbitration.  The decision of the arbitrator shall be binding upon the parties and judgement in accordance with that decision may be entered in any court having jurisdiction thereof. Assignment.  The Company shall have no right to assign this Agreement or any obligations created hereby unless IB expressly approves the assignment in writing.  IB shall have the right to assign any or all of its rights and obligations under this contract to any third parties, provided such assignment has first obtained the written consent of the Company. Authority to Bind.  A responsible representative or officer of the Company has read and understands the contents of this Agreement and is empowered and duly authorized on behalf of the Company to execute it. Non-Circumvention.  Company shall not pursue any financial relationship for Company’ direct benefit or indirectly for the benefit of related parties with any entity introduced by IB from the date of initial contract of the parties and lasting for a period of two (2) years after the termination of IB’s Services without the written consent of the introducing party.  Should IB be circumvented by Company, IB shall be paid a closing fee of fifty percent of the total value of consideration realized by Company on the date such transaction transpires. Confidentiality & Proprietary Information.  The parties recognize that Florida Statutes provide for the definition of Trade Secrets and proprietary information.  Each 6 -------------------------------------------------------------------------------- party specifically agrees that it will refrain from disclosing, converting or misappropriating clients of whatever nature, one from the other.  It is recognized that the statutory damages shall prevail in an action at law in the event of breach hereof and that both parties are free to pursue equitable remedies including but not limited to injunctive relief in the event of same being violated. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth above. FOR THE COMPANY: FOR FAE HOLDINGS, INC.   [exhibit1064001.jpg] [exhibit1064001.jpg] By:_________________________ By:_______________________________ Matt Schissler, Chairman/CEO William O’Callaghan, Managing Director       By: ________________________   Sandra Smith, CFO   7

  Exhibit 10.1 15 September 2006 BETWEEN (1) South East Water LLC AND (2) Macquarie Luxembourg Water S. à. r. l.   FIRST AMENDMENT AGREEMENT RELATING TO THE TERMS AND CONDITIONS OF CLASS A PREFERRED EQUITY CERTIFICATES     --------------------------------------------------------------------------------   CONTENTS           1. DEFINITIONS AND INTERPRETATION     3             2. CONFIRMATION AND AMENDMENT     4             3. GOVERNING LAW     4             4. JURISDICTION     4     --------------------------------------------------------------------------------   THIS FIRST AMENDMENT AGREEMENT (the “Amendment Agreement”) is made on 15 September 2006. BETWEEN: (1)   South East Water LLC a public limited company, incorporated under the laws of the DELAWARE and having a registered office at 125 W55th Street, 22nd floor, New York, NY 10019 USA, with register number N/A, duly represented by a Director,       (hereinafter the “Lender”) AND (2)   Macquarie Luxembourg Water S.à  r.l, a Luxembourg limited company (société à responsabilite limitée), incorporated under the laws of Luxembourg and having its registered office at 5, rue Guillaume Kroll, L-1882 Luxembourg, registered with the Luxembourg register of Commerce and Companies (R.C.S. Luxembourg) under number B100413 and having a share capital of twelve thousand five hundred euros (EUR 25,000), duly represented by a Director,       (hereinafter the “Borrower”) All the entities here above listed are hereinafter referred as to the “Parties”. RECITALS: (A)   The Parties have entered into the terms and conditions of Class A Preferred Equity Certificated on 22 December 2004 (the “A PECs”) whereby the Lender granted Class A Preferred Equity Certificated to the Borrower.   (B)   The Parties now wish to amend and restate the A PECs and in particular to amend the definition of the Company’s Income attached to the class A PECs. THE PARTIES AGREE AS FOLLOWS: 1.   DEFINITIONS AND INTERPRETATION       In this Amendment Agreement and the Recitals, the following words and expressions shall (unless the context requires otherwise) have the meanings ascribed to them in the A PECs.       Words denoting the singular shall include the plural and vice versa, words denoting one gender shall include the other gender and words denoting persons shall include firms, partnerships, unincorporated organizations and companies and vice versa.       References in this Amendment Agreement to any statutory provision shall be deemed also to refer to any statutory modification or re-enactment thereof or any statutory instrument, order or regulation made there under or under any such re-enactment.   --------------------------------------------------------------------------------       References in this Amendment Agreement to any other agreement shall be construed as a reference to that other agreement as the same may from time to time be, amended, varied, supplemented or novated.       References to a “person” or to “persons” in this Amendment Agreement Includes, without limitation, a reference to any individual, firm, company, corporation or other body corporate, government, state or agency of a state or any joint venture, association or partnership, works council or employee representative body (whether or not having a separate legal personality).   2.   CONFIRMATION AND AMENDMENT   2.1.   The Parties agree to amend, with effect as of 1 April 2006, the A PECs, and, in particular;   2.2   To amend section 1 as reproduced below, such new section replacing the definition of the Company’s Income:       COMPANY’S INCOME       shall mean 100% of all direct or Indirect Income (including but not limited to dividend, capital gains and bank interest received) less 100% of the Costs, by the Company from its Investments in the Accrual Period.   3.   GOVERNING LAW.       This Amendment Agreement shall be governed by and construed in accordance with the laws of Grand Duchy of Luxembourg.   4.   JURISDICTION.       Each party Irrevocably and unconditionally submits to the exclusive jurisdiction of the courts of Luxembourg and the courts of appeal from them. Each party waives any right it has to object to an action being brought in those courts including, without limitation, by claiming that the action has been brought in an inconvenient forum or that those courts do not have jurisdiction.   --------------------------------------------------------------------------------   IN WITNESS WHEREOF the Parties have caused this Amendment Agreement to be duly executed and signed on the date first written above in as many original copies as there are Parties to this Amendment Agreement, each Party declaring that it has received one original copy.       /s/ Peter Stokes   /s/ Howard Higgins           Macquarie Luxembourg Water     S.à.r.l.       By: PETER STOKES           Capacity: CHIEF EXECUTIVE OFFICER   By: Howard Higgins       ON BEHALF OF:   Capacity: Manager MACQUARIE INFRASTRUCTURE COMPANY LLC           AS MANAGING MEMBER OF:           SOUTH EAST WATER LLC                   --------------------------------------------------------------------------------   Terms and Conditions of Class A Preferred Equity Certificates Dated December 22, 2004 Macquarie Luxembourg Water Sarl (1) South East Water LLC (2)   --------------------------------------------------------------------------------   TABLE OF CONTENTS                 AUTHORISATION FOR PREFERRED EQUITY CERTIFICATES     1   TERMS AND CONDITIONS     1   1     Definitions     1   2     Return     4   3     Redemption     4   4     Withholding Taxes     5   5     Covenants     6   6     Default     6   7     Registration of the A PECs; Transfer Restrictions; Issuance and Exchange of PEC Certificates; Loss of PEC Certificates     6   8     General Terms and Conditions of A PECs     7   9     Miscellaneous     7     --------------------------------------------------------------------------------              DATE   December 22, 2004     PARTIES       MACQUARIE LUXEMBOURG WATER Sarl., a private limited liability company, incorporated under the laws of Luxembourg, whose registered office is at 5, rue Guillaume, BP 2501, L-1025 Luxembourg (the “Company”); and       SOUTH EAST WATER LLC, whose principal executive office is at 600 Fifth Avenue, 21st Floor, New York, New York 10020 (“SEW LLC”).       AUTHORISATION FOR PREFERRED EQUITY CERTIFICATES       The board of managers of the Company has authorised the issuance of a number of Class A Preferred Equity Certificates (collectively the “A PECs” and individually an “A PEC”) to SEW LLC, having an aggregate par value of the Euro equivalent of £10,825,587.02 (less €4,375) in respect of making equity investments in infrastructure and related assets located in European OECD countries. The PECs shall be denominated in Euro (EUR) upon issuance thereof. Each A PEC shall be issued in registered form.       TERMS AND CONDITIONS   1   Definitions       As used in this Agreement, the following terms shall have the following meaning:               A PEC   shall mean the PECs issued, or to be issued, by the Company under this Agreement;               A PEC Register   shall mean the register and transfer book maintained by the Company for the A PECs;               Accrual Period   shall mean each period from, and including, one Payment Date to, but excluding, the next following Payment Date, except for the initial Accrual Period that will commence on, and include, the Date of Issuance. If the A PECs are redeemed under any provision of Section 3, the Accrual Period, with respect to the A PECs redeemed, shall mean the period from and including the Payment Date immediately preceding the date of redemption of the A PECs to but excluding the date of redemption;               Annual Payment Date   shall mean each twelve-month anniversary after the initial Payment Date;               Applicable Rate   shall mean the rate of return equal to the 12 month EURIBOR rate at the Date of Issuance of the A PECs plus 200 basis points for each Accrual Period; 1 --------------------------------------------------------------------------------                 Available Amount   shall mean the amount available to make payments to the holders of the A PECs;               Business Day   shall mean any day other than a Saturday, Sunday or other day on which banking institutions in Luxembourg and London are required or authorised to remain closed;               Company   Macquarie Luxembourg Water Sarl, a private limited liability company, incorporated under the laws of Luxembourg, whose registered office is at 5, rue Guillaume, BP 2501, L-1025 Luxembourg;               Company’s Income   shall mean 85% of all income (dividend and capital gains) less 85% of the Costs, by the Company from its Investments in the Accrual Period;               Costs   shall mean all costs and expenses incurred by the Company in the Accrual Period that are economically attributable to the Investment. Such Costs will not include the Return paid or accrued during such Accrual Period on the A PECs, nor income taxes imposed by the Grand-Duchy of Luxembourg or any sub-division, municipality or local authority thereof;               Date of Issuance   shall mean the date as of which the A PECs are issued;               Excess   shall mean the amount with which the Nominal Amount exceeds the Available Amount;               Excluded Return   for any given period means the total amount of return excluded from such period by reason of the limitations set forth in Section 2.2;               Initial Accrual Period   shall mean the period from and including the Date of Issuance up to but excluding the Initial Payment Date;               Initial Payment Date   will mean 31 March 2005;               Insolvent   shall mean the situation where the aggregate amount of the Company’s obligations, determined in accordance with generally accepted accounting principles as in effect in Luxembourg, exceeds the fair market value of the Company’s assets. The A PECs and any Class of Preferred Equity Certificates that will be issued after this date will be regarded as obligations of the Company for the purpose of computing the Company’s insolvency;               Intermediary Payment Date   shall mean any date determined at the discretion of the Board of Directors of the Company.               Investment   shall mean the Company’s equity investment in Macquarie Water (UK) Limited as held at the Date of Issuance or to be increased or decreased by the Company thereafter;               Liquidation   shall have meant the event of any voluntary or involuntary liquidation, bankruptcy, dissolution or winding up of the affairs of the Company; 2 --------------------------------------------------------------------------------                 Mandatory Redemption Date   means the Payment Date nearest and prior to the 98th anniversary of the Date of Issuance;               Nominal Amount   shall mean the Par Value of any outstanding A PEC plus any Unpaid Return;               Par Value   shall mean EUR 1.00 (one Euro) with respect to each outstanding A PEC;               Payment Date   shall mean the Initial Payment Date, any Annual Payment Date, any Intermediary Payment Date, and the Redemption Date. A reasonable amount of time will be granted to the Board of Directors of the Company after each Payment Date to determine the amount of Return payable for any Accrual Period;               PEC   shall mean the Preferred Equity Certificate issued or to be issued by the Company under the Terms and Conditions of Preferred Equity Certificates;               PEC Register   shall mean the register and transfer book maintained by the Company for the PECs;               Person   shall mean any individual, corporation, company, voluntary association, partnership, joint venture, trust, unincorporated organisation or government (or any agency, instrumentality or political subdivision thereof);               Redemption Date   shall mean the date fixed for redemption of the A PECs;               Redemption Price   shall mean a value equal to the sum of (i) the Par Value for each outstanding A PEC that will be redeemed plus (ii) unpaid Return accumulated through the Redemption Date;               Retained Earnings   shall mean the retained earnings of the Company determined on an unconsolidated basis in accordance with the generally accepted accounting principles as in effect in Luxembourg. However the retained earnings will be computed without taking into account the Unpaid Return on the A PECs;               Return   for any Accrual Period shall accrue on the A PECs from the Date of Issuance to but not including the earlier of (i) the date on which the A PECs have been redeemed in whole or otherwise paid in full and (ii) the Payment Date nearest and prior to the Mandatory Redemption Date. Return will accrue for each Accrual Period, subject to the payment limitation of section 2.2, in an amount equal to the (i) Excluded Return for the prior Accrual Period and (ii) the Company’s Income on the Investment during such Accrual Period. Such amount accrued at any time for all Accrual Periods since the Date of Issuance, whether or not declared, is herein called the “Return”. The Return shall be distributed among the holders of A PECs in a proportion equal to that which the number of ordinary shares in the Company held by each holder of A PECs bears to the total 3 --------------------------------------------------------------------------------                     number of ordinary shares of the Company in issue at any given time;               Subordinated Securities   shall mean all shares of common stock, whether outstanding on the date hereof or issued in the future; and               Unpaid Return   shall be any amount of Return that has accrued but has not become payable pursuant to the payment limitations of Section 2.1. 2   Return   2.1   Return on the A PECs shall be payable on each Payment Date only if and to the extent       (a)   declared by the Board of Directors of the Company,       (b)   the Company is not immediately before and after given effect to such payment Insolvent; and       (c)   that such payment, will not violate any covenant contained in or result in a default under any           agreement or other financial obligation of the Company. 2.2   Each payment of Return on the A PECs shall be made by the Company directly to the holders of record as their name appears on the A PEC Register on the record date for such payment. The record date for such payment shall be the Business Day immediately preceding the applicable Payment Date or, if not paid on a Payment Date, the Business Day immediately preceding the actual payment date. 2.3   Each payment made with respect to the A PECs shall be by wire transfer to any account maintained by such holder with a bank identified by such holder in a written notice given to the Company not later than three Business Days prior to the relevant Payment Date.   3   Redemption   3.1   Mandatory Redemption       On the Mandatory Redemption Date, the Company shall redeem the outstanding A PECs at the Redemption Price provided that:       (a)   the Par Value of the A PECs will be payable to the extent the Company will not be        Insolvent after making such payment; and       (b)   the Unpaid Return will be payable only to the extent the Company will not be Insolvent after        making such payment.       The Redemption Price shall be paid to the holders of record on the Mandatory Redemption Date. 3.2   Redemption upon Liquidation of the Company       In the event of a Liquidation the holders of the A PECs shall be entitled to be paid the Redemption Price, in any event before any payment shall be made or any assets distributed to the holders of any Subordinated Securities, provided that:       (a)   the Par Value of the A PECs will be payable to the extent the Company will not be Insolvent after        making such payment; and       (b)   the Unpaid Return will be payable only to the extent the Company will not be Insolvent after        making such payment.       The Redemption Price shall be paid to the holders of record ultimately on the date on which the liquidation of the Company shall be completed. 4 --------------------------------------------------------------------------------       The Board of Managers of the Company shall not cause the shareholders of the Company to adopt a resolution to commence a voluntary Liquidation without the consent of the holders of the A PECs unless the Nominal Amount of the outstanding A PECs can be paid.       For purposes of this Section 3.2 neither the voluntary sale, conveyance, exchange or transfer (for cash, shares, stock, securities or other consideration) of all or substantially all the property or assets of the Company nor the consolidation or merger of the Company with one or more corporations shall be deemed to be a Liquidation unless such voluntary sale, conveyance, exchange or transfer shall be in connection with a dissolution or winding up of the business of the Company.   3.3   Optional Redemption by the holders of A PECs       As of the date of an Event of Default (as defined in Section 6), the holders of the A PECs shall be entitled, by notice in writing to the Company, to have the A PECs held by it redeemed at the Redemption Price, before any payment shall be made or any assets distributed to the holders of any Subordinated Securities, provided that:       (a)   the Par Value of the A PECs will be payable to the extent the Company will not be Insolvent after making        such payment; and       (b)   the Unpaid Return will be payable only to the extent the Company will not be Insolvent after making        such payment.     The Redemption Price shall be paid to the holder of record ultimately on the 15th day after the aforementioned notice has been received by the Company.   3.4   Redemption at the option of the Company       The Company may at any time on giving not less than 10 Business Days notice to the holder thereof, redeem the A PECs in whole or in part (but if in part only in whole multiples of £10,000) at par together with any accrued but unpaid Return thereon down to the date of redemption PROVIDED THAT simultaneously with such redemption the Company redeems an equal proportion of each of the other preferred equity certificates issued by it (including for the avoidance of doubt, any other preferred equity certificates issued to GIFSA).   3.5   General       Redemption of the A PECs will be subject to the condition that:       (a)   from and after the Redemption Date, the A PECs shall cease to accrue a Return, and the A PECs shall        no longer be deemed to be outstanding and all rights of the holders thereof (except the right to receive        from the Company the Redemption Price) shall cease. Upon the Redemption Date, specified for        redemption in any such notice, the payment of the Redemption Price by the Company shall become        payable. Surrender of the A PECs shall be made at the registered office of the Company.        Upon surrender in accordance with said notice of the A PECs so redeemed (properly endorsed or        assigned for transfer, if the Board of Directors of the Company shall so require and the notice shall so        state), such A PECs shall be redeemed by the Company at the Redemption Price as aforesaid;       (b)   any Return, any Unpaid Return or any other amount due and not paid on the Redemption        Date will accrue interest at the Applicable Rate beginning on and including the Redemption Date. 4   Withholding Taxes       All payments on the A PECs shall be made free and clear of withholding taxes imposed by any taxing jurisdiction, unless the withholding of such tax is compelled by law. For purposes of this 5 --------------------------------------------------------------------------------       Section 4, withholding taxes shall not include income taxes measured or imposed upon the net income of the holder.   5   Covenants       After the Date of Issuance and for so long as the A PECs are outstanding, the Company will not, without the written consent of the holders of the A PECs, issue any shares of capital stock having, upon or following the Liquidation of the Company, any right to payment ranking prior or equal to the payment in full of the Nominal Amount on the A PECs to the holders.   6   Default   6.1   Each of the following events shall constitute an “Event of Default”:    (a)   the Company shall fail to pay the full amount of any Return, as to which the requirements of section 2.1 have been met, on the applicable Payment Date or fail to make any payments required under Section 3 and such failure continues for five Business Days following the date on which the holder of record gives notice of such failure to the Company; or      (b)   except as expressly permitted herein, the Company shall:   (i)   be dissolved or liquidated;     (ii)   become insolvent or unable to pay its debts as they become due; or     (iii)   institute or have instituted against it a proceeding seeking a judgement of insolvency or bankruptcy or any other relief under bankruptcy or insolvency law, and in the case any such proceeding or petition instituted or presented against it, such proceeding or petition:    (A)   results in a judgement of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation; or      (B)   is not dismissed, discharged, stayed or restrained in each case within 90 days of the institution or presentation thereof. 6.2   The Company shall promptly notify the holders of the A PECs if an Event of Default occurs.   7   Registration of the A PECs; Transfer Restrictions; Issuance and Exchange of PEC Certificates; Loss of PEC Certificates   7.1   The A PECs shall be issued only in registered form, and the name and address of the holder of each certificate representing the A PECs shall be entered into the A PEC Register by the Company. Except as expressly required by law, the Person in whose name the A PEC stand in the A PEC Register shall be deemed to be the full and undivided owner and record holder thereof for all purposes.   7.2   Upon request of the holder of record of the A PECs, the Company shall, at the cost of such holder, issue a certificate evidencing one or more A PECs. In case such certificate evidences more than one A PEC, the Company shall upon request of the holder of record replace, at the cost of such holder, such certificate by new certificates evidencing one or more A PECs.   7.3   Each holder of record shall promptly notify the Company of any mutilation, loss, theft, or destruction of any certificate or certificates evidencing the A PECs of which it is the record holder. The Company may, in its discretion, issue a new certificate in place of any certificate theretofore issued by it and alleged to have been mutilated, lost, stolen or destroyed, upon satisfactory proof of such mutilation, loss, theft or destruction. 6 --------------------------------------------------------------------------------   8   General Terms and Conditions of A PECs   8.1   Ranking       Subject to the terms and conditions hereof, the A PECs shall, with respect to payment rights, which includes the Return, redemption and rights on liquidation, winding up and dissolution, rank prior to all Subordinated Securities but the obligations in respect of the A PEC shalls, except for any other Class of Preferred Equity Certificates issued by the Company at present or in the future which shall rank pari passu with the A PEC’s, rank subordinate to all other present and future obligations of the Company whether secured or unsecured.   8.2   Convertibility       The A PECs shall not be convertible into any other security issued by the Company.   8.3   Voting Rights       The holders of record of the A PECs shall not be entitled to any voting rights in respect of the Company by reason of their ownership of the A PECs.   8.4   Non recourse       Notwithstanding any provision of these Terms and Conditions, the obligations of the Company hereunder to make payments to the holders of the A PECs are, at any time of determination, limited to the lesser of the Nominal Amount and the Available Amount. The Available Amount shall, subject to any other provision of this A PEC, at all times be limited to the income the Company has received from its Investment up to and including the date of its Liquidation and the value of the Investment on that date. On a liquidation of the Company, in the event that the Nominal Amount exceeds the Available Amount, the right of any person to claim payment in respect the Excess shall be extinguished. No party will, at any time, have recourse to, or make demand or initiate proceedings against, the Company in respect of the Excess. The Company shall incur no liability and be under no additional duty to any person solely as a result of any inability on its part to make payments or to perform other obligations hereunder, which inability results from the operation of the foregoing provisions of this clause.   9   Miscellaneous   9.1   Governing Law       These Terms and Conditions of the A PECs shall be governed by and shall be construed in accordance with the laws of Luxembourg and the Company and the holders of the A PECs accepting these terms and conditions hereby submit to the non-exclusive jurisdiction of the Courts of Luxembourg with respect to any suit, action or proceeding relating hereto. 7 --------------------------------------------------------------------------------   EXECUTED AS AN AGREEMENT                   SIGNED by     )           for and on behalf of     )           Macquarie Luxembourg Water Sarl     )                       /s/ Jim Craig           )       Authorised Signatory           )                 )                 )                       /s/ Annabelle Helps           )       Authorised Signatory           )             SIGNED by     )           for and on behalf of     )           South East Water LLC     )                       /s/ Peter Stokes           )       Authorised Signatory           )                 )                 )                                   )       Authorised Signatory           )           8 --------------------------------------------------------------------------------   Terms and Conditions of Class B Preferred Equity Certificates Dated 22 December, 2004 Macquarie Luxembourg Water Sarl (1) South East Water LLC (2)   --------------------------------------------------------------------------------   TABLE OF CONTENTS           AUTHORISATION FOR PREFERRED EQUITY CERTIFICATES     1   TERMS AND CONDITIONS     1   1 Definitions     1   2 Return     4   3 Redemption     4   4 Withholding Taxes     6   5 Covenants     6   6 Default     6   7 Registration of the B PECs; Transfer Restrictions; Issuance and Exchange of B PEC Certificates; Loss of B PEC Certificates     6   8 General Terms and Conditions of B PECs     7   9 Miscellaneous     7     --------------------------------------------------------------------------------                 DATE   December 22, 2004 PARTIES MACQUARIE LUXEMBOURG WATER Sarl., a private limited liability company, incorporated under the laws of Luxembourg, whose registered office is at 5, rue Guillaume, BP 2501, L-1025 Luxembourg (the “Company”); and SOUTH EAST WATER LLC, whose principal executive office is at 600 Fifth Avenue, 21st Floor, New York, New York 10020 (“SEW LLC”). AUTHORISATION FOR PREFERRED EQUITY CERTIFICATES The board of managers of the Company has authorised the issuance of 9,712,500 Class B Preferred Equity Certificates (collectively the “B PECs” and individually, a “B PEC”) to SEW LLC, having an aggregate par value of £9,712,500 in respect of making debt investments in infrastructure and related assets located in European EOCD countries. The PECs shall be denominated in British Pounds upon issuance thereof. Each B PEC shall be issued in registered form. TERMS AND CONDITIONS 1   Definitions As used in these Terms and Conditions, the following terms shall have the following meaning:               Accrual Period   shall mean each period from, and including, one Payment Date to, but excluding, the next following Payment Date, except for the initial Accrual Period that will commence on, and include, the Date of Issuance. If the B PECs are redeemed under any provision of Section 3, the Accrual Period, with respect to the B PECs redeemed, shall mean the period from and including the Payment Date immediately preceding the date of redemption of the B PECs to but excluding the date of redemption;               Annual Payment Date   shall mean each twelve-month anniversary after the initial Payment Date;               Applicable Rate   shall mean the rate of return equal to the 12 month EURIBOR rate at the Date of Issuance of the B PECs plus 200 basis points for each Accrual Period;               Available Amount   shall mean the amount available to make payments to the holders of the B PECs;               B PECs   shall mean the PECs issued, or to be issued, by the Company under this Agreement; 1 --------------------------------------------------------------------------------                 B PEC Register   shall mean the register and transfer book maintained by the Company for the B PECs;               Business Day   shall mean any day other than a Saturday, Sunday or other day on which banking institutions in Luxembourg and London are required or authorised to remain closed;               Company   Macquarie Luxembourg Water Sarl, a private limited liability company, incorporated under the laws of Luxembourg, whose registered office is at 5, rue Guillaume, BP 2501, L-1025 Luxembourg;               Company’s Income   shall mean all income and realised gains received by the Company from its Investment during the Accrual Period, less the Costs;               Costs   shall mean all costs and expenses incurred by the Company during the Accrual Period that are economically attributable to the Investment. Such Costs will not include the Return paid or accrued during such Accrual Period on the B PECs, nor income taxes imposed by the Grand-Duchy of Luxembourg or any sub-division, municipality or local authority thereof;               Date of Issuance   shall mean the date as of which the B PECs are issued;               Excess   shall mean the amount with which the Nominal Amount exceeds the Available Amount;               Excluded Return   for any given period means the total amount of return excluded from such period by reason of the limitations set forth in Section 2.2;               Initial Accrual Period   shall mean the period from and including the Date of Issuance up to but excluding the Initial Payment Date;               Initial Payment Date   shall mean 31 March 2005;               Insolvent   shall mean the situation where the aggregate amount of the Company’s obligations, determined in accordance with generally accepted accounting principles as in effect in Luxembourg, exceeds the fair market value of the Company’s assets. The B PECs and any Class of preferred equity certificates that will be issued after this date will be regarded as obligations of the Company for the purpose of computing the Company’s insolvency;               Intermediary Payment Date   shall mean any date determined at the discretion of the Board of Directors of the Company.               Investment   shall mean the Company’s holding of an interest bearing loan receivable of £55,500,000 on Macquarie Water (UK) Limited as held at the Date of Issuance or to be increased or decreased by the Company thereafter; 2 --------------------------------------------------------------------------------         Liquidation   shall mean the event of any voluntary or involuntary liquidation, bankruptcy, dissolution or winding up of the affairs of the Company;       Mandatory Redemption Date   shall mean the Payment Date nearest and prior to the 98th anniversary of the Date of Issuance;       Nominal Amount   shall mean the Par Value of any outstanding B PEC plus any Unpaid Return;       Par Value   shall mean £1.00 (one British Pound) with respect to each outstanding B PEC;       Payment Date   shall mean the Initial Payment Date, any Annual Payment Date, any Intermediary Payment Date and the Redemption Date. A reasonable amount of time will be granted to the board of managers of the Company after each Payment Date to determine the amount of Return payable for any Accrual Period;       PEC or PECs   shall mean individually or collectively the Preferred Equity Certificates issued or to be issued by the Company under the Terms and Conditions of Preferred Equity Certificates;       PEC Register   shall mean the register and transfer book maintained by the Company for the PECs;       Person   shall mean any individual, corporation, company, voluntary association, partnership, joint venture, trust, unincorporated organisation or government (or any agency, instrumentality or political subdivision thereof);       Redemption Date   shall mean the date fixed for redemption of the B PECs;       Redemption Price   shall mean a value equal to the sum of (i) the Par Value for each outstanding B PEC that will be redeemed plus (ii) Unpaid Return accumulated through the Redemption Date;       Retained Earnings   shall mean the retained earnings of the Company determined on an unconsolidated basis in accordance with the generally accepted accounting principles as in effect in Luxembourg. However the Retained Earnings will be computed without taking into account the Unpaid Return on the B PECs;       Return   for any Accrual Period shall accrue on B PECs from the Date of Issuance to but not including the earlier of (i) the date on which all of the B PECs have been redeemed in whole or otherwise paid in full and (ii) the Payment Date nearest and prior to the Mandatory Redemption Date. Return will accrue for each Accrual Period, subject to the payment limitation of Section 2.2, in an amount equal to the sum of (a) the Excluded Return for then prior Accrual Period, (b) the Company’s Income during such Accrual Period minus the net required taxable profit to be reported by the Company in Luxembourg with respect to its 3 --------------------------------------------------------------------------------             Investment during such Accrual Period. Such amount accrued at any time for all Accrual Periods since the Date of Issuance, whether or not declared, is herein called the “Return”.       Subordinated Securities   shall mean all shares of common stock, whether outstanding on the date hereof or issued in the future; and       Unpaid Return   shall be any amount of Return that has accrued but has not become payable pursuant to the payment limitations of Section 2.1. 2   Return   2.1   Return on the B PECs shall be payable on each Payment Date only if and to the extent   (a)   declared by the board of managers of the Company;     (b)   the Company is not immediately before and after given effect to such payment Insolvent;     (c)   that such payment, will not violate any covenant contained in or result in a default under any agreement or other financial obligation of the Company. 2.2   Each payment of Return on the B PECs shall be made by the Company directly to the holders of record as their names appear on the B PEC Register on the record date for such payment. The record date for such payment shall be the Business Day immediately preceding the applicable Payment Date or, if not paid on a Payment Date, the Business Day immediately preceding the actual payment date.   2.3   Each payment made with respect to a B PEC shall be by wire transfer to any account maintained by such holder with a bank identified by such holder in a written notice given to the Company not later than three Business Days prior to the relevant Payment Date.   3   Redemption   3.1   Mandatory Redemption       On the Mandatory Redemption Date, the Company shall redeem all (but not some) of the then outstanding B PECs at the Redemption Price provided that:   (a)   the Par Value of the B PECs will be payable to the extent the Company will not be Insolvent after making such payment; and     (b)   the Unpaid Return will be payable only to the extent the Company will not be Insolvent after making such payment.     The Redemption Price shall be paid to the holders of record on the Mandatory Redemption Date.   3.2   Redemption upon Liquidation of the Company       In the event of a Liquidation the holders of the B PECs shall be entitled to be paid the Redemption Price, in any event before any payment shall be made or any assets distributed to the holders of any Subordinated Securities, provided that:   (a)   the Par Value of the B PECs will be payable to the extent the Company will not be Insolvent after making such payment; and     (b)   the Unpaid Return will be payable only to the extent the Company will not be Insolvent after making such payment. 4 --------------------------------------------------------------------------------       The Redemption Price shall be paid to the holders of record ultimately on the date on which the Liquidation of the Company shall be completed.       The board of managers of the Company shall not cause the shareholders of the Company to adopt a resolution to commence a voluntary Liquidation without the consent of the holders of the B PECs unless the Nominal Amount of the outstanding B PEC’s can be paid.       For purposes of this Section 3.2 neither the voluntary sale, conveyance, exchange or transfer (for cash, shares, stock, securities or other consideration) of all or substantially all the property or assets of the Company nor the consolidation or merger of the Company with one or more corporations shall be deemed to be a Liquidation unless such voluntary sale, conveyance, exchange or transfer shall be in connection with a dissolution or winding up of the business of the Company.   3.3   Optional Redemption by the holders of B PECs       As of the date of an Event of Default (as defined in Section 6), any holder of B PECs shall be entitled, by notice in writing to the Company, to have the B PECs held by it redeemed at the Redemption Price, before any payment shall be made or any assets distributed to the holders of any Subordinated Securities, provided that:   (a)   the Par Value of the B PECs will be payable to the extent the Company will not be Insolvent after making such payment; and     (b)   the Unpaid Return will be payable only to the extent the Company will not be Insolvent after making such payment.     The Redemption Price shall be paid to the holders of record ultimately on the 15th day after the aforementioned notice has been received by the Company.   3.4   Redemption at the option of the Company       The Company may at any time on giving not less than 10 Business Days notice to the holder thereof, redeem the B PECs in whole or in part (but if in part only in whole multiples of £10,000) at par together with any accrued but unpaid Return thereon down to the date of redemption PROVIDED THAT simultaneously with such redemption the Company redeems an equal proportion of each of the other preferred equity certificates issued by it (including for the avoidance of doubt, any other preferred equity certificates issued to SEW LLC).   3.5   General       Redemption of the B PECs will be subject to the condition that:   (a)   from and after the Redemption Date, the B PECs shall cease to accrue a Return, and the B PECs shall no longer be deemed to be outstanding and all rights of the holders thereof (except the right to receive from the Company the Redemption Price) shall cease. Upon the Redemption Date, specified for redemption in any such notice, the payment of the Redemption Price by the Company shall become payable. Surrender of the B PECs shall be made at the registered office of the Company. Upon surrender in accordance with said notice of the B PECs so redeemed (properly endorsed or assigned for transfer, if the board of managers of the Company shall so require and the notice shall so state), such B PECs shall be redeemed by the Company at the Redemption Price as aforesaid;     (b)   any Par Value or any Unpaid Return payable pursuant to Section 3.1. to and including Section 3.3. but not paid on the Redemption Date will accrue interest at the Applicable Rate beginning on and including the Redemption Date. 5 --------------------------------------------------------------------------------   4   Withholding Taxes       All payments on the B PECs shall be made free and clear of withholding taxes imposed by any taxing jurisdiction, unless the withholding of such tax is compelled by law. For purposes of this Section 4, withholding taxes shall not include income taxes measured or imposed upon the net income of the holder.   5   Covenants       After the Date of Issuance and for so long as any B PECs are outstanding, the Company will not, without the written consent of the holders of the B PECs, issue any shares of capital stock having, upon or following the Liquidation of the Company, any right to payment ranking prior or equal to the payment in full of the Nominal Amount on each B PEC to the holders.   6   Default   6.1   Each of the following events shall constitute an “Event of Default”:   (a)   the Company fails to pay the full amount of any Return, as to which the requirements of Section 2.1 have been met, on the applicable Payment Date or fails to make any payments required under Section 3 and such failure continues for five Business Days following the date on which the holder of record gives notice of such failure to the Company; or     (b)   except as expressly permitted herein, the Company:   (i)   is dissolved or liquidated;     (ii)   becomes insolvent or unable to pay its debts as they become due; or     (iii)   institutes or has instituted against it a proceeding seeking a judgement of insolvency or bankruptcy or any other relief under bankruptcy or insolvency law, and in the case any such proceeding or petition instituted or presented against it, such proceeding or petition:   (A)   results in a judgement of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation; or     (B)   is not dismissed, discharged, stayed or restrained in each case within 90 days of the institution or presentation thereof. 6.2   The Company shall promptly notify the holders of the B PECs if an Event of Default has occurred.   7   Registration of the B PECs; Transfer Restrictions; Issuance and Exchange of B PEC Certificates; Loss of B PEC Certificates   7.1   All B PECs shall be issued only in registered form, and the name and address of the holder of each certificate representing a B PEC shall be entered into the B PEC Register by the Company. Except as expressly required by law, the Person in whose name the B PECs stand in the B PEC Register shall be deemed to be the full and undivided owner and record holder thereof for all purposes.   7.2   Upon request of the holder of record of the B PECs, the Company shall, at the cost of such holder, issue a certificate evidencing one or more B PECs. In case such certificate evidences more than one B PEC, the Company shall upon request of the holder of record replace, at the cost of such holder, such certificate by new certificates evidencing one or more B PECs.   7.3   Each holder of record shall promptly notify the Company of any mutilation, loss, theft, or destruction of any certificate or certificates evidencing any B PECs of which it is the record holder. 6 --------------------------------------------------------------------------------       The Company may, in its discretion, issue a new certificate in place of any certificate theretofore issued by it and alleged to have been mutilated, lost, stolen or destroyed, upon satisfactory proof of such mutilation, loss, theft or destruction.   7.4   The transfer of any B PEC is subject to the prior written consent of the Company.   8   General Terms and Conditions of B PECs   8.1   Ranking       Subject to the terms and conditions hereof, the B PECs shall, with respect to payment rights, which includes the Return, redemption and rights on liquidation, winding up and dissolution, rank prior to all Subordinated Securities but the obligations in respect of the B PECs shall, except for any other class of preferred equity certificates issued by the Company at present or in the future which shall rank pari passu with the B PEC’s, rank subordinate to all other present and future obligations of the Company whether secured or unsecured.   8.2   Convertibility       The B PECs shall not be convertible into any other security issued by the Company.   8.3   Voting Rights.       The holders of record of the B PECs shall not be entitled to any voting rights in respect of the Company by reason of their ownership of the B PECs.   8.4   Non recourse       Notwithstanding any provision of these Terms and Conditions, the obligations of the Company hereunder to make payments to the holders of the B PECs are, at any time of determination, limited to the lesser of the Nominal Amount and the Available Amount. The Available Amount shall, subject to any other provision of this B PEC, at all times be limited to the income the Company has received from its Investment up to and including the date of its Liquidation and the value of the Investment on that date. On a liquidation of the Company, in the event that the Nominal Amount exceeds the Available Amount, the right of any person to claim payment in respect the Excess shall be extinguished. No party will, at any time, have recourse to, or make demand or initiate proceedings against, the Company in respect of the Excess. The Company shall incur no liability and be under no additional duty to any person solely as a result of any inability on its part to make payments or to perform other obligations hereunder, which inability results from the operation of the foregoing provisions of this clause.   9   Miscellaneous   9.1   Governing Law       These Terms and Conditions of the B PECs are governed by, and shall be construed in accordance with, the laws of Luxembourg and the Company and any holders of the B PECs accepting these terms and conditions hereby submit to the non-exclusive jurisdiction of the courts of Luxembourg with respect to any suit, action or proceeding relating hereto. 7 --------------------------------------------------------------------------------   EXECUTED AS AN AGREEMENT                   SIGNED by     )           for and on behalf of                 Macquarie Luxembourg Water Sarl     )     /s/ Jim Craig                             )     Authorised signatory           )                 )                 )     /s/ Annabelle Helps                             )     Authorised signatory           )                             SIGNED by     )           for and on behalf of     )     /s/ Peter Stokes                       South East Water LLC     )     Authorised signatory           )                 )                 )                                   )     Authorised signatory           )           8

  Exhibit 10.1 Settlement, Release and Cross-License Agreement      THIS SETTLEMENT, RELEASE, AND CROSS-LICENSE AGREEMENT (“Agreement”) is entered into as of this 17th day of January 2006 (the “Effective Date”), between TRILOGY SOFTWARE, INC., corporation existing under the laws of Delaware with its principal place of business at 6011 West Courtyard Drive, Austin, TX, and TRILOGY DEVELOPMENT GROUP, INC., corporation existing under the laws of Delaware with its principal place of business at 6011 West Courtyard Drive, Austin, TX 78730, on the one hand (collectively, “TRILOGY”); and SELECTICA, INC., corporation existing under the laws of Delaware with its principal place of business at 3 West Plumeria Drive, San Jose, California 95134 (“SELECTICA”), on the other hand. WITNESSETH      WHEREAS, TRILOGY and SELECTICA are engaged in a lawsuit, styled Trilogy Software Inc., et al. v. Selectica, Inc., Civil Action No. 2-04-CV-160 TJW, pending in the United States District Court for the Eastern District of Texas, Marshall Division (the “Civil Action”);      WHEREAS, TRILOGY is the owner of certain patents asserted in the Civil Action, as listed in Exhibit A hereto;      WHEREAS, SELECTICA is the owner of certain patents asserted in the Civil Action, as listed in Exhibit B hereto;      WHEREAS, each Party desires a license to certain patents, as described herein;      WHEREAS, TRILOGY and SELECTICA respectively each deny the claims and counterclaims made against them in the Civil Action and any allegation not expressly admitted in the Civil Action; and      WHEREAS, each of TRILOGY and SELECTICA, in contemplation of the uncertainties of the disputed Civil Action, respectively desires to compromise and settle the claims or counterclaims alleged in the Civil Action.      NOW, THEREFORE, in consideration of the mutual promises and obligations recited herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, TRILOGY and SELECTICA agree as follows:      1. DEFINITIONS. The following terms used in this Agreement shall have the meanings set forth below:           1.1 An “Affiliate” of, or Entity “Affiliated” with, a specified Entity, is an Entity that directly, or indirectly through one or more intermediaries, Controls or is Controlled by, or is under common Control with, the Entity specified.           1.2 “Entity” means an individual, a corporation, a partnership, an association, a joint-stock company, a trust, or any unincorporated business organization.   --------------------------------------------------------------------------------             1.3 “Agreement” means this Settlement and Cross-License Agreement.           1.4 “Control” and its derivative terms mean the ownership, directly or indirectly, of more than fifty percent (50%) of the voting stock or other voting or managerial equity interests in an Entity.           1.5 “TRILOGY” means TRILOGY SOFTWARE, INC., corporation existing under the laws of Delaware with its principal place of business at 6011 West Courtyard Drive, Austin, Texas 78730, and TRILOGY DEVELOPMENT GROUP, INC., corporation existing under the laws of Delaware with its principal place of business at 6011 West Courtyard Drive, Austin, Texas 78730.           1.6 “SELECTICA” means Selectica, Inc., a corporation existing under the laws of Delaware with its principal place of business at 3 West Plumeria Drive, San Jose, California 95134.           1.7 “Parties” means TRILOGY and SELECTICA, and a “Party” means either of them.           1.8 “Trilogy Patents,” as used herein, means (i) the patents-in-suit listed on Exhibit A hereto; and (ii) all parents, provisionals, substitutes, renewals, continuations, continuations-in-part, divisionals, foreign counterparts, reissues, oppositions, continued examinations, reexaminations and extensions of any of the foregoing Patents owned by, filed by, assigned to or otherwise assertable by TRILOGY or any of its Affiliates, or successors in interest at any time (i.e. as of, prior to, or after the Effective Date), whether filed before, on or after the Effective Date.           1.9 “Selectica Patents,” as used herein, means (i) the patents-in-suit listed on Exhibit B hereto; and (ii) all parents, provisionals, substitutes, renewals, continuations, continuations-in-part, divisionals, foreign counterparts, reissues, oppositions, continued examinations, reexaminations and extensions of any of the foregoing Patents owned by, filed by, assigned to or otherwise assertable by SELECTICA or any of its Affiliates, or successors in interest at any time (i.e. as of, prior to, or after the Effective Date), whether filed before, on or after the Effective Date.           1.10 “Purchase,” as used herein, means the sale of the entire business or a portion of the business of either Party to a purchaser (a “Purchaser”) of said entire business or a portion of the business.           1.11 “Purchaser Products,” as used herein, means (i) the services provided or products existing, manufactured, sold, offered for sale, leased, licensed, or brokered by a Purchaser or its Affiliates prior to or as of the date of a Purchase by the Purchaser; and/or (ii) the evolution of such Purchaser’s (or its Affiliates’) prior or existing products or services (as described in subpart (i) of this paragraph) after a Purchase.           1.12 The “Releases” refer to the releases described in paragraphs 3.1 and 3.2. 2 --------------------------------------------------------------------------------        2. CROSS-LICENSE GRANTS.           2.1 Trilogy’s Grant of Nonexclusive License to Selectica. Subject to the terms and conditions contained in this Agreement, TRILOGY hereby grants to SELECTICA a fully paid-up, royalty-free, irrevocable, nonexclusive, nontransferable (except as set forth in Section 5.1 below), worldwide license under the Trilogy Patents to make, use, sell, develop, publish, distribute, lease, license, export, import, have made, offer to sell or otherwise transfer any product (including both tangible or intangible products such as services, whether temporary or permanent) or practice any method covered by any claim of the Trilogy Patents (the “Trilogy License”).           2.2 Selectica’s Grant of Nonexclusive License to Trilogy. Subject to the terms and conditions contained in this Agreement, SELECTICA hereby grants to TRILOGY a fully paid-up, royalty-free, irrevocable, nonexclusive, nontransferable (except as set forth in Section 5.1 below), worldwide license under the Selectica Patents, to make, use, sell, develop, publish, distribute, lease, license, export, import, have made, offer to sell or otherwise transfer any product (including both tangible or intangible products such as services, whether temporary or permanent) or practice any method covered by any claim of the Selectica Patents (the “Selectica License”).      3. MUTUAL RELEASES AND DISMISSAL.           3.1 Release by TRILOGY. TRILOGY, on behalf of itself and its Affiliates, principals, employees, agents, successors and assigns as of the Effective Date, shall and does hereby irrevocably release and forever discharge SELECTICA and any parent, subsidiary, or other Affiliated or related corporations or entities, and each of their respective current and former officers, directors, agents, employees, representatives, and attorneys from any and all claims, actions, causes of action, suits, damages, duties, rights, obligations, liabilities, adjustments, responsibilities, judgments and demands (i) that were plead in the Civil Action (including without limitation any act of past, present or future infringement, misappropriation or other violation of a Trilogy Patent); and (ii) that arise out of Selectica’s employment of Reuben Swartz. Nothing in this release shall discharge or otherwise affect the rights, duties and obligations created in this Agreement.           3.2 Release by SELECTICA. SELECTICA, on behalf of itself and its Affiliates, principals, employees, agents, successors and assigns as of the Effective Date, shall and does hereby irrevocably release and forever discharge TRILOGY and any parent, subsidiary, or other Affiliated or related corporations or entities, and each of their respective current and former officers, directors, agents, employees, representatives, and attorneys from any and all claims, actions, causes of action, suits, damages, duties, rights, obligations, liabilities, adjustments, responsibilities, judgments and demands that were plead in the Civil Action (including without limitation any act of past, present or future infringement, misappropriation or other violation of a Selectica Patent) . Nothing in this release shall discharge or otherwise affect the rights, duties and obligations created in this Agreement.           3.3 Dismissal of the Civil Action. Within two (2) business days of the Effective Date of this Agreement, the Parties shall file a Stipulation of Dismissal pursuant to 3 --------------------------------------------------------------------------------   F.R.C.P. 41(a), in the form attached hereto as Exhibit C, dismissing with prejudice all claims and counterclaims made therein and specifying that all costs incurred therein (including attorney and expert fees and expenses) shall be borne solely by the Party incurring such costs.      4. PAYMENT.           4.1 Settlement Payment. TRILOGY and SELECTICA agree that in exchange for the Cross-License and the settlement of the Civil Action, SELECTICA will make a non-refundable, lump-sum payment of Seven Million, Five Hundred Thousand Dollars in United States currency ($7,500,000.00 US) (the “Settlement Payment”) to TRILOGY by February 21, 2006. TRILOGY and SELECTICA agree that this payment constitutes a compromise in settlement of a dispute under Rule 408 of the Federal Rules of Evidence. Neither Party admits any liability whatsoever in connection with the Lawsuits.           4.2 Payment Instructions. The Settlement Payment will be made by wire transfer to TRILOGY through its attorneys, McKool Smith P.C., to the following client trust account on or before February 21, 2006: Inwood National Bank 100 Centennial Boulevard Richardson, Texas 75081 ABA #111001040 Account Name: McKool Smith, P.C., IOLTA Account Trust Account Number 3126637      5. LIMITATION ON RELEASES AND LICENSES.           5.1 Transferability Matters. The Licenses granted hereunder are non-transferable and non-assignable except pursuant to a Purchase. The Licenses granted hereunder are transferable and assignable to a Purchaser and its Affiliates pursuant to a Purchase by said Purchaser, but in no event shall Licenses following such assignment or transfer apply to or cover any Purchaser Products. Notwithstanding the foregoing, the Licenses granted hereunder shall apply to upgrades or enhancements to those products or services of the Party that existed or were offered for sale as of the date of the Purchase. But a Purchase shall not immunize Purchaser Products from suit, nor shall a Purchaser obtain any protection under this Agreement for Purchaser Products by consummating a Purchase or by combining Purchaser Products with any products or services of a Party (or with any upgrades or enhancements to said products or services of an acquired Party).           5.2 No grants to third parties. Except as stated herein, the releases and licenses, as set forth above, are not intended as and are not the grant of a general license or any other rights under either the Trilogy Patents or the Selectica Patents to any third party, not expressly licensed or released.           5.3 No Sublicense. TRILOGY shall not have the right to sublicense rights to the Selectica Patents. SELECTICA shall not have the right to sublicense rights to the Trilogy Patents. 4 --------------------------------------------------------------------------------             5.4 Reservation of Rights. TRILOGY and SELECTICA reserve all rights and licenses not expressly granted to pursuant to this Agreement.      6. REPRESENTATIONS AND WARRANTIES.           6.1 General. Each Party warrants and represents to the other that (a) it has the right and power to enter into this Agreement and to settle and dismiss the Civil Action; (b) its execution hereof has been duly authorized by all necessary corporate action of such Party; and (c) it has all requisite legal rights necessary to grant the other Party all Releases and Licenses granted to the other Party as set forth above.           6.2 Trilogy’s Warranties. TRILOGY expressly represents and warrants that (i) it is the sole and exclusive owner of all right, title, and interest in and to the Trilogy Patents, (ii) it has all rights to license and enforce the Trilogy Patents, including the right to seek past damages for infringement, to grant releases with respect to infringement of the Trilogy Patents, and to license the Trilogy Patents, (iii) it will take no action, including but not limited to granting any license or other rights, under the Trilogy Patents, TRILOGY’s claims or otherwise, that would conflict with, prevent, or otherwise frustrate the licenses, rights and other benefits granted to SELECTICA hereunder; and (iv) there are no liens, conveyances, mortgages, assignments, encumbrances, or other agreements that would prevent, impair, or frustrate the full and complete exercise of the terms and conditions of this Agreement.           6.3 Selectica’s Warranties. SELECTICA expressly represents and warrants that (i) it is the sole and exclusive owner of all right, title, and interest in and to the Selectica Patents, (ii) it has all rights to license and enforce the Selectica Patents, including the right to seek past damages for infringement, to grant releases with respect to infringement of the Selectica Patents, and to license the Selectica Patents, (iii) it will take no action, including but not limited to granting any license or other rights, under the Selectica Patents, SELECTICA’s claims or otherwise, that would conflict with, prevent, or otherwise frustrate the licenses, rights and other benefits granted to TRILOGY hereunder; and (iv) there are no liens, conveyances, mortgages, assignments, encumbrances, or other agreements that would prevent, impair, or frustrate the full and complete exercise of the terms and conditions of this Agreement.      7. GENERAL PROVISIONS.           7.1 Non-warranty. Nothing in this Agreement shall be construed as:                (a) a warranty or representation as to the validity or scope of any Trilogy Patent or Selectica Patent;                (b) a warranty or representation that making, using or selling of products by or for the either Party will be free from infringement of any patents other than the Trilogy Patents and Selectica Patents.           7.2 Successors, Subsidiaries, and Assigns. Except as otherwise provided in sections 2.1, 2.2, 3.1, 3.2, and 5.1, this Agreement, and the Releases contained herein, shall be binding upon and shall inure to the benefit of TRILOGY and SELECTICA, and their respective agents, representatives, subsidiaries, successors, trustees, heirs and assigns. Each Party shall 5 --------------------------------------------------------------------------------   advise every such successor, trustee, heir or assign, of the rights of the other Party pursuant to this Agreement, and shall further advise that such successor, trustee, heir or assign to the Trilogy or Selectica Patents, or any of them individually, or this Agreement, takes such patents subject to the rights granted hereunder.           7.3 Agreement Obligations Not Released. The Releases are not intended to release any of the Parties from their respective obligations created by this Agreement or to prevent any Party from enforcing the terms of this Agreement against the other.           7.4 Entire Agreement. Each of the Parties acknowledges that no person has made any promise, representation or warranty whatsoever, express or implied, not contained herein concerning the subject matter hereof, to induce the execution of this instrument, and each signatory hereby acknowledges that such signatory has not executed this instrument in reliance upon any such promise, representation or warranty. This Agreement constitutes the entire agreement between the parties and supersedes all prior negotiations, representations or agreements between the parties, either written or oral, on the subject hereof. This Agreement may be amended only by written instrument designated as an amendment to this Agreement and executed by the Parties hereto or their respective successors, heirs or assigns.           7.5 Names and Trademarks. Nothing contained in this Agreement shall be construed as conferring any rights to use in advertising, publicity, or other marketing activities any name, trademark, or other designation of either Party hereto, including any contraction, abbreviation, or simulation of any of the foregoing, and each Party hereto agrees not to use the existence of this Agreement in any marketing activity, whether public or private.           7.6 Third Party Actions. Nothing contained in this Agreement shall be construed as (a) creating an obligation to bring or prosecute actions or suits against third parties for infringement, or to secure and/or maintain any of its intellectual property rights or (b) limiting the rights that a party has outside the scope of this Agreement.           7.7 Effective Date. This Agreement will become binding upon the exchange of facsimile copies of the required signatures and such faxed copies shall be binding and effective as if they were original signatures. The parties will thereafter exchange formal signed originals of this Agreement for their permanent records.           7.8 Bankruptcy. All licenses and releases granted under this Agreement are deemed to be, for the purpose of Section 365(n) of the U.S. Bankruptcy Code, licenses of rights to intellectual property as defined under Section 101 of the U.S. Bankruptcy Code, as amended. The Parties agree that, as licensees of such rights under this Agreement, they shall each retain and may exercise all of their rights and elections under the U.S. Bankruptcy Code, as amended.           7.9 Term. This Agreement shall become effective as of the Effective Date. The licenses granted under Section 2 of this Agreement shall remain in full force until the last of the licensed patents have expired and all rights thereunder have ceased to exist. All other rights and obligations under this Agreement shall survive any such expiration.           7.10 Trilogy’s Rights in the Event of Non-Payment by Selectica. If, for any reason, Selectica fails to make timely payment as provided in section 4, above, Trilogy shall 6 --------------------------------------------------------------------------------   have the right (in addition to all other remedies available to it) to enforce this Agreement and Selectica’s payment obligations by instituting an action in the United States District Court for the Eastern District of Texas, Marshall Division. The parties agree that the United States District Court for the Eastern District of Texas, Marshall Division shall have sole and exclusive jurisdiction over an action for failure to make timely payment. In the event Selectica fails to timely make the settlement payment described in section 4, it submits to the jurisdiction of the Eastern District of Texas and consents to venue in such District. Selectica further covenants not to initiate any action (for declaratory judgment or otherwise) relating to any payment dispute in any venue or jurisdiction other than in the United States District Court for the Eastern District of Texas, Marshall Division.           7.11 Attorneys’ Fees. In the event of litigation pursuant to paragraph 7.10, the prevailing party shall recover its reasonable and necessary attorneys’ fees, costs, and expert witness expenses incurred in connection with such litigation or arbitration. 7 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the Parties have caused their duly authorized officers to execute this Agreement as of the Effective Date.               TRILOGY SOFTWARE, INC.       Dated this 17th of January, 2006               By:   /s/ Lance A. Jones                       Name: Lance A. Jones         Title: Vice President and General Counsel                       TRILOGY DEVELOPMENT GROUP, INC.       Dated this 17th of January, 2006               By:   /s/ Lance A. Jones                       Name: Lance A. Jones         Title: Vice President and General Counsel                       SELECTICA, INC.       Dated this 17th of January, 2006               By:   /s/ Vincent G. Ostrosky                       Name: Vincent G. Ostrosky         Title: President & CEO           --------------------------------------------------------------------------------   EXHIBIT A TRILOGY PATENTS-IN-SUIT The following United States Patent Nos.: 5,825,651 5,878,400 6,405,308 6,553,350 6,675,294   --------------------------------------------------------------------------------   EXHIBIT B SELECTICA PATENTS-IN-SUIT The following United States Patent Nos.: 6,049,822 6,233,609 6,460,077 6,535,913   --------------------------------------------------------------------------------   EXHIBIT C FORM OF STIPULATION OF DISMISSAL  

Exhibit 10.10   October 19, 2005   CRT Capital Group LLC 262 Harbor Drive Stamford, CT 06902   Re:          Federal Services Acquisition Corporation Initial Public Offering    Ladies and Gentlemen:   This letter is being delivered to you in accordance with the Underwriting Agreement (the “Underwriting Agreement”) between Federal Services Acquisition Corporation, a Delaware corporation (the “Company”), and CRT Capital Group LLC (the “Underwriter”) relating to an underwritten initial public offering (the “IPO”) of the Company’s units (the “Units”), each comprised of one share of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), and two warrants, each of which are exercisable for one share of Common Stock (each, a “Warrant”).   In order to induce the Company and the Underwriter to enter into the Underwriting Agreement and to proceed with the IPO, and in recognition of the benefit that such IPO will confer upon the undersigned as a stockholder of the company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby agrees with the Underwriter as follows:   The undersigned represents and warrants that, as of the date hereof, other than de minimis errors or omissions, (i) the biographical information furnished to the Company and the Underwriter and attached hereto as Exhibit A is true and accurate in all respects, does not omit any material information with respect to the undersigned’s background during the previous five years and contains all of the information required to be disclosed pursuant to Item 401 of Regulation S-K, promulgated under the Securities Act of 1933, as amended, and (ii) the questionnaires furnished by the undersigned to the Company and the Underwriter and attached hereto as Exhibit B are true and accurate in all respects.  The undersigned further represents and warrants that:   (a)           The undersigned 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 practices relating to the offering of securities in any jurisdiction;   (b)           The undersigned has never been convicted of or pleaded guilty to any crime and is not currently a defendant in a criminal proceeding (i) involving any fraud, (ii) relating to any financial transaction or handling of funds of another person, (iii) pertaining to any dealings in any securities; and   --------------------------------------------------------------------------------   (c)           The undersigned 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.   The undersigned understands that the Underwriter may conduct a background check with respect to the undersigned, and hereby authorizes any employer, financial institution or consumer credit reporting agency to release to the Underwriter and its legal representatives or agents (including any investigative search firm retained by the Underwriter) any information they may have about the undersigned’s background and finances (“Information”).  Neither the Underwriter nor its agents shall be violating the undersigned’s right of privacy in any manner in requesting and obtaining the Information or in otherwise performing a background check, and the undersigned hereby releases them from liability for any damage whatsoever in that connection.   The undersigned acknowledges and understands that the Underwriter and the Company will rely upon the agreements, representations and warranties set forth herein in proceeding with the IPO.   This letter agreement shall be binding on the undersigned and the undersigned’s respective successors, heirs, personal representatives and assigns.   This letter agreement shall be governed by and interpreted and construed in accordance with the laws of the State of New York applicable to contracts formed and to be performed entirely within the State of New York, without regard to the conflicts of law provisions thereof to the extent such principles or rules would require or permit the application of the laws of another jurisdiction.   No term or provision of this letter agreement may be amended, changed, waived, altered or modified except by written instrument executed and delivered by the party against whom such amendment, change, waiver, alteration or modification is to be enforced.      Very truly yours,       /s/ JOEL R. JACKS     Joel R. Jacks   On behalf of FSAC Partners, LLC   Accepted and agreed as of the date hereof:    CRT CAPITAL GROUP LLC   By: /s/ ERIC SEAL    Name: Eric Seal Title: Vice President   2 --------------------------------------------------------------------------------    EXHIBIT A   Biography   See attached.   3 --------------------------------------------------------------------------------    EXHIBIT B   Questionnaires   See attached.   4 --------------------------------------------------------------------------------

Exhibit 10.1 Loan No. V  59941   LOAN AGREEMENT Dated as of October 30, 2006 Between BEHRINGER HARVARD THREE PARKWAY, LLC as Borrower and JPMORGAN CHASE BANK, N.A., as Lender     -------------------------------------------------------------------------------- TABLE OF CONTENTS       Page I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION   1   Section 1.1 Definitions   1   Section 1.2 Principles of Construction   23 II. GENERAL TERMS   24   Section 2.1 Loan Commitment; Disbursement to Borrower   24   Section 2.2 Interest Rate   24   Section 2.3 Loan Payment   25   Section 2.4 Prepayments   26   Section 2.5 Defeasance   26   Section 2.6 Release of Property   29   Section 2.7 Lockbox Account/Cash Management   29   Section 3.1 Conditions Precedent to Closing   31 IV. REPRESENTATIONS AND WARRANTIES   35   Section 4.1 Borrower Representations   35   Section 4.2 Survival of Representations   42 V. BORROWER COVENANTS   42   Section 5.1 Affirmative Covenants   42   Section 5.2 Negative Covenants   52 VI. INSURANCE; CASUALTY; CONDEMNATION   60   Section 6.1 Insurance   60   Section 6.2 Casualty   63   Section 6.3 Condemnation   64   Section 6.4 Restoration   64 VII. RESERVE FUNDS   69   Section 7.1 Required Repairs   69   Section 7.2 Tax and Insurance Escrow Fund   70   Section 7.3 Replacements and Replacement Reserve   70   Section 7.4 Rollover Reserve   75   Section 7.5 excelleRx Lease   76   --------------------------------------------------------------------------------   Section 7.6 Lease Obligation Fund   77   Section 7.7 Reserve Funds, Generally   77   Section 7.8 Letter of Credit Rights   78   Section 7.9 Application of Letter of Credit Proceeds   78 VIII. DEFAULTS   78   Section 8.1 Event of Default   78   Section 8.2 Remedies   80   Section 8.3 Remedies Cumulative; Waivers   81 IX. SPECIAL PROVISIONS   82   Section 9.1 Securitization   82   Section 9.2 Intentionally Omitted   83   Section 9.3 Exculpation   83   Section 9.4 Matters Concerning Property Manager   85   Section 9.5 Servicer   85 X. MISCELLANEOUS   85   Section 10.1 Survival   85   Section 10.2 Lender’s Discretion   85   Section 10.3 Governing Law   86   Section 10.4 Modification, Waiver in Writing   86   Section 10.5 Delay Not a Waiver   86   Section 10.6 Notices   86   Section 10.7 Trial by Jury   87   Section 10.8 Headings   87   Section 10.9 Severability   87   Section 10.10 Preferences   88   Section 10.11 Waiver of Notice   88   Section 10.12 Remedies of Borrower   88   Section 10.13 Expenses; Indemnity   88   Section 10.14 Schedules Incorporated   89   Section 10.15 Offsets, Counterclaims and Defenses   90   Section 10.16 No Joint Venture or Partnership; No Third Party Beneficiaries   90   Section 10.17 Publicity   90   Section 10.18 Waiver of Marshalling of Assets   90   ii --------------------------------------------------------------------------------   Section 10.19 Waiver of Counterclaim   90   Section 10.20 Conflict; Construction of Documents; Reliance   91   Section 10.21 Brokers and Financial Advisors   91   Section 10.22 Prior Agreements   91   Section 10.23 Transfer of Loan   91   Section 10.24 Joint and Several Liability   91   SCHEDULES   Schedule I - Form Guaranty of Payment       Schedule II – Rent Roll       Schedule III – Required Repairs - Deadlines for Completion       Schedule IV – Organizational Chart of Borrower       Schedule V – Exceptions to Representations       Schedule VI – Lease Obligations   iii -------------------------------------------------------------------------------- LOAN AGREEMENT THIS LOAN AGREEMENT, dated as of this 30th day of October, 2006 (as amended, restated, replaced, supplemented or otherwise modified from time to time, this “Agreement”), between JPMORGAN CHASE BANK, N.A., a banking association chartered under the laws of the United States of America, having an address at 270 Park Avenue, New York, New York 10017 (“Lender”) and BEHRINGER HARVARD THREE PARKWAY, LLC, a Delaware limited liability company, having its principal place of business c/o Behringer Harvard Funds, 15601 Dallas Parkway, Suite 600, Addison, Texas 75001 (“Borrower”). W I T N E S S E T H:   WHEREAS, Borrower desires to obtain the Loan (as hereinafter defined) from Lender; and WHEREAS, Lender is willing to make the Loan to Borrower, subject to and in accordance with the terms of this Agreement and the other Loan Documents (as hereinafter defined). NOW, THEREFORE, in consideration of the making of the Loan by Lender and the covenants, agreements, representations and warranties set forth in this Agreement, the parties hereto hereby covenant, agree, represent and warrant as follows: I.                                         DEFINITIONS; PRINCIPLES OF CONSTRUCTION SECTION 1.1                                   DEFINITIONS.  FOR ALL PURPOSES OF THIS AGREEMENT, EXCEPT AS OTHERWISE EXPRESSLY REQUIRED OR UNLESS THE CONTEXT CLEARLY INDICATES A CONTRARY INTENT: “Additional Insolvency Opinion” shall have the meaning set forth in Section 4.1.30(c) hereof. “Affiliate” shall mean, as to any Person, any other Person that, directly or indirectly, is in Control of, is Controlled by or is under common Control with such Person or is a director or officer of such Person or of an Affiliate of such Person. “Affiliated Manager” shall mean any Property Manager in which Borrower, Principal, or Guarantor has, directly or indirectly, any legal, beneficial or economic interest. “Agreement” shall mean this Loan Agreement, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “ALTA” shall mean American Land Title Association, or any successor thereto. “Annual Budget” shall mean the operating budget, including all planned Capital Expenditures, for the Property prepared by Borrower in accordance with Section 5.1.11.(d) hereof for the applicable Fiscal Year or other period. -------------------------------------------------------------------------------- “Approved Annual Budget” shall have the meaning set forth in Section 5.1.11(d) hereof. “Assignment of Leases” shall mean that certain first priority Assignment of Leases and Rents, dated as of the date hereof, from Borrower, as assignor, to Lender, as assignee, assigning to Lender all of Borrower’s interest in and to the Leases and Rents of the Property as security for the Loan, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “Assignment of Management Agreement” shall mean that certain Assignment of Management Agreement and Subordination of Management Fees, dated as of the Closing Date, among Lender, Borrower and Property Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “Award” shall mean any compensation paid by any Governmental Authority in connection with a Condemnation in respect of all or any part of the Property. “Bankruptcy Action” shall mean with respect to any Person (a) such Person filing a voluntary petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (b) the filing of an involuntary petition against such Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, in which such Person colludes with, or otherwise assists such Person, or cause to be solicited petitioning creditors for any involuntary petition against such Person; (c) such Person filing an answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (d) such Person consenting to or acquiescing in or joining in an application for the appointment of a custodian, receiver, trustee, or examiner for such Person or any portion of the Property; (e) such Person making an assignment for the benefit of creditors, or admitting, in writing or in any legal proceeding, its insolvency or inability to pay its debts as they become due. “Bankruptcy Code” shall mean Title 11 of the United States Code, 11 U.S.C. §101, et seq., as the same may be amended from time to time, and any successor statute or statutes and all rules and regulations from time to time promulgated thereunder, and any comparable foreign laws relating to bankruptcy, insolvency or creditors’ rights or any other Federal or state bankruptcy or insolvency law. “Basic Carrying Costs” shall mean the sum of the following costs associated with the Property for the relevant Fiscal Year or payment period:  (i) Taxes and (ii) Insurance Premiums. “Behringer Holdings” shall mean Behringer Harvard Holdings, a Delaware limited liability company. “Behringer Harvard Funds” shall mean, individually or collectively, Behringer Holdings, Behringer Harvard Short-Term Opportunity Fund I LP, a Texas limited partnership, Behringer Harvard Mid-Term Value Enhancement Fund I LP, a Texas limited partnership, Behringer Harvard Operating Partnership I LP, a Texas limited partnership, Behringer Harvard REIT I, Inc., a Maryland corporation, Behringer Harvard Opportunity REIT I, Inc., a Maryland 2 -------------------------------------------------------------------------------- corporation, and/or Behringer Harvard Strategic Opportunity Fund I LP, a Texas limited partnership. “Borrower” shall mean Behringer Harvard Three Parkway, LLC, a Delaware limited liability company, together with its permitted successors and assigns. “Borrower’s Knowledge” shall mean the actual knowledge attributable to those principals, employees and officers of Borrower who have given substantive attention to the Property, the Loan Documents and related matters, without any implied duty to conduct any inquiry or investigation. “Business Day” shall mean any day other than a Saturday, Sunday or any other day on which national banks in New York, New York are not open for business. “Capital Expenditures” shall mean, for any period, the amount expended for items capitalized under GAAP or other accounting principles reasonably acceptable to Lender, consistently applied (including expenditures for building improvements or major repairs, leasing commissions and tenant improvements). “Cash Management Account” shall have the meaning set forth in Section 2.7.2 hereof. “Cash Management Agreement” shall mean that certain Cash Management Agreement, dated as of the date hereof, by and among Borrower, Property Manager and Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “Cash Sweep Period” shall have the meaning set forth in the Cash Management Agreement. “Casualty” shall have the meaning set forth in Section 6.2 hereof. “Casualty Consultant” shall have the meaning set forth in Section 6.4(b)(iii) hereof. “Casualty Retainage” shall have the meaning set forth in Section 6.4(b)(iv) hereof. “Casualty/Condemnation Prepayment” shall have the meaning set forth in Section 6.4(e) hereof. “Closing Date” shall mean the date of the funding of the Loan. “Code” shall mean the Internal Revenue Code of 1986, as amended, as it may be further amended from time to time, and any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form. 3 -------------------------------------------------------------------------------- “Condemnation” shall mean a temporary or permanent taking by any Governmental Authority as the result or in lieu or in anticipation of the exercise of the right of condemnation or eminent domain, of all or any part of the Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting the Property or any part thereof. “Condemnation Pr oceeds” shall have the meaning set forth in Section 6.4(b). “Consumer Price Index” or “CPI” shall mean the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the United States Department of Labor, All Items; 1982-84 = 100.  If the Bureau of Labor Statistics substantially revises the manner in which the CPI is determined, an adjustment shall be made by Lender in the revised index which would produce results equivalent, as nearly as possible, to those which would be obtained if the CPI had not been so revised. “Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise.  “Controlled” and “Controlling” shall have correlative meanings. “Debt” shall mean the outstanding principal amount set forth in, and evidenced by, this Agreement and the Note together with all interest accrued and unpaid thereon and all other sums (including the Defeasance Payment Amount and any Yield Maintenance Premium) due to Lender in respect of the Loan under the Note, this Agreement, the Mortgage or any other Loan Document. “Debt Service” shall mean, with respect to any particular period of time, scheduled principal and interest payments due under this Agreement and the Note. “Debt Service Coverage Ratio” shall mean a ratio for the applicable period in which: (a)                                  the numerator is the Net Operating Income (excluding interest on credit accounts and using annualized operating expenses for any recurring expenses not paid monthly (e.g., Taxes and Insurance Premiums)) for such period as set forth in the statements required hereunder, without deduction for (i) actual management fees incurred in connection with the operation of the Property, or (ii) amounts paid to the Reserve Funds, less (A) management fees equal to the greater of (1) assumed management fees of three percent (3%) of Gross Income from Operations or (2) the actual management fees incurred, (B) assumed Replacement Reserve Fund contributions equal to $0.20 per square foot of gross leasable area at the Property, and (C) assumed Rollover Reserve Fund contributions equal to $0.70 per square foot of gross leasable area at the Property (adjusted proportionately for any period other than one year); and (b)                                 the denominator is the aggregate amount of principal and interest due and payable on the Loan and any Mezzanine Loan for such applicable period 4 -------------------------------------------------------------------------------- (assuming a thirty (30) year amortization schedule, unless otherwise provided herein). “Default” shall mean the occurrence of any event hereunder or under any other Loan Document which, but for the giving of notice or passage of time, or both, would be an Event of Default. “Default Rate” shall mean, with respect to the Loan, a rate per annum equal to the lesser of (a) the Maximum Legal Rate or (b) the greater of (i) five percent (5%) above the Interest Rate or (ii) five percent (5%) above the Prime Rate in effect at the time of the occurrence of the Event of Default. “Defeasance Date” shall have the meaning set forth in Section 2.5.1(a)(i) hereof. “Defeasance Deposit” shall mean an amount equal to the remaining principal amount of the Note, the Defeasance Payment Amount, any costs and expenses incurred or to be incurred in the purchase of U.S. Obligations necessary to meet the Scheduled Defeasance Payments and any revenue, documentary stamp or intangible taxes or any other tax or charge due in connection with the transfer of the Note or otherwise required to accomplish the agreements of Sections 2.4 and 2.5 hereof (including, without limitation, any fees and expenses of accountants, attorneys and the Rating Agencies incurred in connection therewith). “Defeasance Event” shall have the meaning set forth in Section 2.5.1(a) hereof. “Defeasance Expiration Date” shall mean the date that is two (2) years from the “startup day” within the meaning of Section 860G(a)(9) of the Code for the REMIC Trust. “Defeasance Payment Amount” shall mean the amount (if any) which, when added to the remaining principal amount of the Note will be sufficient to purchase U.S. Obligations providing the required Scheduled Defeasance Payments. “Disclosure Document” shall mean a prospectus, prospectus supplement, private placement memorandum, or similar offering memorandum or offering circular, or such other information reasonably requested by Lender, in each case in preliminary or final form, used to offer Securities in connection with a Securitization. “Eligible Account” shall mean a separate and identifiable account from all other funds held by the holding institution that is either (a) an account or accounts maintained with a federal or state-chartered depository institution or trust company which complies with the definition of Eligible Institution or (b) a segregated trust account or accounts maintained with a federal or state chartered depository institution or trust company acting in its fiduciary capacity which, in the case of a state chartered depository institution or trust company, is subject to regulations substantially similar to 12 C.F.R. §9.10(b), having in either case a combined capital and surplus of at least Fifty Million and 00/100 Dollars ($50,000,000.00) and subject to supervision or examination by federal and state authority.  An Eligible Account will not be evidenced by a certificate of deposit, passbook or other instrument. 5 -------------------------------------------------------------------------------- “Eligible Institution” shall mean a depository institution or trust company, the short term unsecured debt obligations or commercial paper of which are rated at least “A-1+” by S&P, “P-1” by Moody’s and “F-1+” by Fitch in the case of accounts in which funds are held for thirty (30) days or less (or, in the case of (a) accounts in which funds are held for more than thirty (30) days, the long-term unsecured debt obligations of which are rated at least “AA” by Fitch and S&P and “Aa2” by Moody’s or (b) any Letter of Credit, the long-term unsecured debt obligations of which are rated at least “A” by Fitch and S&P and “A2” by Moody’s). “Embargoed Person” shall have the meaning set forth in Section 5.1.24 hereof. “Environmental Indemnity” shall mean that certain Environmental Indemnity Agreement, dated as of the date hereof, executed by Borrower in connection with the Loan for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and the rulings issued thereunder. “Escrow Agreement” shall have the meaning set forth in Section 7.1 hereof. “Event of Default” shall have the meaning set forth in Section 8.1(a) hereof. “excelleRx Lease” shall mean that certain Lease dated as of December 13, 2004 made by and between AGL Investments No. 2 Limited Partnership L.L.L.P., predecessor in interest to Borrower, as landlord, and excelleRx, Inc., as tenant, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “Extraordinary Expense” shall have the meaning set forth in Section 5.1.11(e) hereof. “Fiscal Year” shall mean each twelve (12) month period commencing on January 1 and ending on December 31 during each year of the term of the Loan. “Fitch” shall mean Fitch, Inc. “GAAP” shall mean generally accepted accounting principles in the United States of America as of the date of the applicable financial report. “Governmental Authority” shall mean any court, board, agency, commission, office or other authority of any nature whatsoever for any governmental unit (foreign, federal, state, county, district, municipal, city or otherwise) whether now or here­after in existence. “Gross Income from Operations” shall mean for any period, all income, computed in accordance with GAAP or other accounting principles reasonably acceptable to Lender, derived from the ownership and operation of the Property from whatever source during such period, including, but not limited to, Rents from tenants in occupancy, open for business (except that tenants with ratings of BBB or better from the Rating Agencies need not be in occupancy or open for business) and paying full contractual rent without right of offset or credit, 6 -------------------------------------------------------------------------------- utility charges, escalations, forfeited security deposits, interest on credit accounts, service fees or charges, license fees, parking fees, rent concessions or credits, business interruption or other loss of income or rental insurance proceeds or other required pass-throughs and interest on Reserve Funds, if any, but excluding Rents which in the aggregate exceed 5% of the total Rents that are from month-to-month tenants or tenants that are included in any Bankruptcy Action (unless such tenant’s Lease has been affirmed in the related Bankruptcy Action), sales, use and occupancy or other taxes on receipts required to be accounted for by Borrower to any Governmental Authority, refunds and uncollectible accounts, sales of furniture, fixtures and equipment, Insurance Proceeds (other than business interruption or other loss of income or rental insurance), Awards, unforfeited security deposits, utility and other similar deposits and any disbursements to Borrower from the Reserve Funds, if any.  Gross income shall not be diminished as a result of the Mortgage or the creation of any intervening estate or interest in the Property or any part thereof. “Guarantor” shall mean Behringer Harvard REIT I, Inc., a Maryland corporation. “Guaranty” shall mean that certain Guaranty Agreement, dated as of the date hereof, executed and delivered by Guarantor in connection with the Loan to and for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “Guaranty of Payment” shall mean a Guaranty Agreement in the form attached as Schedule I to this Agreement. “Improvements” shall have the meaning set forth in the granting clause of the Mortgage. “Indebtedness” of a Person, at a particular date, means the sum (without duplication) at such date of (a) indebtedness or liability for borrowed money; (b) obligations evidenced by bonds, debentures, notes, or other similar instruments; (c) obligations for the deferred purchase price of property or services (including trade obligations); (d) obligations under letters of credit; (e) obligations under acceptance facilities; (f) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business) and other contingent obligations to purchase, to provide funds for payment, to supply funds, to invest in any Person or entity, or otherwise to assure a creditor against loss; and (g) obligations secured by any Liens, whether or not the obligations have been assumed. “Indemnifying Person” shall mean each of Borrower, Principal and Guarantor. “Independent Director” shall mean a natural person serving as director of a corporation or manager of a limited liability company who is not at the time of initial appointment, or at any time while serving in such capacity, and has not been at any time during the preceding five (5) years:  (a) a stockholder, director, member, manager (with the exception of serving as the Independent Director of Borrower or Principal), trustee, officer, employee, partner, attorney or counsel of the Borrower or Principal or any Affiliate of either of them; (b) a creditor, customer, supplier or other Person who derives any of its purchases or revenues (other 7 -------------------------------------------------------------------------------- than fees for services as an Independent Director and for providing services incidental thereto) from its activities with the Borrower or Principal or any Affiliate of either of them; (c) a Person or other entity Controlling or under common Control with any Person excluded from serving as Independent Director under subparagraph (a) or (b); or (d) a member of the immediate family of any Person excluded from serving as Independent Director under subparagraph (a) or (b). “Insolvency Opinion” shall mean that certain non-consolidation opinion letter dated the date hereof delivered by Luce, Forward, Hamilton & Scripps LLP in connection with the Loan. “Insurance Premiums” shall have the meaning set forth in Section 6.1(b) hereof. “Insurance Proceeds” shall have the meaning set forth in Section 6.4(b) hereof. “Interest Rate” shall mean a rate of 5.4750% per annum. “JPM” shall mean JPMorgan Chase Bank, N.A., a banking association chartered under the laws of the United States of America, and its successors in interest. “Lease” shall mean any lease, sublease or subsublease, letting, license, concession or other agreement (whether written or oral and whether now or hereafter in effect) pursuant to which any Person is granted a possessory interest in, or right to use or occupy all or any portion of any space in the Property, and every modification, amendment or other agreement relating to such lease, sublease, subsublease, or other agreement entered into in connection with such lease, sublease, subsublease, or other agreement and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto. “Lease Obligation Fund” shall have the meaning set forth in Section 7.6 hereof. “Lease Obligations” shall have the meaning set forth in Section 7.6 hereof. “Lease Termination Fee” shall mean any payment, fee or penalty paid by a Tenant in connection with the cancellation or termination of such Tenant’s Lease, whether by reason of such Tenant’s default or pursuant to the terms of such Lease. “Legal Requirements” shall mean all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities affecting the Property or any part thereof, or the construction, use, alteration or operation thereof, or any part thereof, whether now or hereafter enacted and in force, and all permits, licenses and authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to Borrower, at any time in force affecting the Property or any part thereof, including, without limitation, any which may (a) require repairs, modifications or alterations in or to the Property or any part thereof, or (b) in any way limit the use and enjoyment thereof. 8 -------------------------------------------------------------------------------- “Lender” shall mean JPMorgan Chase Bank, N.A., together with its successors and assigns. “Letter of Credit” shall mean a clean, irrevocable, unconditional, transferable (with all transfer fees for the account of the applicant thereunder), evergreen letter of credit acceptable to Lender (a) with respect to which Borrower has no reimbursement obligations, (b) entitling the Lender to draw thereon in a location approved by Lender, and (c) issued by an Eligible Institution. “Licenses” shall have the meaning set forth in Section 4.1.22 hereof. “Lien” shall mean any mortgage, deed of trust, deed to secure debt, lien, pledge, hypothecation, assignment (for security), security interest, or any other encumbrance, charge or transfer (for security) of, on or affecting Borrower, the Property, any portion thereof or any interest therein, 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, the filing of any financing statement, and mechanic’s, materialmen’s and other similar liens and encumbrances. “Loan” shall mean the loan made by Lender to Borrower pursuant to this Agreement and evidenced by the Note. “Loan Documents” shall mean, collectively, this Agreement, the Note, the Mortgage, the Assignment of Leases, the Environmental Indemnity, the O&M Agreement, the Assignment of Management Agreement, the Guaranty, the Cash Management Agreement, the Lockbox Agreement and all other documents pursuant to which any Person incurs, has incurred or assumes any obligation to or for the benefit of Lender in connection with the Loan. “Lockbox Account” shall have the meaning set forth in Section 2.7.1 hereof. “Lockbox Agreement” shall mean that certain Clearing Account Agreement dated the date hereof among Borrower, Lender and Lockbox Bank, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, relating to funds deposited in the Lockbox Account. “Lockbox Bank” shall mean JPMorgan Chase Bank, N.A., or any successor or permitted assigns thereof. “Material Action” means, with respect to any Person, to file any insolvency or reorganization case or proceeding, to institute proceedings to have such Person be adjudicated bankrupt or insolvent, to institute proceedings under any applicable insolvency law, to seek any relief under any law relating to relief from debts or the protection of debtors, to consent to the filing or institution of bankruptcy or insolvency proceedings against such Person, to file a petition seeking, or consent to, reorganization or relief with respect to such Person under any applicable federal or state law relating to bankruptcy or insolvency, to seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian, or any similar official of or for such Person or a substantial part of its property, to make any assignment for the benefit of creditors of such Person, to admit in writing such Person’s inability to pay its debts 9 -------------------------------------------------------------------------------- generally as they become due, or to affirmatively take action in furtherance of any of the foregoing. “Maturity Date” shall mean November 1, 2016, or such other date on which the final payment of principal of the Note becomes due and payable as therein or herein provided, whether at such stated maturity date, by declaration of acceleration, or otherwise. “Maximum Legal Rate” shall mean the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the indebtedness evidenced by the Note and as provided for herein or the other Loan Documents, under the laws of such state or states whose laws are held by any court of competent jurisdiction to govern the interest rate provisions of the Loan. “Member Loans” shall mean loans from direct or indirect owners of Borrower, provided that: (a)                                  such Member Loans shall not have a fixed maturity date that is any earlier than the Maturity Date and shall not be secured; (b)                                 Borrower shall not apply the proceeds of any such Member Loan to any purpose other than toward the acquisition, operation or improvement of the Property: (c)                                  the maximum amount of the Member Loans to Borrower shall not exceed $13,825,000 in the aggregate; (d)                                 the terms and conditions upon which the Member Loans are made to Borrower shall be commercially reasonable; (e)                                  the terms of the Member Loan shall (i) require that, so long as the Loan shall remain outstanding, the holder thereof will not receive any payments on account thereof unless (x) all current payments under the Note, this Agreement and the other Loan Documents have been paid in full, and (y) all Expenses (as defined in that certain Subordination and Standstill Agreement of even date herewith between Lender and Behringer Harvard Operating Partnership I LP) then due and payable have been paid in full; (ii) provide that such Member Loan be nonrecourse to Borrower except to the extent of cash (“Retained Cash”) held by Borrower after payment of all amounts described in subclauses (x) and (y) of the preceding clause (i); and (iii) provide that such Member Loan shall not constitute a claim against Borrower if Retained Cash is not sufficient to pay such Member Loan; (f)                                    the Person making the Member Loan shall be a direct or indirect owner of Borrower and shall not pledge, assign, transfer or convey its interest in the Member Loan, except that in connection with a transfer of all of such Person’s ownership interest in Borrower in accordance with the terms of this Agreement, such Member Loan must also be conveyed to the 10 -------------------------------------------------------------------------------- transferee or another Person owning a direct or indirect interest in Borrower; and (g)                                 the holder of the Member Loan shall have entered into a subordination agreement with Lender satisfactory to Lender prior to advancing any funds for the Member Loan to Borrower, and the documentation of the Member Loan shall provide, that such holder of the Member Loan (i) will not accept any payments on account thereof except as permitted under clause (e) above and (ii) will not take any action to enforce any of its rights or remedies to collect any portion or all of the Member Loan while any portion of the Debt is outstanding and will not, in any bankruptcy proceeding involving Borrower, vote in favor of any plan of reorganization in favor of which Lender has not voted. “Monthly Debt Service Payment Amount” shall mean (a) an amount equal to interest only on the outstanding principal balance of the Loan, calculated in accordance with the terms hereof, for each Payment Date commencing on the Payment Date occurring in December, 2006 through and including the Payment Date occurring in November, 2011 and (b) a constant monthly payment of $380,076.15 with respect to each Payment Date thereafter. “Moody’s” shall mean Moody’s Investors Service, Inc. “Mortgage” shall mean that certain first priority Mortgage (or Deed of Trust or Deed to Secure Debt) and Security Agreement, dated the date hereof, executed and delivered by Borrower to Lender as security for the Loan and encumbering the Property, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “Net Cash Flow” shall mean, for any period, the amount obtained by subtracting Operating Expenses and Capital Expenditures for such period from Gross Income from Operations for such period. “Net Cash Flow Schedule” shall have the meaning set forth in Section 5.1.11(b) hereof. “Net Operating Income” shall mean the amount obtained by subtracting Operating Expenses from Gross Income from Operations. “Net Proceeds” shall have the meaning set forth in Section 6.4(b) hereof. “Net Proceeds Deficiency” shall have the meaning set forth in Section 6.4(b)(vi) hereof. “Net Proceeds Prepayment” shall have the meaning set forth in Section 6.4(e) hereof. “Note” shall mean that certain Promissory Note of even date herewith, in the principal amount of Sixty-Seven Million One Hundred Twenty-Five Thousand and No/100 11 -------------------------------------------------------------------------------- Dollars ($67,125,000), made by Borrower in favor of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “Officer’s Certificate” shall mean a certificate delivered to Lender by Borrower which is signed by an authorized officer of the general partner or managing member of Borrower. “O&M Agreement” shall mean that certain Operations and Maintenance Agreement, dated as of the Closing Date, executed and delivered by Borrower in connection with the Loan to and for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “Operating Expenses” shall mean the total of all expenditures, computed in accordance with GAAP or other accounting principles reasonably acceptable to Lender, of whatever kind relating to the operation, maintenance and management of the Property that are incurred on a regular monthly or other periodic basis, including without limitation, utilities, ordinary repairs and maintenance, insurance, license fees, property taxes and assessments, advertising expenses, management fees, payroll and related taxes, computer processing charges, operational equipment or other lease payments, and other similar costs, but excluding depreciation, Debt Service, Capital Expenditures and contributions to the Reserve Funds. “Other Charges” shall mean all ground rents, maintenance charges, impositions other than Taxes, and any other charges, including, without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Property, now or hereafter levied or assessed or imposed against the Property or any part thereof, but shall exclude charges for utilities payable directly by a Tenant. “Other Obligations” shall have the meaning as set forth in the Mortgage. “Payment Date” shall mean the first (1st) day of each calendar month during the term of the Loan or, if such day is not a Business Day, the immediately preceding Business Day. “Permitted Encumbrances” shall mean, with respect to the Property, collectively, (a) the Liens and security interests created by the Loan Documents, (b) all Liens, encumbrances and other matters disclosed in the Title Insurance Policy, (c) Liens, if any, for Taxes imposed by any Governmental Authority not yet due or delinquent, and (d) such other title and survey exceptions as Lender has approved or may approve in writing in Lender’s reasonable discretion, which Permitted Encumbrances in the aggregate do not materially adversely affect the value or use of the Property or Borrower’s ability to repay the Loan. “Permitted Release Date” shall mean the date that is the third (3rd) anniversary of the first Payment Date. “Permitted Use” shall mean office and other appurtenant and related uses. “Person” shall mean any individual, corporation, partnership, joint venture, limited liability company, estate, trust, unincorporated association, any federal, state, county or 12 -------------------------------------------------------------------------------- municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing. “Personal Property” shall have the meaning set forth in the granting clause of the Mortgage. “Physical Conditions Report” shall mean a report prepared by a company satisfactory to Lender regarding the physical condition of the Property, satisfactory in form and substance to Lender in its sole discretion, which report shall, among other things, (a) confirm that the Property and its use complies, in all material respects, with all applicable Legal Requirements (including, without limitation, zoning, subdivision and building laws) and (b) to the extent available, include a copy of a final certificate of occupancy with respect to all Improvements on the Property. “Plan” shall have the meaning specified in Section 5.2.9(c) hereof. “Policies” shall have the meaning specified in Section 6.1(b) hereof. “Policy” shall have the meaning specified in Section 6.1(b) hereof. “Prepayment Rate” shall mean the yield calculated by the linear interpolation of the yields, as reported in Federal Reserve Statistical Release H.15-Selected Interest Rates under the heading “U.S. Government Securities/Treasury Constant Maturities” for the week ending prior to the date the payment or such proceeds are received, of U.S. Treasury constant maturities with maturity dates (one longer and one shorter) most nearly approximating the Maturity Date.  (In the event Release H.15 is no longer published, Lender shall select a comparable publication to determine the Treasury Rate). “Prime Rate” shall mean the prime rate reported in the Money Rates section of The Wall Street Journal.  In the event that The Wall Street Journal should cease or temporarily interrupt publication, the term “Prime Rate” shall mean the daily average prime rate published in another business newspaper, or business section of a newspaper, of national standing and general circulation chosen by Lender.  In the event that a prime rate is no longer generally published or is limited, regulated or administered by a governmental or quasi-governmental body, then Lender shall select a comparable interest rate index which is readily available and verifiable to Borrower but is beyond Lender’s control. “Principal” shall mean the Special Purpose Entity that is the general partner of Borrower, if Borrower is a limited partnership, or managing member of Borrower, if Borrower is a limited liability company. “Property” shall mean the parcel of real property, the Improvements thereon and all personal property owned by Borrower and encumbered by the Mortgage, together with all rights pertaining to such property and Improvements, as more particularly described in the granting clauses of the Mortgage and referred to therein as the “Property”. “Property Management Agreement” shall mean the management agreement entered into by and between Borrower and Property Manager, pursuant to which Property 13 -------------------------------------------------------------------------------- Manager is to provide management and other services with respect to the Property, or, if the context requires, the Replacement Management Agreement. “Property Manager” shall mean HPT Management Services LP, a Texas limited partnership, or, if the context requires, a Qualifying Property Manager who is managing the Property in accordance with the terms and provisions of this Agreement pursuant to a Replacement Management Agreement. “Provided Information” shall mean any and all financial and other information provided at any time by, or on behalf of, any Indemnifying Person with respect to any Property, Borrower, Principal, Guarantor and/or Property Manager. “Qualifying Property Manager” shall mean either (a) Property Manager; or (b) a reputable and experienced management organization reasonably satisfactory to Lender, which organization or its principals possess at least ten (10) years experience in managing properties similar in size, scope, use and value as the Property, provided, that Borrower shall have obtained (i) prior written confirmation from the applicable Rating Agencies that management of the Property by such Person will not cause a downgrade, withdrawal or qualification of the then current ratings of the Securities or any class thereof and (ii) if such Person is an Affiliate of Borrower, an Additional Insolvency Opinion.  Lender acknowledges that, notwithstanding anything herein to the contrary, HPT Management Services LP shall be deemed to be a Qualifying Property Manager. “Rating Agencies” shall mean each of S&P, Moody’s and Fitch, or any other nationally recognized statistical rating agency which has been approved by Lender. “Related Entities” shall have the meaning set forth in Section 5.2.10(e) hereof. “REMIC Trust” shall mean a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code that holds the Note. “Relevant Leasing Threshold” shall mean any Lease for an amount of leaseable square footage equal to or greater than one (1) full floor. “Relevant Restoration Threshold” shall mean Five Hundred Thousand and No/100 dollars ($500,000). “Rents” shall mean all rents (including percentage rents), rent equivalents, moneys payable as damages or in lieu of rent or rent equivalents, royalties (including, without limitation, all oil and gas or other mineral royalties and bonuses), income, receivables, receipts, revenues, deposits (including, without limitation, security, utility and other deposits), accounts, cash, issues, profits, charges for services rendered, all other amounts payable as rent under any Lease or other agreement relating to the Property, including, without limitation, charges for electricity, oil, gas, water, steam, heat, ventilation, air-conditioning and any other energy, telecommunication, telephone, utility or similar items or time use charges, HVAC equipment charges, sprinkler charges, escalation charges, license fees, maintenance fees, charges for Taxes, Operating Expenses or other reimbursables payable to Borrower (or to the Property Manager for the account of Borrower) under any Lease, and other consideration of whatever form or nature 14 -------------------------------------------------------------------------------- received by or paid to or for the account of or benefit of Borrower or its agents or employees (but excluding amounts paid by Borrower to its agents or employees) from any and all sources arising from or attributable to the Property, and proceeds, if any, from business interruption or other loss of income insurance. “Replacement Management Agreement” shall mean, collectively, (a) either (i) a management agreement with a Qualifying Property Manager substantially in the same form and substance as the Property Management Agreement, or (ii) a management agreement with a Qualifying Property Manager, which management agreement shall be reasonably acceptable to Lender in form and substance, provided, with respect to this subclause (ii), Lender, at its option, may require that Borrower shall have obtained prior written confirmation from the applicable Rating Agencies that such management agreement will not cause a downgrade, withdrawal or qualification of the then current rating of the Securities or any class thereof and (b) an assignment of management agreement and subordination of management fees substantially in the form then used by Lender (or of such other form and substance reasonably acceptable to Lender), executed and delivered to Lender by Borrower and such Qualifying Property Manager at Borrower’s expense. “Replacement Reserve Account” shall have the meaning set forth in Section 7.3.1 hereof. “Replacement Reserve Fund” shall have the meaning set forth in Section 7.3.1 hereof. “Replacement Reserve Monthly Deposit” shall have the meaning set forth in Section 7.3.1 hereof. “Replacements” shall have the meaning set forth in Section 7.3.1(a) hereof. “Required Amount” shall mean, at any time, an amount equal to the sum of Ninety Thousand and No/100 Dollars ($90,000.00) multiplied by a fraction, the numerator of which shall be the CPI level on the then most current anniversary of the Closing Date and the denominator of which shall be the CPI level on the Closing Date; provided that in no event shall the Required Amount be less than Ninety Thousand and No/100 Dollars ($90,000.00).  The Required Amount, as adjusted by the CPI on each anniversary of the Closing Date, shall apply only to the next succeeding renewal of any insurance policy required under Section 6.1.1(a)(ix). “Required Repairs” shall have the meaning set forth in Section 7.1 hereof. “Reserve Funds” shall mean, collectively, the Tax and Insurance Escrow Fund, the Replacement Reserve Fund, the Rollover Reserve Fund, the Lease Obligation Fund and any other escrow fund established by the Loan Documents. “Resizing Event” shall have the meaning set forth in Section 9.1.2 hereof. “Restoration” shall mean the repair and restoration of the Property after a Casualty or Condemnation as nearly as possible to the condition the Property was in immediately 15 -------------------------------------------------------------------------------- prior to such Casualty or Condemnation, with such alterations as may be reasonably approved by Lender. “Restricted Party” shall mean collectively, (a) Borrower, Principal, any Guarantor, and any Affiliated Manager and (b) any shareholder, partner, member, non-member manager, any direct or indirect legal or beneficial owner of, Borrower, Principal, any Guarantor, any Affiliated Manager or any non-member manager. “Rollover Reserve Account” shall have the meaning set forth in Section 7.4.1 hereof. “Rollover Reserve Fund” shall have the meaning set forth in Section 7.4.1 hereof. “S&P” shall mean Standard & Poor’s Ratings Group, a division of the McGraw-Hill Companies. “Sale or Pledge” shall mean a voluntary or involuntary sale, conveyance, assignment, transfer, encumbrance, pledge, grant of option or other transfer or disposal of a legal or beneficial interest, whether direct or indirect. “Scheduled Defeasance Payments” shall have the meaning set forth in Section 2.5.1(b) hereof. “Securities” shall have the meaning set forth in Section 9.1 hereof. “Securitization” shall have the meaning set forth in Section 9.1 hereof. “Security Agreement” shall have the meaning set forth in Section 2.5.1(a)(vi) hereof. “Servicer” shall have the meaning set forth in Section 9.5 hereof. “Servicing Agreement” shall have the meaning set forth in Section 9.5 hereof. “Severed Loan Documents” shall have the meaning set forth in Section 8.2(c) hereof. “Special Purpose Entity” shall mean a corporation, limited partnership or limited liability company that, since the date of its formation and at all times on and after the date thereof, has complied with and shall at all times comply with the following requirements unless it has received either prior consent to do otherwise from Lender or a permitted administrative agent thereof, or, while the Loan is securitized, confirmation from each of the applicable Rating Agencies requiring such review that such noncompliance would not result in the requalification, withdrawal, or downgrade of the ratings of any Securities or any class thereof: (i)             is and shall be organized solely for the purpose of (A) in the case of Borrower, acquiring, developing, owning, holding, selling, leasing, transferring, 16 -------------------------------------------------------------------------------- exchanging, managing and operating the Property, entering into and performing its obligations under the Loan Documents with Lender, refinancing the Property in connection with a permitted repayment of the Loan, and transacting lawful business that is incident, necessary and appropriate to accomplish the foregoing; or (B) in the case of a Principal, acting as a general partner of the limited partnership that owns the Property or as member of the limited liability company that owns the Property and transacting lawful business that is incident, necessary and appropriate to accomplish the foregoing; (ii)                                         has not engaged and shall not engage in any business unrelated to (A) the acquisition, development, ownership, management, operation or sale of the Property, or (B) in the case of a Principal, acting as general partner of the limited partnership that owns the Property or acting as a member of the limited liability company that owns the Property, as applicable; (iii)                                      has not owned and shall not own any real property other than, in the case of Borrower, the Property; (iv)                                     does not have, shall not have and at no time had any assets other than (A) in the case of Borrower, the Property and personal property necessary or incidental to its ownership and operation of the Property or (B) in the case of a Principal, its partnership interest in the limited partnership or the member interest in the limited liability company that owns the Property and personal property necessary or incidental to its ownership of such interests; (v)                                        has not engaged in, sought, consented or permitted to and shall not engage in, seek, consent to or permit (A) any dissolution, winding up, liquidation, consolidation or merger, (B) any sale or other transfer of all or substantially all of its assets or any sale of assets outside the ordinary course of its business, except as permitted by the Loan Documents, or (C) in the case of a Principal, any transfer of its partnership or membership interests; (vi)                                     shall not cause, consent to or permit any amendment of its limited partnership agreement, articles of incorporation, articles of organization, certificate of formation, operating agreement or other formation document or organizational document (as applicable) with respect to the matters set forth in this definition; (vii)                                  if such entity is a limited partnership, has and shall have at least one general partner and has and shall have, as its only general partners, Special Purpose Entities each of which (A) is a corporation or single-member Delaware limited liability company, (B) has one Independent Director (provided, however, if any Rating Agency requires two (2) Independent Directors, Borrower shall appoint, or cause the appointment of, a second Independent Director), and (C) holds a direct interest as general partner in the limited partnership of not less than 0.5% (or 0.1%, if the limited partnership is a Delaware entity); 17 -------------------------------------------------------------------------------- (viii)                               if such entity is a corporation, has and shall have at least one (1) Independent Director (provided, however, if any Rating Agency requires two (2) Independent Directors, Borrower shall appoint, or cause the appointment of, a second Independent Director), and shall not cause or permit the board of directors of such entity to take any Material Action either with respect to itself or, if the corporation is a Principal, with respect to Borrower or any action requiring the unanimous affirmative vote of one hundred percent (100%) of the members of its board of directors unless each Independent Director shall have participated in such vote and shall have voted in favor of such action; (ix)                                       if such entity is a limited liability company (other than a limited liability company meeting all of the requirements applicable to a single-member limited liability company set forth in this definition of “Special Purpose Entity”), has and shall have at least one (1) member that is a Special Purpose Entity, that is a corporation, that has at least one (1) Independent Director (provided, however, if any Rating Agency requires two (2) Independent Directors, Borrower shall appoint, or cause the appointment of, a second Independent Director) and that directly owns at least one-half-of-one percent (0.5%) of the equity of the limited liability company (or 0.1% if the limited liability company is a Delaware entity); (x)                                          if such entity is a single-member limited liability company, (A) is and shall be a Delaware limited liability company, (B) has and shall have at least one (1) Independent Director (provided, however, if any Rating Agency requires two (2) Independent Directors, Borrower shall appoint, or cause the appointment of, a second Independent Director) serving as manager of such company, (C) shall not take any Material Action and shall not cause or permit the members or managers of such entity to take any Material Action, either with respect to itself or, if the company is a Principal, with respect to Borrower, in each case unless the required number of Independent Directors then serving as managers of the company shall have participated and consented in writing to such action, and (D) has and shall have either (1) a member which owns no economic interest in the company, has signed the company’s limited liability company agreement and has no obligation to make capital contributions to the company, or (2) a natural person or entity that is not a member of the company, that has signed its limited liability company agreement and that, under the terms of such limited liability company agreement becomes a member of the company immediately prior to the withdrawal or dissolution of the last remaining member of the company; (xi)                                       has not and shall not (and, if such entity is (a) a limited liability company, has and shall have a limited liability agreement or an operating agreement, as applicable, (b) a limited partnership, has a limited partnership agreement, or (c) a corporation, has a certificate of incorporation or articles that, in each case, provide that such entity shall not) (1) dissolve, merge, liquidate, consolidate; (2) sell all or substantially all of its assets; (3) to the extent permitted by applicable law, amend its organizational documents with respect to the matters set forth in this definition without the consent of Lender; or (4) without the 18 -------------------------------------------------------------------------------- affirmative vote of each Independent Director of itself or the consent of a Principal that is a member or general partner in it:  (A) file or consent to the filing of any bankruptcy, insolvency or reorganization case or proceeding, institute any proceedings under any applicable insolvency law or otherwise seek relief under any laws relating to the relief from debts or the protection of debtors generally, file a bankruptcy or insolvency petition or otherwise institute insolvency proceedings; (B) seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for the entity or a substantial portion of its property; (C) make an assignment for the benefit of the creditors of the entity; or (D) affirmatively take any action in furtherance of any of the foregoing; (xii)                                    has at all times been and shall at all times remain solvent and has paid and shall pay its debts and liabilities (including, a fairly-allocated portion of any personnel and overhead expenses that it shares with any Affiliate) from its assets as the same shall become due, and has maintained and shall maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (xiii)                                 has not failed and shall not fail to correct any known misunderstanding regarding the separate identity of such entity; (xiv)                                has maintained and shall maintain its bank accounts, books of account, books and records separate from those of any other Person and, to the extent that it is not a disregarded entity for tax purposes and is required to file tax returns under applicable law, has filed and shall file its own tax returns, except to the extent that it is required by law to file consolidated tax returns and, if it is a corporation, has not filed and shall not file a consolidated federal income tax return with any other corporation, except to the extent that it is required by law to file consolidated tax returns; (xv)                                   has maintained and shall maintain its own resolutions and agreements; (xvi)                                has not commingled and shall not commingle its funds or assets with those of any other Person and has not participated and shall not participate in any cash management system with any other Person, except with respect to a custodial account maintained by the Property Manager on behalf of Affiliates of Borrower and, with respect to funds in such custodial account, has separately accounted, and will continue to separately account for, each item of income and expense applicable to the Property and Borrower; (xvii)                             has held and shall hold its assets in its own name; (xviii)                          [intentionally omitted]; (xix)                                  (A) has maintained and shall maintain its financial statements, accounting records and other entity documents separate from those of any other 19 -------------------------------------------------------------------------------- Person; (B) has shown and shall show, in its financial statements, its asset and liabilities separate and apart from those of any other Person; and (C) has not permitted and shall not permit its assets to be listed as assets on the financial statement of any of its Affiliates except as required by GAAP; provided, however, that any such consolidated financial statement contains a note indicating that the Special Purpose Entity’s separate assets and credit are not available to pay the debts of such Affiliate and that the Special Purpose Entity’s liabilities do not constitute obligations of the consolidated entity; (xx)                                     has paid and shall pay its own liabilities and expenses, including the salaries of its own employees, out of its own funds and assets, and has maintained and shall maintain a sufficient number of employees in light of its contemplated business operations, which may be none; (xxi)                                  has observed and shall observe all partnership, corporate or limited liability company formalities, as applicable; (xxii)                               [intentionally omitted] (xxiii)                            shall have no Indebtedness other than (i) the Loan, (ii) liabilities incurred in the ordinary course of business relating to the ownership and operation of the Property and the routine administration of Borrower, in amounts not to exceed $1,500,000 (other than management fees and commissions and liabilities that are reserved for) and, in the case of a general partner or managing member of a Person, liabilities arising by reason of its status as a general partner or managing member, which liabilities are paid not more than sixty (60) days after the later of the date incurred or invoiced (unless disputed in good faith with adequate reserves established therefor), are not evidenced by a note, and which amounts are normal and reasonable under the circumstances, (iii) Member Loans, and (iv) such other liabilities that are permitted pursuant to the Loan Documents; (xxiv)                           has not assumed, guaranteed or become obligated and shall not assume or guarantee or become obligated for the debts of any other Person, has not held out and shall not hold out its credit as being available to satisfy the obligations of any other Person or has not pledged and shall not pledge its assets for the benefit of any other Person, in each case except as permitted pursuant to this Agreement; (xxv)                              has not acquired and shall not acquire obligations or securities of its partners, members or shareholders or any other owner or Affiliate; (xxvi)                           has allocated and shall allocate fairly and reasonably any overhead expenses that are shared with any of its Affiliates, constituents, or owners, or any guarantors of any of their respective obligations, or any Affiliate of any of the foregoing, including, but not limited to, paying for shared office space and for services performed by any employee of an Affiliate; 20 -------------------------------------------------------------------------------- (xxvii)                        has maintained and used and shall maintain and use separate stationery, invoices and checks bearing its name and not bearing the name of any other entity unless such entity is clearly designated as being the Special Purpose Entity’s agent, provided, however, that Property Manager, on behalf of such Person, may maintain and use invoices and checks bearing Property Manager’s name; (xxviii)                     [intentionally omitted]; (xxix)                             has held itself out and identified itself and shall hold itself out and identify itself as a separate and distinct entity under its own name or in a name franchised or licensed to it by an entity other than an Affiliate of Borrower and not as a division or part of any other Person, except for services rendered by Property Manager under the Property Management Agreement, so long as Property Manager holds itself out as an agent of Borrower (xxx)                                has maintained and shall maintain its assets in such a manner that it shall not be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person; (xxxi)                             has not made and shall not make loans to any Person and has not held and shall not hold evidence of indebtedness issued by any other Person or entity (other than cash and investment-grade securities issued by an entity that is not an Affiliate of or subject to common ownership with such entity); (xxxii)                          has not identified and shall not identify its partners, members or shareholders, or any Affiliate of any of them, as a division or part of it; (xxxiii)                       other than capital contributions and distributions permitted under the terms of its organizational documents, has not entered into or been a party to, and shall not enter into or be a party to, any transaction with any of its partners, members, shareholders or Affiliates except in the ordinary course of its business and on terms which are commercially reasonable terms comparable to those of an arm’s-length transaction with an unrelated third party; (xxxiv)                      has not had and shall not have any obligation to, and has not indemnified and shall not indemnify its partners, officers, directors or members, as the case may be, in each case unless such an obligation or indemnification is fully subordinated to the Debt and shall not constitute a claim against it in the event that its cash flow is insufficient to pay the Debt; (xxxv)                         if such entity is a corporation, to the extent permitted under applicable corporate law, has considered and shall consider the interests of its creditors in connection with all corporate actions that could reasonably be expected to affect such creditors; (xxxvi)                      has not had and shall not have any of its obligations guaranteed by any Affiliate except as otherwise required in the Loan Documents; 21 -------------------------------------------------------------------------------- (xxxvii)                   has not formed, acquired or held and shall not form, acquire or hold any subsidiary, except that a Principal may acquire and hold its interest in Borrower; (xxxviii)                has complied and shall comply with all of the terms and provisions contained in its organizational documents. (xxxix)                        has conducted and shall conduct its business so that each of the assumptions made about it and each of the facts stated about it in the Insolvency Opinion are true; (xl)                                       has not permitted and shall not permit any Affiliate or constituent party independent access to its bank accounts; (xli)                                    is, has always been and shall continue to be duly formed, validly existing, and in good standing in the state of its incorporation or formation and in all other jurisdictions where it is required to be qualified to do business; and (xlii)                                 has no material contingent or actual obligations not related to the Property. “State” shall mean the State or Commonwealth in which the Property or any part thereof is located. “Successor Borrower” shall have the meaning set forth in Section 2.5.3 hereof. “Survey” shall mean a survey of the Property prepared by a surveyor licensed in the State and satisfactory to Lender and the company or companies issuing the Title Insurance Policy, and containing a certification of such surveyor satisfactory to Lender. “Tax and Insurance Escrow Fund” shall have the meaning set forth in Section 7.2 hereof regardless of whether the funds held therein are held by Lender for the payment of Taxes or Insurance Premiums or both. “Taxes” shall mean all real estate and personal property taxes, assessments, water rates or sewer rents, now or hereafter levied or assessed or imposed against the Property or part thereof. “Threshold Amount” shall have the meaning set forth in Section 5.1.21 hereof. “Tenant” shall mean any person or entity with a possessory right to all or any part of the Property pursuant to a Lease or other written agreement. “Title Insurance Policy” shall mean an ALTA mortgagee title insurance policy in the form acceptable to Lender (or, if the Property is in a State which does not permit the issuance of such ALTA policy, such form as shall be permitted in such State and acceptable to Lender) issued with respect to the Property and insuring the lien of the Mortgage. 22 -------------------------------------------------------------------------------- “Transfer” shall have the meaning set forth in Section 5.2.10(b) hereof. “Transferee” shall have the meaning set forth in Section 5.2.10(e)(iii) hereof. “Transferee’s Principals” shall mean collectively, (A) Transferee’s managing members, general partners or principal shareholders and (B) such other members, partners or shareholders which directly or indirectly shall own a fifty-one percent (51%) or greater economic and voting interest in Transferee. “UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in the State in which the Property is located. “U.S. Obligations” shall mean non-redeemable securities evidencing an obligation to timely pay principal and/or interest in a full and timely manner that are (a) direct obligations of the United States of America for the payment of which its full faith and credit is pledged, or (b) to the extent acceptable to the Rating Agencies, other “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended; provided that up to twenty-five percent (25%) of the U.S. obligations may be securities issued by quasi-governmental agencies rated at least AAA by the Rating Agencies provided that such securities are acceptable to the Rating Agencies. “Yield Maintenance Premium” shall mean an amount equal to the greater of (a) one percent (1%) of the outstanding principal of the Loan to be prepaid or satisfied and (b) the excess, if any, of (i) the sum of the present values of all then-scheduled payments of principal and interest under the Note assuming that all outstanding principal and interest on the Loan is paid on the Maturity Date (with each such payment and assumed payment discounted to its present value at the date of prepayment at the rate which, when compounded monthly, is equivalent to the Prepayment Rate when compounded semi-annually and deducting from the sum of such present values any short-term interest paid from the date of prepayment to the next succeeding Payment Date in the event such payment is not made on a Payment Date), over (ii) the principal amount being prepaid. SECTION 1.2                                   PRINCIPLES OF CONSTRUCTION. ALL REFERENCES TO SECTIONS AND SCHEDULES ARE TO SECTIONS AND SCHEDULES IN OR TO THIS AGREEMENT UNLESS OTHERWISE SPECIFIED.  ALL USES OF THE WORD “INCLUDING” SHALL MEAN “INCLUDING, WITHOUT LIMITATION” UNLESS THE CONTEXT SHALL INDICATE OTHERWISE.  UNLESS OTHERWISE SPECIFIED, 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.  UNLESS OTHERWISE SPECIFIED, ALL MEANINGS ATTRIBUTED TO DEFINED TERMS HEREIN SHALL BE EQUALLY APPLICABLE TO BOTH THE SINGULAR AND PLURAL FORMS OF THE TERMS SO DEFINED. 23 -------------------------------------------------------------------------------- II.                                     GENERAL TERMS SECTION 2.1                                   LOAN COMMITMENT; DISBURSEMENT TO BORROWER. 2.1.1                     AGREEMENT TO LEND AND BORROW. SUBJECT TO AND UPON THE TERMS AND CONDITIONS SET FORTH HEREIN, LENDER HEREBY AGREES TO MAKE AND BORROWER HEREBY AGREES TO ACCEPT THE LOAN ON THE CLOSING DATE. 2.1.2                     SINGLE DISBURSEMENT TO BORROWER. BORROWER MAY REQUEST AND RECEIVE ONLY ONE (1) BORROWING HEREUNDER IN RESPECT OF THE LOAN AND ANY AMOUNT BORROWED AND REPAID HEREUNDER IN RESPECT OF THE LOAN MAY NOT BE REBORROWED. 2.1.3                     THE NOTE, MORTGAGE AND LOAN DOCUMENTS. THE LOAN SHALL BE EVIDENCED BY THE NOTE AND SECURED BY THE MORTGAGE, THE ASSIGNMENT OF LEASES AND THE OTHER LOAN DOCUMENTS. 2.1.4                     USE OF PROCEEDS. BORROWER SHALL USE THE PROCEEDS OF THE LOAN TO (A) ACQUIRE THE PROPERTY OR REPAY AND DISCHARGE ANY EXISTING LOANS RELATING TO THE PROPERTY, (B) PAY ALL PAST-DUE BASIC CARRYING COSTS, IF ANY, WITH RESPECT TO THE PROPERTY, (C) MAKE DEPOSITS INTO THE RESERVE FUNDS ON THE CLOSING DATE IN THE AMOUNTS PROVIDED HEREIN, (D) PAY COSTS AND EXPENSES INCURRED IN CONNECTION WITH THE CLOSING OF THE LOAN, AS APPROVED BY LENDER, (E) FUND ANY WORKING CAPITAL REQUIREMENTS OF THE PROPERTY AND (F) DISTRIBUTE THE BALANCE, IF ANY, TO BORROWER. SECTION 2.2                                   INTEREST RATE. 2.2.1                     INTEREST RATE. INTEREST ON THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN SHALL ACCRUE FROM (AND INCLUDE) THE CLOSING DATE TO BUT EXCLUDING THE MATURITY DATE AT THE INTEREST RATE (UNLESS THE DEFAULT RATE SHALL BE IN EFFECT). 2.2.2                     INTEREST CALCULATION. INTEREST ON THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN SHALL BE CALCULATED BY MULTIPLYING (A) THE ACTUAL NUMBER OF DAYS ELAPSED IN THE PERIOD FOR WHICH THE CALCULATION IS BEING MADE BY (B) A DAILY RATE BASED ON A THREE HUNDRED SIXTY (360) DAY YEAR BY (C) THE OUTSTANDING PRINCIPAL BALANCE. 2.2.3                     DEFAULT RATE. IN THE EVENT THAT, AND FOR SO LONG AS, ANY EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN AND, TO THE EXTENT PERMITTED BY LAW, ALL ACCRUED AND UNPAID INTEREST IN RESPECT OF THE LOAN AND ANY OTHER AMOUNTS DUE PURSUANT TO THE LOAN DOCUMENTS, SHALL ACCRUE INTEREST AT THE DEFAULT RATE, CALCULATED FROM THE DATE SUCH PAYMENT WAS DUE WITHOUT REGARD TO ANY GRACE OR CURE PERIODS CONTAINED HEREIN. 2.2.4                     USURY SAVINGS. THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS ARE SUBJECT TO THE EXPRESS CONDITION THAT AT NO TIME SHALL BORROWER BE OBLIGATED OR REQUIRED TO PAY INTEREST ON THE PRINCIPAL BALANCE OF THE LOAN AT A RATE WHICH COULD SUBJECT LENDER TO EITHER CIVIL OR CRIMINAL LIABILITY AS A RESULT OF BEING IN EXCESS OF THE MAXIMUM LEGAL RATE.  IF, BY THE TERMS OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, BORROWER IS AT ANY TIME REQUIRED OR OBLIGATED TO PAY INTEREST ON THE PRINCIPAL BALANCE DUE HEREUNDER AT A RATE IN EXCESS OF THE MAXIMUM LEGAL RATE, THE INTEREST RATE OR THE DEFAULT RATE, AS THE CASE MAY BE, SHALL BE DEEMED TO BE 24 -------------------------------------------------------------------------------- IMMEDIATELY REDUCED TO THE MAXIMUM LEGAL RATE AND ALL PREVIOUS PAYMENTS IN EXCESS OF THE MAXIMUM LEGAL RATE SHALL BE DEEMED TO HAVE BEEN PAYMENTS IN REDUCTION OF PRINCIPAL AND NOT ON ACCOUNT OF THE INTEREST DUE HEREUNDER.  ALL SUMS PAID OR AGREED TO BE PAID TO LENDER FOR THE USE, FORBEARANCE, OR DETENTION OF THE SUMS DUE UNDER THE LOAN, SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE AMORTIZED, PRORATED, ALLOCATED, AND SPREAD THROUGHOUT THE FULL STATED TERM OF THE LOAN UNTIL PAYMENT IN FULL SO THAT THE RATE OR AMOUNT OF INTEREST ON ACCOUNT OF THE LOAN DOES NOT EXCEED THE MAXIMUM LEGAL RATE OF INTEREST FROM TIME TO TIME IN EFFECT AND APPLICABLE TO THE LOAN FOR SO LONG AS THE LOAN IS OUTSTANDING. SECTION 2.3                                   LOAN PAYMENT. 2.3.1                     MONTHLY DEBT SERVICE PAYMENTS.  BORROWER SHALL PAY TO LENDER (A) ON THE CLOSING DATE, AN AMOUNT EQUAL TO INTEREST ONLY ON THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN FROM THE CLOSING DATE UP TO AND INCLUDING OCTOBER 31, 2006 AND (B) ON EACH PAYMENT DATE THEREAFTER UP TO AND INCLUDING THE MATURITY DATE, BORROWER SHALL MAKE A PAYMENT TO LENDER OF PRINCIPAL AND/OR INTEREST, AS APPLICABLE, IN AN AMOUNT EQUAL TO THE MONTHLY DEBT SERVICE PAYMENT AMOUNT, WHICH PAYMENTS SHALL BE APPLIED FIRST TO ACCRUED AND UNPAID INTEREST AND THE BALANCE TO PRINCIPAL. 2.3.2                     PAYMENTS GENERALLY.  THE FIRST (1ST) INTEREST ACCRUAL PERIOD HEREUNDER SHALL COMMENCE ON AND INCLUDE THE CLOSING DATE AND SHALL END ON AND INCLUDE OCTOBER 31, 2006.  EACH INTEREST ACCRUAL PERIOD THEREAFTER SHALL COMMENCE ON THE FIRST (1ST) DAY OF EACH CALENDAR MONTH DURING THE TERM OF THIS AGREEMENT AND SHALL END ON AND INCLUDE THE FINAL CALENDAR DATE OF SUCH CALENDAR MONTH.  FOR PURPOSES OF MAKING PAYMENTS HEREUNDER, BUT NOT FOR PURPOSES OF CALCULATING INTEREST ACCRUAL PERIODS, IF THE DAY ON WHICH SUCH PAYMENT IS DUE IS NOT A BUSINESS DAY, THEN AMOUNTS DUE ON SUCH DATE SHALL BE DUE ON THE IMMEDIATELY PRECEDING BUSINESS DAY AND WITH RESPECT TO PAYMENTS OF PRINCIPAL DUE ON THE MATURITY DATE, INTEREST SHALL BE PAYABLE AT THE INTEREST RATE OR THE DEFAULT RATE, AS THE CASE MAY BE, THROUGH AND INCLUDING THE DAY IMMEDIATELY PRECEDING SUCH MATURITY DATE.  ALL AMOUNTS DUE UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE PAYABLE WITHOUT SETOFF, COUNTERCLAIM, DEFENSE OR ANY OTHER DEDUCTION WHATSOEVER. 2.3.3                     PAYMENT ON MATURITY DATE.  BORROWER SHALL PAY TO LENDER ON THE MATURITY DATE THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN, ALL ACCRUED AND UNPAID INTEREST AND ALL OTHER AMOUNTS DUE HEREUNDER AND UNDER THE NOTE, THE MORTGAGE AND THE OTHER LOAN DOCUMENTS. 2.3.4                     LATE PAYMENT CHARGE.  IF ANY PRINCIPAL, INTEREST OR ANY OTHER SUMS DUE UNDER THE LOAN DOCUMENTS (EXCLUDING PRINCIPAL DUE ON THE MATURITY DATE) ARE NOT PAID BY BORROWER ON OR PRIOR TO THE DATE ON WHICH IT IS DUE, BORROWER SHALL PAY TO LENDER UPON DEMAND AN AMOUNT EQUAL TO THE LESSER OF FIVE PERCENT (5%) OF SUCH UNPAID SUM OR THE MAXIMUM LEGAL RATE IN ORDER TO DEFRAY THE EXPENSE INCURRED BY LENDER IN HANDLING AND PROCESSING SUCH DELINQUENT PAYMENT AND TO COMPENSATE LENDER FOR THE LOSS OF THE USE OF SUCH DELINQUENT PAYMENT.  ANY SUCH AMOUNT SHALL BE SECURED BY THE MORTGAGE AND THE OTHER LOAN DOCUMENTS TO THE EXTENT PERMITTED BY APPLICABLE LAW. 25 -------------------------------------------------------------------------------- 2.3.5                     METHOD AND PLACE OF PAYMENT.  EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, ALL PAYMENTS AND PREPAYMENTS UNDER THIS AGREEMENT AND THE NOTE SHALL BE MADE TO LENDER NOT LATER THAN 11:00 A.M., NEW YORK CITY TIME, ON THE DATE WHEN DUE AND SHALL BE MADE IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA IN IMMEDIATELY AVAILABLE FUNDS AT LENDER’S OFFICE OR AS OTHERWISE DIRECTED BY LENDER, AND ANY FUNDS RECEIVED BY LENDER AFTER SUCH TIME SHALL, FOR ALL PURPOSES HEREOF, BE DEEMED TO HAVE BEEN PAID ON THE NEXT SUCCEEDING BUSINESS DAY. SECTION 2.4                                   PREPAYMENTS. 2.4.1                     VOLUNTARY PREPAYMENTS.  EXCEPT AS OTHERWISE PROVIDED IN SECTION 2.4.2, BORROWER SHALL NOT HAVE THE RIGHT TO PREPAY THE LOAN IN WHOLE OR IN PART PRIOR TO THE MATURITY DATE; PROVIDED THAT ON THE PAYMENT DATE THREE (3) MONTHS PRIOR TO THE MATURITY DATE, OR ON ANY PAYMENT DATE THEREAFTER (OR ON ANY DATE THEREAFTER PROVIDED THAT INTEREST IS PAID THROUGH THE NEXT PAYMENT DATE), BORROWER MAY, AT ITS OPTION AND UPON THIRTY (30) DAYS PRIOR WRITTEN NOTICE TO LENDER PREPAY THE DEBT IN WHOLE WITHOUT PAYMENT OF THE YIELD MAINTENANCE PREMIUM.  IF FOR ANY REASON BORROWER PREPAYS THE LOAN ON A DATE OTHER THAN A PAYMENT DATE, BORROWER SHALL PAY LENDER, IN ADDITION TO THE DEBT, ALL INTEREST WHICH WOULD HAVE ACCRUED ON THE AMOUNT OF THE LOAN THROUGH AND INCLUDING THE PAYMENT DATE NEXT OCCURRING FOLLOWING THE DATE OF SUCH PREPAYMENT. 2.4.2                     MANDATORY PREPAYMENTS.  ON THE NEXT OCCURRING PAYMENT DATE FOLLOWING THE DATE ON WHICH LENDER ACTUALLY RECEIVES ANY NET PROCEEDS, IF LENDER IS NOT OBLIGATED OR DOES NOT ELECT TO MAKE SUCH NET PROCEEDS AVAILABLE TO BORROWER FOR THE RESTORATION OF THE PROPERTY OR OTHERWISE REMIT SUCH NET PROCEEDS TO BORROWER PURSUANT TO SECTION 6.4 HEREOF, BORROWER SHALL PREPAY OR AUTHORIZE LENDER TO APPLY SUCH NET PROCEEDS AS A PREPAYMENT OF ALL OR A PORTION OF THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN TOGETHER WITH ACCRUED INTEREST AND ANY OTHER SUMS DUE HEREUNDER IN AN AMOUNT EQUAL TO ONE HUNDRED PERCENT (100%) OF SUCH NET PROCEEDS; PROVIDED, HOWEVER, IF AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, LENDER MAY APPLY SUCH NET PROCEEDS TO THE DEBT (UNTIL PAID IN FULL) IN ANY ORDER OR PRIORITY IN ITS SOLE DISCRETION.  OTHER THAN DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, NO YIELD MAINTENANCE PREMIUM SHALL BE DUE IN CONNECTION WITH ANY PREPAYMENT MADE PURSUANT TO THIS SECTION 2.4.2. 2.4.3                     PREPAYMENTS AFTER DEFAULT.  IF DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, PAYMENT OF ALL OR ANY PART OF THE DEBT IS TENDERED BY BORROWER OR OTHERWISE RECOVERED BY LENDER, SUCH TENDER OR RECOVERY SHALL BE (A) MADE ON THE NEXT OCCURRING PAYMENT DATE TOGETHER WITH THE MONTHLY DEBT SERVICE PAYMENT AND (B) DEEMED A VOLUNTARY PREPAYMENT BY BORROWER IN VIOLATION OF THE PROHIBITION AGAINST PREPAYMENT SET FORTH IN SECTION 2.4.1 HEREOF AND BORROWER SHALL PAY, IN ADDITION TO THE DEBT, AN AMOUNT EQUAL TO THE YIELD MAINTENANCE PREMIUM. SECTION 2.5                                   DEFEASANCE. 2.5.1                     VOLUNTARY DEFEASANCE.  (A)  PROVIDED NO EVENT OF DEFAULT SHALL THEN EXIST, BORROWER SHALL HAVE THE RIGHT AT ANY TIME AFTER THE EARLIER TO OCCUR OF THE DEFEASANCE EXPIRATION DATE AND THE PERMITTED RELEASE DATE AND PRIOR TO THE DATE VOLUNTARILY PREPAYMENTS ARE PERMITTED UNDER SECTION 2.4.1 HEREOF TO VOLUNTARILY DEFEASE THE LOAN IN FULL BY AND UPON SATISFACTION OF THE FOLLOWING CONDITIONS (SUCH EVENT BEING A “DEFEASANCE EVENT”): 26 -------------------------------------------------------------------------------- (I)                                            BORROWER SHALL PROVIDE NOT LESS THAN THIRTY (30) DAYS PRIOR WRITTEN NOTICE TO LENDER SPECIFYING THE PAYMENT DATE (THE “DEFEASANCE DATE”) ON WHICH THE DEFEASANCE EVENT IS TO OCCUR; (II)                                         [INTENTIONALLY OMITTED]; (III)                                      BORROWER SHALL PAY TO LENDER ALL OTHER SUMS, NOT INCLUDING SCHEDULED INTEREST OR PRINCIPAL PAYMENTS, THEN DUE UNDER THE NOTE, THIS AGREEMENT, THE MORTGAGE AND THE OTHER LOAN DOCUMENTS; (IV)                                     BORROWER SHALL PAY TO LENDER THE REQUIRED DEFEASANCE DEPOSIT FOR THE DEFEASANCE EVENT; (V)                                        [INTENTIONALLY OMITTED]; (VI)                                     BORROWER SHALL EXECUTE AND DELIVER A PLEDGE AND SECURITY AGREEMENT, IN FORM AND SUBSTANCE THAT WOULD BE REASONABLY SATISFACTORY TO A PRUDENT LENDER CREATING A FIRST PRIORITY LIEN ON THE DEFEASANCE DEPOSIT AND THE U.S. OBLIGATIONS PURCHASED WITH THE DEFEASANCE DEPOSIT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 2.5 (THE “SECURITY AGREEMENT”); (VII)                                  BORROWER SHALL DELIVER AN OPINION OF COUNSEL FOR BORROWER THAT IS STANDARD IN COMMERCIAL LENDING TRANSACTIONS AND SUBJECT ONLY TO CUSTOMARY QUALIFICATIONS, ASSUMPTIONS AND EXCEPTIONS OPINING, AMONG OTHER THINGS, THAT BORROWER HAS LEGALLY AND VALIDLY TRANSFERRED AND ASSIGNED THE U.S. OBLIGATIONS AND ALL OBLIGATIONS, RIGHTS AND DUTIES UNDER AND TO THE NOTE TO THE SUCCESSOR BORROWER, THAT LENDER HAS A PERFECTED FIRST PRIORITY SECURITY INTEREST IN THE DEFEASANCE DEPOSIT AND THE U.S. OBLIGATIONS DELIVERED BY BORROWER AND THAT ANY REMIC TRUST FORMED PURSUANT TO A SECURITIZATION WILL NOT FAIL TO MAINTAIN ITS STATUS AS A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT” WITHIN THE MEANING OF SECTION 860D OF THE CODE AS A RESULT OF SUCH DEFEASANCE EVENT; (VIII)                               IF REQUIRED PURSUANT TO THE APPLICABLE POOLING AND SERVICING AGREEMENT OR BY THE RATING AGENCIES, BORROWER SHALL DELIVER CONFIRMATION IN WRITING FROM EACH OF THE APPLICABLE RATING AGENCIES TO THE EFFECT THAT SUCH RELEASE WILL NOT RESULT IN A DOWNGRADE, WITHDRAWAL OR QUALIFICATION OF THE RESPECTIVE RATINGS IN EFFECT IMMEDIATELY PRIOR TO SUCH DEFEASANCE EVENT FOR THE SECURITIES ISSUED IN CONNECTION WITH THE SECURITIZATION WHICH ARE THEN OUTSTANDING.  IF REQUIRED BY THE APPLICABLE RATING AGENCIES, BORROWER SHALL ALSO DELIVER OR CAUSE TO BE DELIVERED AN ADDITIONAL INSOLVENCY OPINION WITH RESPECT TO THE SUCCESSOR BORROWER IN FORM AND SUBSTANCE SATISFACTORY TO LENDER AND THE APPLICABLE RATING AGENCIES; (IX)                                       BORROWER SHALL DELIVER AN OFFICER’S CERTIFICATE CERTIFYING THAT THE REQUIREMENTS SET FORTH IN THIS SECTION 2.5.1(A) HAVE BEEN SATISFIED; (X)                                          BORROWER SHALL DELIVER A CERTIFICATE OF BORROWER’S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT CERTIFYING THAT THE U.S. OBLIGATIONS PURCHASED WITH THE 27 -------------------------------------------------------------------------------- DEFEASANCE DEPOSIT GENERATE MONTHLY AMOUNTS EQUAL TO OR GREATER THAN THE SCHEDULED DEFEASANCE PAYMENTS; (XI)                                       BORROWER SHALL DELIVER SUCH OTHER CERTIFICATES, DOCUMENTS OR INSTRUMENTS AS LENDER MAY REASONABLY REQUEST; AND (XII)                                    BORROWER SHALL PAY ALL COSTS AND EXPENSES OF LENDER INCURRED IN CONNECTION WITH THE DEFEASANCE EVENT, INCLUDING (A) ANY COSTS AND EXPENSES ASSOCIATED WITH A RELEASE OF THE LIEN OF THE MORTGAGE AS PROVIDED IN SECTION 2.6 HEREOF, (B) REASONABLE ATTORNEYS’ FEES AND EXPENSES INCURRED IN CONNECTION WITH THE DEFEASANCE EVENT, (C) THE COSTS AND EXPENSES OF THE RATING AGENCIES, (D) ANY REVENUE, DOCUMENTARY STAMP OR INTANGIBLE TAXES OR ANY OTHER TAX OR CHARGE DUE IN CONNECTION WITH THE TRANSFER OF THE NOTE, OR OTHERWISE REQUIRED TO ACCOMPLISH THE DEFEASANCE AND (E) THE COSTS AND EXPENSES OF SERVICER AND ANY TRUSTEE, INCLUDING REASONABLE ATTORNEYS’ FEES. (B)                                 IN CONNECTION WITH THE DEFEASANCE EVENT, BORROWER SHALL USE THE DEFEASANCE DEPOSIT TO PURCHASE U.S. OBLIGATIONS WHICH PROVIDE PAYMENTS ON OR PRIOR TO, BUT AS CLOSE AS POSSIBLE TO, ALL SUCCESSIVE SCHEDULED PAYMENT DATES AFTER THE DEFEASANCE DATE UPON WHICH INTEREST AND PRINCIPAL PAYMENTS ARE REQUIRED UNDER THIS AGREEMENT AND THE NOTE, AND IN AMOUNTS EQUAL TO THE SCHEDULED PAYMENTS DUE ON SUCH PAYMENT DATES UNDER THIS AGREEMENT AND THE NOTE (INCLUDING, WITHOUT LIMITATION, SCHEDULED PAYMENTS OF PRINCIPAL, INTEREST, SERVICING FEES (IF ANY), AND ANY OTHER AMOUNTS DUE UNDER THE LOAN DOCUMENTS ON SUCH DATES) AND ASSUMING THE NOTE IS PAID IN FULL ON THE MATURITY DATE (THE “SCHEDULED DEFEASANCE PAYMENTS”).  ANY PORTION OF THE DEFEASANCE DEPOSIT IN EXCESS OF THE AMOUNT NECESSARY TO PURCHASE THE U.S. OBLIGATIONS REQUIRED BY THIS SECTION 2.5 AND SATISFY BORROWER’S OTHER OBLIGATIONS UNDER THIS SECTION 2.5 AND SECTION 2.6 SHALL BE REMITTED TO BORROWER. 2.5.2                     COLLATERAL.  EACH OF THE U.S. OBLIGATIONS THAT ARE PART OF THE DEFEASANCE COLLATERAL SHALL BE DULY ENDORSED BY THE HOLDER THEREOF AS DIRECTED BY LENDER OR ACCOMPANIED BY A WRITTEN INSTRUMENT OF TRANSFER IN FORM AND SUBSTANCE THAT WOULD BE SATISFACTORY TO A PRUDENT LENDER (INCLUDING, WITHOUT LIMITATION, SUCH INSTRUMENTS AS MAY BE REQUIRED BY THE DEPOSITORY INSTITUTION HOLDING SUCH SECURITIES OR BY THE ISSUER THEREOF, AS THE CASE MAY BE, TO EFFECTUATE BOOK-ENTRY TRANSFERS AND PLEDGES THROUGH THE BOOK-ENTRY FACILITIES OF SUCH INSTITUTION) IN ORDER TO PERFECT UPON THE DELIVERY OF THE DEFEASANCE COLLATERAL A FIRST PRIORITY SECURITY INTEREST THEREIN IN FAVOR OF LENDER IN CONFORMITY WITH ALL APPLICABLE STATE AND FEDERAL LAWS GOVERNING THE GRANTING OF SUCH SECURITY INTERESTS. 2.5.3                     SUCCESSOR BORROWER.  IN CONNECTION WITH ANY DEFEASANCE EVENT, BORROWER MAY AT ITS OPTION, OR IF SO REQUIRED BY THE APPLICABLE RATING AGENCIES SHALL, ESTABLISH OR DESIGNATE A SUCCESSOR ENTITY (THE “SUCCESSOR BORROWER”) ACCEPTABLE TO LENDER, WHICH SHALL BE A SPECIAL PURPOSE ENTITY, AND BORROWER SHALL TRANSFER AND ASSIGN ALL OBLIGATIONS, RIGHTS AND DUTIES UNDER AND TO THE NOTE TOGETHER WITH THE PLEDGED U.S. OBLIGATIONS TO SUCH SUCCESSOR BORROWER.  SUCH SUCCESSOR BORROWER SHALL ASSUME THE OBLIGATIONS UNDER THE NOTE AND THE SECURITY AGREEMENT AND BORROWER SHALL BE RELIEVED OF ITS OBLIGATIONS UNDER SUCH DOCUMENTS.  BORROWER SHALL PAY ONE THOUSAND AND 00/100 DOLLARS ($1,000) TO ANY SUCH SUCCESSOR BORROWER AS CONSIDERATION FOR ASSUMING THE OBLIGATIONS UNDER THE NOTE AND THE SECURITY AGREEMENT.  28 -------------------------------------------------------------------------------- NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NO OTHER ASSUMPTION FEE SHALL BE PAYABLE UPON A TRANSFER OF THE NOTE IN ACCORDANCE WITH THIS SECTION 2.5.3, BUT BORROWER SHALL PAY ALL COSTS AND EXPENSES INCURRED BY LENDER, INCLUDING LENDER’S ATTORNEYS’ FEES AND EXPENSES AND ANY FEES AND EXPENSES OF ANY RATING AGENCIES, INCURRED IN CONNECTION THEREWITH. SECTION 2.6                                   RELEASE OF PROPERTY. EXCEPT AS SET FORTH IN THIS SECTION 2.6 OR A PREPAYMENT OF THE ENTIRE LOAN PURSUANT TO SECTION 2.4.2, NO REPAYMENT, PREPAYMENT OR DEFEASANCE OF ALL OR ANY PORTION OF THE LOAN SHALL CAUSE, GIVE RISE TO A RIGHT TO REQUIRE, OR OTHERWISE RESULT IN, THE RELEASE OF THE LIEN OF THE MORTGAGE ON THE PROPERTY.  IF THE ENTIRE LOAN HAS BEEN PREPAID PURSUANT TO SECTION 2.4.2, OR AFTER THE REQUIREMENTS OF SECTION 2.6.1 HAVE BEEN SATISFIED, THE PROPERTY SHALL BE RELEASED FROM THE LIEN OF THE MORTGAGE. 2.6.1                     RELEASE OF PROPERTY. (A)                                  IF BORROWER HAS ELECTED TO DEFEASE THE ENTIRE LOAN AND THE REQUIREMENTS OF SECTION 2.5 AND THIS SECTION 2.6 HAVE BEEN SATISFIED, THE PROPERTY SHALL BE RELEASED FROM THE LIEN OF THE MORTGAGE. (B)                                 IN CONNECTION WITH THE RELEASE OF THE MORTGAGE, BORROWER SHALL SUBMIT TO LENDER, NOT LESS THAN THIRTY (30) DAYS PRIOR TO THE DEFEASANCE DATE, A RELEASE OF LIEN (AND RELATED LOAN DOCUMENTS) FOR THE PROPERTY FOR EXECUTION BY LENDER.  SUCH RELEASE SHALL BE IN A FORM APPROPRIATE IN THE JURISDICTION IN WHICH THE PROPERTY IS LOCATED AND THAT WOULD BE SATISFACTORY TO A PRUDENT LENDER AND CONTAINS STANDARD PROVISIONS, IF ANY, PROTECTING THE RIGHTS OF THE RELEASING LENDER.  IN ADDITION, BORROWER SHALL PROVIDE ALL OTHER DOCUMENTATION LENDER REASONABLY REQUIRES TO BE DELIVERED BY BORROWER IN CONNECTION WITH SUCH RELEASE, TOGETHER WITH AN OFFICER’S CERTIFICATE CERTIFYING THAT SUCH DOCUMENTATION (I) IS IN COMPLIANCE WITH ALL LEGAL REQUIREMENTS, AND (II) WILL EFFECT SUCH RELEASES IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. 2.6.2                     RELEASE ON PAYMENT IN FULL.  LENDER SHALL, UPON PAYMENT IN FULL OF ALL PRINCIPAL AND INTEREST DUE ON THE LOAN AND ALL OTHER AMOUNTS DUE AND PAYABLE UNDER THE LOAN DOCUMENTS IN ACCORDANCE WITH THE TERMS AND PROVISIONS OF THE NOTE AND THIS AGREEMENT, RELEASE THE LIEN OF THE MORTGAGE ON THE PROPERTY.  BORROWER SHALL PAY TO LENDER ALL REASONABLE ADMINISTRATIVE AND LEGAL COSTS INCURRED IN CONNECTION WITH SUCH RELEASE. SECTION 2.7                                   LOCKBOX ACCOUNT/CASH MANAGEMENT. 2.7.1       LOCKBOX ACCOUNT. (A)                                  DURING THE TERM OF THE LOAN, BORROWER SHALL ESTABLISH AND MAINTAIN AN ACCOUNT (THE “LOCKBOX ACCOUNT”) WITH LOCKBOX BANK IN TRUST FOR THE BENEFIT OF LENDER, WHICH LOCKBOX ACCOUNT SHALL BE UNDER THE SOLE DOMINION AND CONTROL OF LENDER.  THE LOCKBOX ACCOUNT SHALL BE ENTITLED “BEHRINGER HARVARD THREE PARKWAY, LLC, AS BORROWER, AND JPMORGAN CHASE BANK, N.A., AS LENDER, PURSUANT TO LOAN AGREEMENT DATED AS OF OCTOBER       , 2006 – LOCKBOX ACCOUNT”.  BORROWER HEREBY GRANTS TO LENDER A FIRST-PRIORITY SECURITY INTEREST IN THE LOCKBOX ACCOUNT AND ALL DEPOSITS AT ANY TIME CONTAINED THEREIN AND THE PROCEEDS THEREOF AND WILL TAKE ALL ACTIONS NECESSARY TO MAINTAIN IN FAVOR OF LENDER A PERFECTED FIRST PRIORITY SECURITY INTEREST IN THE LOCKBOX ACCOUNT, INCLUDING, WITHOUT LIMITATION, EXECUTING AND FILING UCC-1 FINANCING STATEMENTS AND CONTINUATIONS THEREOF.  LENDER AND SERVICER SHALL HAVE THE SOLE RIGHT TO MAKE WITHDRAWALS FROM THE LOCKBOX ACCOUNT AND ALL COSTS AND EXPENSES FOR ESTABLISHING AND 29 -------------------------------------------------------------------------------- MAINTAINING THE LOCKBOX ACCOUNT SHALL BE PAID BY BORROWER.  ALL MONIES NOW OR HEREAFTER DEPOSITED INTO THE LOCKBOX ACCOUNT SHALL BE DEEMED ADDITIONAL SECURITY FOR THE DEBT. (B)                                 BORROWER SHALL, OR SHALL CAUSE PROPERTY MANAGER TO, DELIVER IRREVOCABLE WRITTEN INSTRUCTIONS TO ALL TENANTS UNDER LEASES TO DELIVER ALL RENTS PAYABLE THEREUNDER DIRECTLY TO THE LOCKBOX ACCOUNT.  BORROWER SHALL, AND SHALL CAUSE PROPERTY MANAGER TO, DEPOSIT ALL AMOUNTS RECEIVED BY BORROWER OR PROPERTY MANAGER CONSTITUTING RENTS INTO THE LOCKBOX ACCOUNT WITHIN ONE (1) BUSINESS DAY AFTER RECEIPT THEREOF. (C)                                  BORROWER SHALL OBTAIN FROM LOCKBOX BANK ITS AGREEMENT TO TRANSFER TO THE CASH MANAGEMENT ACCOUNT IN IMMEDIATELY AVAILABLE FUNDS BY FEDERAL WIRE TRANSFER ALL AMOUNTS ON DEPOSIT IN THE LOCKBOX ACCOUNT ONCE EVERY BUSINESS DAY DURING THE CONTINUANCE OF A CASH SWEEP PERIOD. (D)                                 UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, LENDER MAY, IN ADDITION TO ANY AND ALL OTHER RIGHTS AND REMEDIES AVAILABLE TO LENDER, APPLY ANY SUMS THEN PRESENT IN THE LOCKBOX ACCOUNT TO THE PAYMENT OF THE DEBT IN ANY ORDER IN ITS SOLE DISCRETION. (E)                                  THE LOCKBOX ACCOUNT SHALL BE AN ELIGIBLE ACCOUNT AND SHALL NOT BE COMMINGLED WITH OTHER MONIES HELD BY BORROWER OR LOCKBOX BANK. (F)                                    BORROWER SHALL NOT FURTHER PLEDGE, ASSIGN OR GRANT ANY SECURITY INTEREST IN THE LOCKBOX ACCOUNT OR THE MONIES DEPOSITED THEREIN OR PERMIT ANY LIEN OR ENCUMBRANCE TO ATTACH THERETO, OR ANY LEVY TO BE MADE THEREON, OR ANY UCC-1 FINANCING STATEMENTS, EXCEPT THOSE NAMING LENDER AS THE SECURED PARTY, TO BE FILED WITH RESPECT THERETO, AND EXCEPT FOR THE RIGHTS OF THE LOCKBOX BANK UNDER THE LOCKBOX AGREEMENT. (G)                                 BORROWER SHALL INDEMNIFY LENDER AND HOLD LENDER HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, SUITS, CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES, OBLIGATIONS AND COSTS AND EXPENSES (INCLUDING LITIGATION COSTS AND REASONABLE ATTORNEYS FEES AND EXPENSES) ARISING FROM OR IN ANY WAY CONNECTED WITH THE LOCKBOX ACCOUNT AND/OR THE LOCKBOX AGREEMENT (UNLESS ARISING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDER) OR THE PERFORMANCE OF THE OBLIGATIONS FOR WHICH THE LOCKBOX ACCOUNT WAS ESTABLISHED. 2.7.2                     CASH MANAGEMENT ACCOUNT. (A)                                  PURSUANT TO THE CASH MANAGEMENT AGREEMENT, LENDER HAS ESTABLISHED AN ACCOUNT (THE “CASH MANAGEMENT ACCOUNT”) WITH A FINANCIAL INSTITUTION CHOSEN BY LENDER IN ITS DISCRETION, WHICH CASH MANAGEMENT ACCOUNT SHALL BE UNDER THE SOLE DOMINION AND CONTROL OF LENDER.  BORROWER HEREBY GRANTS TO LENDER A FIRST PRIORITY SECURITY INTEREST IN THE CASH MANAGEMENT ACCOUNT AND ALL DEPOSITS AT ANY TIME CONTAINED THEREIN AND THE PROCEEDS THEREOF AND WILL TAKE ALL ACTIONS NECESSARY TO MAINTAIN IN FAVOR OF LENDER A PERFECTED FIRST PRIORITY SECURITY INTEREST IN THE CASH MANAGEMENT ACCOUNT, INCLUDING, WITHOUT LIMITATION, EXECUTING AND FILING UCC-1 FINANCING STATEMENTS AND CONTINUATIONS THEREOF.  LENDER AND SERVICER SHALL HAVE THE SOLE RIGHT TO MAKE WITHDRAWALS FROM THE CASH MANAGEMENT ACCOUNT AND ALL COSTS AND EXPENSES FOR ESTABLISHING AND MAINTAINING THE CASH MANAGEMENT ACCOUNT SHALL BE PAID BY BORROWER. 30 -------------------------------------------------------------------------------- (B)                                 THE INSUFFICIENCY OF FUNDS ON DEPOSIT IN THE CASH MANAGEMENT ACCOUNT SHALL NOT RELIEVE BORROWER FROM THE OBLIGATION TO MAKE ANY PAYMENTS, AS AND WHEN DUE PURSUANT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND SUCH OBLIGATIONS SHALL BE SEPARATE AND INDEPENDENT, AND NOT CONDITIONED ON ANY EVENT OR CIRCUMSTANCE WHATSOEVER. (C)                                  ALL FUNDS ON DEPOSIT IN THE CASH MANAGEMENT ACCOUNT FOLLOWING THE OCCURRENCE OF AN EVENT OF DEFAULT MAY BE APPLIED BY LENDER IN SUCH ORDER AND PRIORITY AS LENDER SHALL DETERMINE. (D)                                 BORROWER HEREBY AGREES THAT LENDER MAY MODIFY THE CASH MANAGEMENT AGREEMENT FOR THE PURPOSE OF ESTABLISHING ADDITIONAL SUB-ACCOUNTS IN CONNECTION WITH ANY PAYMENTS OTHERWISE REQUIRED UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND LENDER SHALL PROVIDE NOTICE THEREOF TO BORROWER. 2.7.3                     PAYMENTS RECEIVED UNDER THE CASH MANAGEMENT AGREEMENT.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, AND PROVIDED NO EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, BORROWER’S OBLIGATIONS WITH RESPECT TO THE PAYMENT OF THE MONTHLY DEBT SERVICE PAYMENT AMOUNT AND AMOUNTS REQUIRED TO BE DEPOSITED INTO THE RESERVE FUNDS, IF ANY, SHALL BE DEEMED SATISFIED TO THE EXTENT SUFFICIENT AMOUNTS ARE DEPOSITED IN THE CASH MANAGEMENT ACCOUNT TO SATISFY SUCH OBLIGATIONS PURSUANT TO THE CASH MANAGEMENT AGREEMENT ON THE DATES EACH SUCH PAYMENT IS REQUIRED, REGARDLESS OF WHETHER ANY OF SUCH AMOUNTS ARE SO APPLIED BY LENDER. III.                                 CONDITIONS PRECEDENT SECTION 3.1                                   CONDITIONS PRECEDENT TO CLOSING.  THE OBLIGATION OF LENDER TO MAKE THE LOAN HEREUNDER IS SUBJECT TO THE FULFILLMENT BY BORROWER OR WAIVER BY LENDER OF THE FOLLOWING CONDITIONS PRECEDENT NO LATER THAN THE CLOSING DATE: 3.1.1                     REPRESENTATIONS AND WARRANTIES; COMPLIANCE WITH CONDITIONS. THE REPRESENTATIONS AND WARRANTIES OF BORROWER CONTAINED IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS ON AND AS OF THE CLOSING DATE WITH THE SAME EFFECT AS IF MADE ON AND AS OF SUCH DATE, AND NO DEFAULT OR AN EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING; AND BORROWER SHALL BE IN COMPLIANCE IN ALL MATERIAL RESPECTS WITH ALL TERMS AND CONDITIONS SET FORTH IN THIS AGREEMENT AND IN EACH OTHER LOAN DOCUMENT ON ITS PART TO BE OBSERVED OR PERFORMED. 3.1.2                     LOAN AGREEMENT AND NOTE.  LENDER SHALL HAVE RECEIVED A COPY OF THIS AGREEMENT AND THE NOTE, IN EACH CASE, DULY EXECUTED AND DELIVERED ON BEHALF OF BORROWER. 3.1.3                     DELIVERY OF LOAN DOCUMENTS; TITLE INSURANCE; REPORTS; LEASES, ETC. (A)                                  MORTGAGE, ASSIGNMENT OF LEASES. LENDER SHALL HAVE RECEIVED FROM BORROWER FULLY EXECUTED AND ACKNOWLEDGED COUNTERPARTS OF THE MORTGAGE AND THE ASSIGNMENT OF LEASES AND EVIDENCE THAT COUNTERPARTS OF THE MORTGAGE AND ASSIGNMENT OF LEASES HAVE BEEN DELIVERED TO THE TITLE COMPANY FOR RECORDING, IN THE REASONABLE JUDGMENT OF LENDER, SO AS TO EFFECTIVELY CREATE UPON SUCH RECORDING VALID AND ENFORCEABLE FIRST PRIORITY LIENS UPON THE PROPERTY, IN FAVOR OF LENDER (OR SUCH OTHER TRUSTEE AS MAY BE REQUIRED UNDER LOCAL LAW), SUBJECT 31 -------------------------------------------------------------------------------- ONLY TO THE PERMITTED ENCUMBRANCES AND SUCH OTHER LIENS AS ARE PERMITTED PURSUANT TO THE LOAN DOCUMENTS.  LENDER SHALL HAVE ALSO RECEIVED FROM BORROWER FULLY EXECUTED COUNTERPARTS OF THE OTHER LOAN DOCUMENTS. (B)                                 TITLE INSURANCE. LENDER SHALL HAVE RECEIVED A BINDING COMMITMENT TO ISSUE THE TITLE INSURANCE POLICY ISSUED BY A TITLE COMPANY ACCEPTABLE TO LENDER AND DATED AS OF THE CLOSING DATE. TO THE EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS, SUCH TITLE INSURANCE POLICY SHALL (I) PROVIDE COVERAGE AN AMOUNT EQUAL TO THE PRINCIPAL AMOUNT OF THE LOAN TOGETHER WITH, IF APPLICABLE, A “TIE-IN” OR SIMILAR ENDORSEMENT, (II) INSURE LENDER THAT THE MORTGAGE CREATES A VALID FIRST PRIORITY LIEN ON THE PROPERTY ENCUMBERED THEREBY, FREE AND CLEAR OF ALL EXCEPTIONS FROM COVERAGE OTHER THAN PERMITTED ENCUMBRANCES AND STANDARD EXCEPTIONS AND EXCLUSIONS FROM COVERAGE (AS MODIFIED BY THE TERMS OF ANY ENDORSEMENTS), (III) CONTAIN SUCH ENDORSEMENTS AND AFFIRMATIVE COVERAGES AS LENDER MAY REASONABLY REQUEST, AND (IV) NAME LENDER OR LENDER’S NOMINEE, ITS SUCCESSORS AND ASSIGNS, AS THE INSURED.  LENDER ALSO SHALL HAVE RECEIVED EVIDENCE THAT ALL PREMIUMS IN RESPECT OF SUCH TITLE INSURANCE POLICY HAVE BEEN PAID. (C)                                  SURVEY. LENDER SHALL HAVE RECEIVED A CURRENT TITLE SURVEY FOR THE PROPERTY, CERTIFIED TO THE TITLE COMPANY AND LENDER AND THEIR SUCCESSORS AND ASSIGNS, IN FORM AND CONTENT SATISFACTORY TO LENDER AND PREPARED BY A PROFESSIONAL AND PROPERLY LICENSED LAND SURVEYOR SATISFACTORY TO LENDER IN ACCORDANCE WITH THE MOST RECENT MINIMUM STANDARD DETAIL REQUIREMENTS FOR ALTA/ACSM LAND TITLE SURVEYS.  THE FOLLOWING ADDITIONAL ITEMS FROM THE LIST OF “OPTIONAL SURVEY RESPONSIBILITIES AND SPECIFICATIONS” (TABLE A) SHOULD BE ADDED TO THE SURVEY: 2, 3, 4, 6, 8, 9, 10, 11 AND 13.  THE SURVEY SHALL REFLECT THE SAME LEGAL DESCRIPTION CONTAINED IN THE TITLE INSURANCE POLICY RELATING TO THE PROPERTY REFERRED TO IN CLAUSE (B) ABOVE AND SHALL INCLUDE, AMONG OTHER THINGS, A LEGAL DESCRIPTION OF THE REAL PROPERTY COMPRISING PART OF THE PROPERTY REASONABLY SATISFACTORY TO LENDER.  THE SURVEYOR’S SEAL SHALL BE AFFIXED TO THE SURVEY AND THE SURVEYOR SHALL PROVIDE A CERTIFICATION FOR THE SURVEY IN FORM AND SUBSTANCE ACCEPTABLE TO LENDER. (D)                                 INSURANCE. LENDER SHALL HAVE RECEIVED VALID CERTIFICATES OF INSURANCE FOR THE POLICIES OF INSURANCE REQUIRED HEREUNDER, SATISFACTORY TO LENDER IN ITS SOLE DISCRETION, AND EVIDENCE OF THE PAYMENT OF ALL PREMIUMS PAYABLE FOR THE EXISTING POLICY PERIOD. (E)                                  ENVIRONMENTAL REPORTS. LENDER SHALL HAVE RECEIVED A PHASE I ENVIRONMENTAL REPORT (AND, IF RECOMMENDED BY THE PHASE I ENVIRONMENTAL REPORT, A PHASE II ENVIRONMENTAL REPORT) IN RESPECT OF THE PROPERTY, IN EACH CASE SATISFACTORY IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO LENDER. (F)                                    ZONING. WITH RESPECT TO THE PROPERTY, LENDER SHALL HAVE RECEIVED, AT LENDER’S OPTION, (I) LETTERS OR OTHER EVIDENCE WITH RESPECT TO THE PROPERTY FROM THE APPROPRIATE MUNICIPAL AUTHORITIES (OR OTHER PERSONS) CONCERNING APPLICABLE ZONING AND BUILDING LAWS, AND (II) EITHER (A) AN ALTA 3.1 ZONING ENDORSEMENT FOR THE APPLICABLE TITLE INSURANCE POLICY OR (B) OTHER EVIDENCE OF ZONING COMPLIANCE, IN EACH CASE IN SUBSTANCE REASONABLY SATISFACTORY TO LENDER. (G)                                 ENCUMBRANCES.  BORROWER SHALL HAVE TAKEN OR CAUSED TO BE TAKEN SUCH ACTIONS IN SUCH A MANNER SO THAT LENDER HAS A VALID AND PERFECTED FIRST LIEN AS OF THE CLOSING 32 -------------------------------------------------------------------------------- DATE WITH RESPECT TO THE MORTGAGE ON THE PROPERTY, SUBJECT ONLY TO APPLICABLE PERMITTED ENCUMBRANCES AND SUCH OTHER LIENS AS ARE PERMITTED PURSUANT TO THE LOAN DOCUMENTS, AND LENDER SHALL HAVE RECEIVED SATISFACTORY EVIDENCE THEREOF. 3.1.4                     RELATED DOCUMENTS.  EACH ADDITIONAL DOCUMENT NOT SPECIFICALLY REFERENCED HEREIN, BUT RELATING TO THE TRANSACTIONS CONTEMPLATED HEREIN, SHALL HAVE BEEN DULY AUTHORIZED, EXECUTED AND DELIVERED BY ALL PARTIES THERETO AND LENDER SHALL HAVE RECEIVED AND APPROVED CERTIFIED COPIES THEREOF. 3.1.5                     DELIVERY OF ORGANIZATIONAL DOCUMENTS.  ON OR BEFORE THE CLOSING DATE, BORROWER SHALL DELIVER OR CAUSE TO BE DELIVERED TO LENDER COPIES CERTIFIED BY BORROWER OF ALL ORGANIZATIONAL DOCUMENTATION RELATED TO BORROWER AND/OR THE FORMATION, STRUCTURE, EXISTENCE, GOOD STANDING AND/OR QUALIFICATION TO DO BUSINESS, AS LENDER MAY REQUEST IN ITS SOLE DISCRETION, INCLUDING, WITHOUT LIMITATION, GOOD STANDING CERTIFICATES, QUALIFICATIONS TO DO BUSINESS IN THE STATE, RESOLUTIONS AUTHORIZING THE ENTERING INTO OF THE LOAN AND INCUMBENCY CERTIFICATES AS MAY BE REQUESTED BY LENDER. 3.1.6                     OPINIONS OF BORROWER’S COUNSEL.  LENDER SHALL HAVE RECEIVED OPINIONS FROM BORROWER’S COUNSEL WITH RESPECT TO DUE EXECUTION, AUTHORITY, ENFORCEABILITY OF THE LOAN DOCUMENTS AND SUCH OTHER MATTERS AS LENDER MAY REASONABLY REQUIRE, ALL SUCH OPINIONS IN FORM, SCOPE AND SUBSTANCE REASONABLY SATISFACTORY TO LENDER AND LENDER’S COUNSEL IN THEIR REASONABLE DISCRETION. 3.1.7                     BUDGETS.  BORROWER SHALL HAVE DELIVERED THE ANNUAL BUDGET FOR THE CURRENT FISCAL YEAR. 3.1.8                     BASIC CARRYING COSTS.  BORROWER SHALL HAVE PAID OR RESERVED FOR ALL BASIC CARRYING COSTS RELATING TO THE PROPERTY WHICH ARE IN ARREARS, INCLUDING WITHOUT LIMITATION, (A) ACCRUED BUT UNPAID INSURANCE PREMIUMS DUE PURSUANT TO THE POLICIES, (B) CURRENTLY DUE AND PAYABLE TAXES (INCLUDING ANY IN ARREARS) RELATING TO THE PROPERTY, AND (C) CURRENTLY DUE OTHER CHARGES RELATING TO THE PROPERTY, WHICH AMOUNTS SHALL BE FUNDED WITH PROCEEDS OF THE LOAN. 3.1.9                     COMPLETION OF PROCEEDINGS.  ALL ORGANIZATIONAL PROCEEDINGS TAKEN OR TO BE TAKEN IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND OTHER LOAN DOCUMENTS AND ALL DOCUMENTS INCIDENTAL THERETO SHALL BE REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO LENDER, AND LENDER SHALL HAVE RECEIVED ALL SUCH COUNTERPART ORIGINALS OR CERTIFIED COPIES OF SUCH DOCUMENTS AS LENDER MAY REASONABLY REQUEST. 3.1.10              PAYMENTS.  ALL PAYMENTS, DEPOSITS OR ESCROWS REQUIRED TO BE MADE OR ESTABLISHED BY BORROWER UNDER THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS ON OR BEFORE THE CLOSING DATE SHALL HAVE BEEN PAID. 3.1.11              TENANT ESTOPPELS.  LENDER SHALL HAVE RECEIVED AN EXECUTED TENANT ESTOPPEL LETTER, WHICH SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO LENDER, FROM (A) EACH TENANT OCCUPYING TEN PERCENT (10%) OF MORE OF THE GROSS LEASABLE AREA OF THE PROPERTY, (B) EACH TENANT LEASING AN ENTIRE BUILDING AT THE PROPERTY, (C) EACH TENANT PAYING BASE RENT IN AN AMOUNT EQUAL TO OR EXCEEDING FIVE PERCENT (5%) OF THE GROSS INCOME FROM OPERATIONS FROM THE PROPERTY OCCUPIED 33 -------------------------------------------------------------------------------- BY SUCH TENANT AND (D) INCLUDING THE AREA LEASED BY THOSE DESCRIBED IN CLAUSES (A), (B) AND (C), LESSEES OF NOT LESS THAN EIGHTY-FIVE PERCENT (85%) OF THE GROSS LEASABLE AREA OF THE PROPERTY. 3.1.12              TRANSACTION COSTS.  BORROWER SHALL HAVE PAID OR REIMBURSED LENDER FOR ALL TITLE INSURANCE PREMIUMS, RECORDING AND FILING FEES OR TAXES, COSTS OF ENVIRONMENTAL REPORTS, PHYSICAL CONDITIONS REPORTS, APPRAISALS AND OTHER REPORTS, THE FEES AND COSTS OF LENDER’S COUNSEL AND ALL OTHER THIRD PARTY OUT-OF-POCKET EXPENSES INCURRED IN CONNECTION WITH THE ORIGINATION OF THE LOAN. 3.1.13              MATERIAL ADVERSE CHANGE.  THERE SHALL HAVE BEEN NO MATERIAL ADVERSE CHANGE IN THE FINANCIAL CONDITION OR BUSINESS CONDITION OF BORROWER, PRINCIPAL, GUARANTOR OR THE PROPERTY SINCE THE DATE OF THE MOST RECENT FINANCIAL STATEMENTS DELIVERED TO LENDER.  THE INCOME AND EXPENSES OF THE PROPERTY, THE OCCUPANCY THEREOF, AND ALL OTHER FEATURES OF THE TRANSACTION SHALL BE AS REPRESENTED TO LENDER WITHOUT MATERIAL ADVERSE CHANGE.  NEITHER BORROWER, PRINCIPAL, GUARANTOR NOR ANY OF THEIR RESPECTIVE CONSTITUENT PERSONS SHALL BE THE SUBJECT OF ANY BANKRUPTCY, REORGANIZATION, OR INSOLVENCY PROCEEDING. 3.1.14              LEASES AND RENT ROLL.  LENDER SHALL HAVE RECEIVED COPIES OF ALL TENANT LEASES, CERTIFIED COPIES OF ANY TENANT LEASES AS REQUESTED BY LENDER AND CERTIFIED COPIES OF ALL GROUND LEASES AFFECTING THE PROPERTY, IF ANY.  LENDER SHALL HAVE RECEIVED A CURRENT CERTIFIED RENT ROLL OF THE PROPERTY, REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO LENDER. 3.1.15              SUBORDINATION AND ATTORNMENT.  LENDER SHALL HAVE RECEIVED APPROPRIATE INSTRUMENTS ACCEPTABLE TO LENDER IN ITS COMMERCIALLY REASONABLE DISCRETION SUBORDINATING ANY LEASES OF RECORD PRIOR TO THE MORTGAGE AND INCLUDING AN AGREEMENT BY SUCH TENANTS TO ATTORN TO LENDER IN THE EVENT OF A FORECLOSURE OR DELIVERY OF A DEED IN LIEU THEREOF. 3.1.16              TAX LOT.  LENDER SHALL HAVE RECEIVED EVIDENCE THAT THE PROPERTY CONSTITUTES ONE (1) OR MORE SEPARATE TAX LOTS, WHICH EVIDENCE SHALL BE REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO LENDER. 3.1.17              PHYSICAL CONDITIONS REPORT.  LENDER SHALL HAVE RECEIVED A PHYSICAL CONDITIONS REPORT WITH RESPECT TO THE PROPERTY, WHICH REPORT SHALL BE REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO LENDER. 3.1.18              PROPERTY MANAGEMENT AGREEMENT.  LENDER SHALL HAVE RECEIVED A CERTIFIED COPY OF THE PROPERTY MANAGEMENT AGREEMENT WITH RESPECT TO THE PROPERTY WHICH SHALL BE SATISFACTORY IN FORM AND SUBSTANCE TO LENDER. 3.1.19              APPRAISAL.  LENDER SHALL HAVE RECEIVED AN APPRAISAL OF THE PROPERTY WHICH SHALL BE SATISFACTORY IN FORM AND SUBSTANCE TO LENDER. 3.1.20              FINANCIAL STATEMENTS.  LENDER SHALL HAVE RECEIVED (A) A BALANCE SHEET WITH RESPECT TO THE PROPERTY FOR THE TWO (2) MOST RECENT FISCAL YEARS AND STATEMENTS OF INCOME AND STATEMENTS OF CASH FLOWS WITH RESPECT TO THE PROPERTY FOR THE THREE (3) MOST RECENT FISCAL YEARS, EACH IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO LENDER OR (B) SUCH OTHER FINANCIAL STATEMENTS RELATING TO THE OPERATION OF THE PROPERTY, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO LENDER.   34 -------------------------------------------------------------------------------- 3.1.21              FURTHER DOCUMENTS.  LENDER OR ITS COUNSEL SHALL HAVE RECEIVED SUCH OTHER DOCUMENTS AND FURTHER APPROVALS, OPINIONS, DOCUMENTS AND INFORMATION AS LENDER OR ITS COUNSEL MAY HAVE REASONABLY REQUESTED INCLUDING THE LOAN DOCUMENTS IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO LENDER AND ITS COUNSEL. IV.                                REPRESENTATIONS AND WARRANTIES SECTION 4.1                                   BORROWER REPRESENTATIONS.  BORROWER REPRESENTS AND WARRANTS AS OF THE DATE HEREOF AND AS OF THE CLOSING DATE THAT, EXCEPT AS SET FORTH ON SCHEDULE V: 4.1.1                     ORGANIZATION.  BORROWER HAS BEEN DULY ORGANIZED AND IS VALIDLY EXISTING AND IN GOOD STANDING WITH REQUISITE POWER AND AUTHORITY TO OWN THE PROPERTY AND TO TRANSACT THE BUSINESSES IN WHICH IT IS NOW ENGAGED.  BORROWER IS DULY QUALIFIED TO DO BUSINESS AND IS IN GOOD STANDING IN EACH JURISDICTION WHERE IT IS REQUIRED TO BE SO QUALIFIED IN CONNECTION WITH THE PROPERTY, BUSINESSES AND OPERATIONS.  BORROWER POSSESSES ALL RIGHTS, LICENSES, PERMITS AND AUTHORIZATIONS, GOVERNMENTAL OR OTHERWISE, NECESSARY TO ENTITLE IT TO OWN THE PROPERTY AND TO TRANSACT THE BUSINESSES IN WHICH IT IS NOW ENGAGED, AND THE SOLE BUSINESS OF BORROWER IS THE OWNERSHIP, MANAGEMENT, OPERATION AND SALE OF THE PROPERTY. 4.1.2                     PROCEEDINGS.  BORROWER HAS TAKEN ALL NECESSARY ACTION TO AUTHORIZE THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.  THIS AGREEMENT AND SUCH OTHER LOAN DOCUMENTS HAVE BEEN DULY EXECUTED AND DELIVERED BY OR ON BEHALF OF BORROWER AND CONSTITUTE LEGAL, VALID AND BINDING OBLIGATIONS OF BORROWER ENFORCEABLE AGAINST BORROWER IN ACCORDANCE WITH THEIR RESPECTIVE TERMS, SUBJECT ONLY TO APPLICABLE BANKRUPTCY, INSOLVENCY AND SIMILAR LAWS AFFECTING RIGHTS OF CREDITORS GENERALLY, AND SUBJECT, AS TO ENFORCEABILITY, TO GENERAL PRINCIPLES OF EQUITY (REGARDLESS OF WHETHER ENFORCEMENT IS SOUGHT IN A PROCEEDING IN EQUITY OR AT LAW). 4.1.3                     NO CONFLICTS.  THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY BORROWER WILL NOT CONFLICT WITH OR RESULT IN A BREACH OF ANY OF THE TERMS OR PROVISIONS OF, OR CONSTITUTE A DEFAULT UNDER, OR RESULT IN THE CREATION OR IMPOSITION OF ANY LIEN, CHARGE OR ENCUMBRANCE (OTHER THAN PURSUANT TO THE LOAN DOCUMENTS) UPON ANY OF THE PROPERTY OR ASSETS OF BORROWER PURSUANT TO THE TERMS OF ANY INDENTURE, MORTGAGE, DEED OF TRUST, LOAN AGREEMENT, PARTNERSHIP AGREEMENT, OR OTHER AGREEMENT OR INSTRUMENT TO WHICH BORROWER IS A PARTY OR BY WHICH ANY OF BORROWER’S PROPERTY OR ASSETS IS SUBJECT, NOR TO BORROWER’S KNOWLEDGE WILL SUCH ACTION RESULT IN ANY VIOLATION OF THE PROVISIONS OF ANY STATUTE OR ANY ORDER, RULE OR REGULATION OF ANY GOVERNMENTAL AUTHORITY HAVING JURISDICTION OVER BORROWER OR ANY OF BORROWER’S PROPERTIES OR ASSETS, AND ANY CONSENT, APPROVAL, AUTHORIZATION, ORDER, REGISTRATION OR QUALIFICATION OF OR WITH ANY COURT OR ANY SUCH GOVERNMENTAL AUTHORITY REQUIRED FOR THE EXECUTION, DELIVERY AND PERFORMANCE BY BORROWER OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS HAS BEEN OBTAINED AND IS IN FULL FORCE AND EFFECT. 4.1.4                     LITIGATION.  TO BORROWER’S KNOWLEDGE, THERE ARE NO ACTIONS, SUITS OR PROCEEDINGS AT LAW OR IN EQUITY BY OR BEFORE ANY GOVERNMENTAL AUTHORITY OR OTHER AGENCY NOW PENDING OR THREATENED AGAINST OR AFFECTING BORROWER, GUARANTOR, PRINCIPAL OR THE PROPERTY, WHICH ACTIONS, SUITS OR PROCEEDINGS, IF DETERMINED AGAINST BORROWER, GUARANTOR, PRINCIPAL OR THE 35 -------------------------------------------------------------------------------- PROPERTY, MIGHT MATERIALLY ADVERSELY AFFECT THE CONDITION (FINANCIAL OR OTHERWISE) OR BUSINESS OF BORROWER, GUARANTOR, PRINCIPAL OR THE CONDITION OR OWNERSHIP OF THE PROPERTY. 4.1.5                     AGREEMENTS.  EXCEPT SUCH INSTRUMENTS AND AGREEMENTS SET FORTH AS PERMITTED ENCUMBRANCES IN THE TITLE INSURANCE POLICY, BORROWER IS NOT A PARTY TO ANY AGREEMENT OR INSTRUMENT OR SUBJECT TO ANY RESTRICTION WHICH MIGHT MATERIALLY AND ADVERSELY AFFECT BORROWER OR THE PROPERTY, OR BORROWER’S BUSINESS, PROPERTIES OR ASSETS, OPERATIONS OR CONDITION, FINANCIAL OR OTHERWISE.  TO BORROWER’S KNOWLEDGE, BORROWER IS NOT IN DEFAULT IN ANY MATERIAL RESPECT IN THE PERFORMANCE, OBSERVANCE OR FULFILLMENT OF ANY OF THE OBLIGATIONS, COVENANTS OR CONDITIONS CONTAINED IN ANY AGREEMENT OR INSTRUMENT TO WHICH IT IS A PARTY OR BY WHICH BORROWER OR THE PROPERTY IS BOUND.  BORROWER HAS NO MATERIAL FINANCIAL OBLIGATION UNDER ANY INDENTURE, MORTGAGE, DEED OF TRUST, LOAN AGREEMENT OR OTHER AGREEMENT OR INSTRUMENT TO WHICH BORROWER IS A PARTY OR BY WHICH BORROWER OR THE PROPERTY IS OTHERWISE BOUND, OTHER THAN (A) OBLIGATIONS INCURRED IN THE ORDINARY COURSE OF THE OPERATION OF THE PROPERTY AS PERMITTED PURSUANT TO CLAUSE (XXIII) OF THE DEFINITION OF “SPECIAL PURPOSE ENTITY” SET FORTH IN SECTION 1.1 HEREOF AND (B) OBLIGATIONS UNDER THE LOAN DOCUMENTS. 4.1.6                     TITLE.  BORROWER HAS GOOD AND INDEFEASIBLE FEE SIMPLE TITLE TO THE REAL PROPERTY COMPRISING PART OF THE PROPERTY AND GOOD TITLE TO THE BALANCE OF THE PROPERTY, FREE AND CLEAR OF ALL LIENS WHATSOEVER EXCEPT THE PERMITTED ENCUMBRANCES, SUCH OTHER LIENS AS ARE PERMITTED PURSUANT TO THE LOAN DOCUMENTS AND THE LIENS CREATED BY THE LOAN DOCUMENTS.  THE PERMITTED ENCUMBRANCES IN THE AGGREGATE DO NOT MATERIALLY AND ADVERSELY AFFECT THE VALUE, OPERATION OR USE OF THE PROPERTY (AS CURRENTLY USED) OR BORROWER’S ABILITY TO REPAY THE LOAN.  TO BORROWER’S KNOWLEDGE, THERE ARE NO CLAIMS FOR PAYMENT FOR WORK, LABOR OR MATERIALS AFFECTING THE PROPERTY WHICH ARE DUE AND UNPAID UNDER THE CONTRACTS PURSUANT TO WHICH WORK OR LABOR WAS PERFORMED OR MATERIALS PROVIDED WHICH ARE OR MAY BECOME A LIEN PRIOR TO, OR OF EQUAL PRIORITY WITH, THE LIENS CREATED BY THE LOAN DOCUMENTS. 4.1.7                     SOLVENCY; NO BANKRUPTCY FILING.  BORROWER (A) HAS NOT ENTERED INTO THE TRANSACTION OR EXECUTED THE NOTE, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS WITH THE ACTUAL INTENT TO HINDER, DELAY OR DEFRAUD ANY CREDITOR AND (B) RECEIVED REASONABLY EQUIVALENT VALUE IN EXCHANGE FOR ITS OBLIGATIONS UNDER SUCH LOAN DOCUMENTS.  GIVING EFFECT TO THE LOAN, THE FAIR SALEABLE VALUE OF BORROWER’S ASSETS EXCEEDS AND WILL, IMMEDIATELY FOLLOWING THE MAKING OF THE LOAN, EXCEED BORROWER’S TOTAL LIABILITIES, INCLUDING, WITHOUT LIMITATION, SUBORDINATED, UNLIQUIDATED, DISPUTED AND CONTINGENT LIABILITIES.  THE FAIR SALEABLE VALUE OF BORROWER’S ASSETS IS AND WILL, IMMEDIATELY FOLLOWING THE MAKING OF THE LOAN, BE GREATER THAN BORROWER’S PROBABLE LIABILITIES, INCLUDING THE MAXIMUM AMOUNT OF ITS CONTINGENT LIABILITIES ON ITS DEBTS AS SUCH DEBTS BECOME ABSOLUTE AND MATURED.  BORROWER’S ASSETS DO NOT AND, IMMEDIATELY FOLLOWING THE MAKING OF THE LOAN WILL NOT, CONSTITUTE UNREASONABLY SMALL CAPITAL TO CARRY OUT ITS BUSINESS AS CONDUCTED OR AS PROPOSED TO BE CONDUCTED.  BORROWER DOES NOT INTEND TO, AND DOES NOT BELIEVE THAT IT WILL, INCUR DEBT AND LIABILITIES (INCLUDING CONTINGENT LIABILITIES AND OTHER COMMITMENTS) BEYOND ITS ABILITY TO PAY SUCH DEBT AND LIABILITIES AS THEY MATURE (TAKING INTO ACCOUNT THE TIMING AND AMOUNTS OF CASH TO BE RECEIVED BY BORROWER AND THE AMOUNTS TO BE PAYABLE ON OR IN RESPECT OF OBLIGATIONS OF BORROWER).  EXCEPT AS EXPRESSLY DISCLOSED TO LENDER IN WRITING, NO PETITION IN BANKRUPTCY HAS BEEN FILED AGAINST BORROWER, OR TO BORROWER’S KNOWLEDGE, OR ANY CONSTITUENT PERSON IN THE LAST SEVEN (7) YEARS, AND NEITHER BORROWER NOR, TO BORROWER’S KNOWLEDGE, ANY CONSTITUENT PERSON IN THE LAST SEVEN (7) YEARS HAS EVER MADE AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS OR TAKEN 36 -------------------------------------------------------------------------------- ADVANTAGE OF ANY INSOLVENCY ACT FOR THE BENEFIT OF DEBTORS.  NEITHER BORROWER NOR ANY OF ITS CONSTITUENT PERSONS ARE CONTEMPLATING EITHER THE FILING OF A PETITION BY IT UNDER ANY STATE OR FEDERAL BANKRUPTCY OR INSOLVENCY LAWS OR THE LIQUIDATION OF ALL OR A MAJOR PORTION OF BORROWER’S ASSETS OR PROPERTY, AND BORROWER HAS NO KNOWLEDGE OF ANY PERSON CONTEMPLATING THE FILING OF ANY SUCH PETITION AGAINST IT OR SUCH CONSTITUENT PERSONS. 4.1.8                     FULL AND ACCURATE DISCLOSURE.  TO BORROWER’S KNOWLEDGE, NO STATEMENT OF FACT MADE BY BORROWER IN THIS AGREEMENT OR IN ANY OF THE OTHER LOAN DOCUMENTS CONTAINS ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMITS TO STATE ANY MATERIAL FACT NECESSARY TO MAKE STATEMENTS CONTAINED HEREIN OR THEREIN NOT MISLEADING.  THERE IS NO MATERIAL FACT PRESENTLY KNOWN TO BORROWER WHICH HAS NOT BEEN DISCLOSED TO LENDER WHICH ADVERSELY AFFECTS THE PROPERTY OR THE BUSINESS, OPERATIONS OR CONDITION (FINANCIAL OR OTHERWISE) OF BORROWER. 4.1.9                     NO PLAN ASSETS.  BORROWER DOES NOT SPONSOR, IS NOT OBLIGATED TO CONTRIBUTE TO, AND IS NOT ITSELF AN “EMPLOYEE BENEFIT PLAN,” AS DEFINED IN SECTION 3(3) OF ERISA, SUBJECT TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE, AND NONE OF THE ASSETS OF BORROWER CONSTITUTES OR WILL CONSTITUTE “PLAN ASSETS” OF ONE OR MORE SUCH PLANS WITHIN THE MEANING OF 29 C.F.R. SECTION 2510.3-101.  IN ADDITION, (A) BORROWER IS NOT A “GOVERNMENTAL PLAN” WITHIN THE MEANING OF SECTION 3(32) OF ERISA AND (B) TRANSACTIONS BY OR WITH BORROWER ARE NOT SUBJECT TO ANY STATE OR OTHER STATUTE, REGULATION OR OTHER RESTRICTION REGULATING INVESTMENTS OF, OR FIDUCIARY OBLIGATIONS WITH RESPECT TO, GOVERNMENTAL PLANS WITHIN THE MEANING OF SECTION 3(32) OF ERISA WHICH IS SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE AND WHICH PROHIBIT OR OTHERWISE RESTRICT THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO THE EXERCISE BY LENDER OF ANY OF ITS RIGHTS UNDER THE LOAN DOCUMENTS. 4.1.10              COMPLIANCE.  TO BORROWER’S KNOWLEDGE, BORROWER AND THE PROPERTY AND THE USE THEREOF COMPLY IN ALL MATERIAL RESPECTS WITH ALL APPLICABLE LEGAL REQUIREMENTS, INCLUDING, WITHOUT LIMITATION, BUILDING AND ZONING ORDINANCES AND CODES.  TO BORROWER’S KNOWLEDGE, BORROWER IS NOT IN DEFAULT OR VIOLATION OF ANY ORDER, WRIT, INJUNCTION, DECREE OR DEMAND OF ANY GOVERNMENTAL AUTHORITY.  TO BORROWER’S KNOWLEDGE, THERE HAS NOT BEEN COMMITTED BY BORROWER OR, TO BORROWER’S KNOWLEDGE, ANY OTHER PERSON IN OCCUPANCY OF OR INVOLVED WITH THE OPERATION OR USE OF THE PROPERTY ANY ACT OR OMISSION AFFORDING THE FEDERAL GOVERNMENT OR ANY OTHER GOVERNMENTAL AUTHORITY THE RIGHT OF FORFEITURE AS AGAINST THE PROPERTY OR ANY PART THEREOF OR ANY MONIES PAID IN PERFORMANCE OF BORROWER’S OBLIGATIONS UNDER ANY OF THE LOAN DOCUMENTS. 4.1.11              FINANCIAL INFORMATION.  TO BORROWER’S KNOWLEDGE, ALL FINANCIAL DATA, INCLUDING, WITHOUT LIMITATION, THE STATEMENTS OF CASH FLOW AND INCOME AND OPERATING EXPENSE, THAT HAVE BEEN DELIVERED TO LENDER IN RESPECT OF THE PROPERTY (I) ARE TRUE, COMPLETE AND CORRECT IN ALL MATERIAL RESPECTS, (II) ACCURATELY REPRESENT THE FINANCIAL CONDITION OF BORROWER AND THE PROPERTY, AS APPLICABLE, AS OF THE DATE OF SUCH REPORTS, AND (III) TO THE EXTENT PREPARED OR AUDITED BY AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTING FIRM, HAVE BEEN PREPARED IN ACCORDANCE WITH ACCOUNTING PRINCIPLES REASONABLY ACCEPTABLE TO LENDER, CONSISTENTLY APPLIED THROUGHOUT THE PERIODS COVERED, EXCEPT AS DISCLOSED THEREIN.  BORROWER DOES NOT HAVE ANY CONTINGENT LIABILITIES, LIABILITIES FOR TAXES, UNUSUAL FORWARD OR LONG-TERM COMMITMENTS OR UNREALIZED OR ANTICIPATED LOSSES FROM ANY UNFAVORABLE COMMITMENTS THAT ARE KNOWN TO BORROWER AND REASONABLY LIKELY TO HAVE A MATERIALLY ADVERSE EFFECT ON THE PROPERTY OR THE OPERATION THEREOF FOR THE PERMITTED USE, EXCEPT AS REFERRED TO OR REFLECTED IN SAID FINANCIAL STATEMENTS.  SINCE THE DATE OF SUCH FINANCIAL STATEMENTS, THERE HAS 37 -------------------------------------------------------------------------------- BEEN NO MATERIALLY ADVERSE CHANGE IN THE FINANCIAL CONDITION, OPERATIONS OR BUSINESS OF BORROWER FROM THAT SET FORTH IN SAID FINANCIAL STATEMENTS. 4.1.12              CONDEMNATION.  NO CONDEMNATION OR OTHER PROCEEDING HAS BEEN COMMENCED OR, TO BORROWER’S KNOWLEDGE, IS CONTEMPLATED WITH RESPECT TO ALL OR ANY PORTION OF THE PROPERTY OR FOR THE RELOCATION OF ROADWAYS PROVIDING ACCESS TO THE PROPERTY. 4.1.13              FEDERAL RESERVE REGULATIONS.  NO PART OF THE PROCEEDS OF THE LOAN WILL BE USED FOR THE PURPOSE OF PURCHASING OR ACQUIRING ANY “MARGIN STOCK” WITHIN THE MEANING OF REGULATION U OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM OR FOR ANY OTHER PURPOSE WHICH WOULD BE INCONSISTENT WITH SUCH REGULATION U OR ANY OTHER REGULATIONS OF SUCH BOARD OF GOVERNORS, OR FOR ANY PURPOSES PROHIBITED BY LEGAL REQUIREMENTS OR BY THE TERMS AND CONDITIONS OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. 4.1.14              UTILITIES AND PUBLIC ACCESS.  THE PROPERTY HAS RIGHTS OF ACCESS TO PUBLIC WAYS AND IS SERVED BY WATER, SEWER, SANITARY SEWER AND STORM DRAIN FACILITIES ADEQUATE TO SERVICE THE PROPERTY FOR ITS INTENDED USES.  TO BORROWER’S KNOWLEDGE, ALL PUBLIC UTILITIES NECESSARY OR CONVENIENT TO THE FULL USE AND ENJOYMENT OF THE PROPERTY ARE LOCATED EITHER IN THE PUBLIC RIGHT-OF-WAY ABUTTING THE PROPERTY (WHICH ARE CONNECTED SO AS TO SERVE THE PROPERTY WITHOUT PASSING OVER OTHER PROPERTY) OR IN RECORDED EASEMENTS SERVING THE PROPERTY AND SUCH EASEMENTS ARE SET FORTH IN AND INSURED BY THE TITLE INSURANCE POLICY.  ALL ROADS NECESSARY FOR THE USE OF THE PROPERTY FOR ITS CURRENT PURPOSES HAVE BEEN COMPLETED AND DEDICATED TO PUBLIC USE AND ACCEPTED BY ALL GOVERNMENTAL AUTHORITIES. 4.1.15              NOT A FOREIGN PERSON.  BORROWER IS NOT A “FOREIGN PERSON” WITHIN THE MEANING OF §1445(F)(3) OF THE CODE. 4.1.16              SEPARATE LOTS.  THE PROPERTY IS COMPRISED OF ONE (1) OR MORE PARCELS WHICH CONSTITUTE A SEPARATE TAX LOT OR LOTS AND DOES NOT CONSTITUTE A PORTION OF ANY OTHER TAX LOT NOT A PART OF THE PROPERTY. 4.1.17              ASSESSMENTS.  THERE ARE NO PENDING, OR TO BORROWER’S KNOWLEDGE, PROPOSED SPECIAL OR OTHER ASSESSMENTS FOR PUBLIC IMPROVEMENTS OR OTHERWISE AFFECTING THE PROPERTY, NOR ARE THERE ANY CONTEMPLATED IMPROVEMENTS TO THE PROPERTY THAT MAY RESULT IN SUCH SPECIAL OR OTHER ASSESSMENTS. 4.1.18              ENFORCEABILITY.  THE LOAN DOCUMENTS ARE NOT SUBJECT TO ANY RIGHT OF RESCISSION, SET-OFF, COUNTERCLAIM OR DEFENSE BY BORROWER OR GUARANTOR, INCLUDING THE DEFENSE OF USURY, NOR WOULD THE OPERATION OF ANY OF THE TERMS OF THE LOAN DOCUMENTS, OR THE EXERCISE OF ANY RIGHT THEREUNDER EXERCISED BY LENDER IN ACCORDANCE WITH APPLICABLE LAW, RENDER THE LOAN DOCUMENTS UNENFORCEABLE, AND NEITHER BORROWER NOR GUARANTOR HAS ASSERTED ANY RIGHT OF RESCISSION, SET-OFF, COUNTERCLAIM OR DEFENSE WITH RESPECT THERETO. 4.1.19              NO PRIOR ASSIGNMENT.  THERE IS NO PRIOR ASSIGNMENT OF THE LEASES OR ANY PORTION OF THE RENTS BY BORROWER OR ANY OF ITS PREDECESSORS IN INTEREST, GIVEN AS COLLATERAL SECURITY WHICH WILL BE OUTSTANDING UPON APPLICATION OF THE PROCEEDS OF THE LOAN. 38 -------------------------------------------------------------------------------- 4.1.20              INSURANCE.  BORROWER HAS OBTAINED AND HAS DELIVERED TO LENDER (A) CERTIFIED COPIES OF THE POLICIES REFLECTING THE INSURANCE COVERAGES, AMOUNTS AND OTHER REQUIREMENTS SET FORTH IN THIS AGREEMENT OR (B) OTHER EVIDENCE OF SUCH MATTERS ACCEPTABLE TO LENDER.  TO BORROWER’S KNOWLEDGE, NO CLAIMS HAVE BEEN MADE OR ARE CURRENTLY PENDING, OUTSTANDING OR OTHERWISE REMAIN UNSATISFIED UNDER ANY SUCH POLICY, AND NEITHER BORROWER NOR ANY OTHER PERSON, HAS DONE, BY ACT OR OMISSION, ANYTHING WHICH WOULD IMPAIR THE COVERAGE OF ANY SUCH POLICY. 4.1.21              USE OF PROPERTY.  THE PROPERTY IS USED EXCLUSIVELY FOR THE PERMITTED USE. 4.1.22              CERTIFICATE OF OCCUPANCY; LICENSES.  TO BORROWER’S KNOWLEDGE, ALL CERTIFICATIONS, PERMITS, LICENSES AND APPROVALS, INCLUDING WITHOUT LIMITATION, CERTIFICATES OF COMPLETION AND OCCUPANCY PERMITS REQUIRED TO BE OBTAINED BY BORROWER FOR THE LEGAL USE, OCCUPANCY AND OPERATION OF THE PROPERTY FOR THE PERMITTED USE HAVE BEEN OBTAINED AND ARE IN FULL FORCE AND EFFECT, AND TO BORROWER’S KNOWLEDGE, ALL CERTIFICATIONS, PERMITS, LICENSES AND APPROVALS, INCLUDING WITHOUT LIMITATION, CERTIFICATES OF COMPLETION AND OCCUPANCY PERMITS REQUIRED TO BE OBTAINED BY ANY PERSON OTHER THAN BORROWER FOR THE LEGAL USE, OCCUPANCY AND OPERATION OF THE PROPERTY THE PERMITTED USE, HAVE BEEN OBTAINED AND ARE IN FULL FORCE AND EFFECT (ALL OF THE FOREGOING CERTIFICATIONS, PERMITS, LICENSES AND APPROVALS ARE COLLECTIVELY REFERRED TO AS THE “LICENSES”).  BORROWER SHALL AND SHALL CAUSE ALL OTHER PERSONS TO, KEEP AND MAINTAIN ALL LICENSES NECESSARY FOR THE OPERATION OF THE PROPERTY FOR THE PERMITTED USE. TO BORROWER’S KNOWLEDGE, THE USE BEING MADE OF THE PROPERTY IS IN CONFORMITY WITH ALL CERTIFICATES OF OCCUPANCY ISSUED FOR THE PROPERTY. 4.1.23              FLOOD ZONE.  TO BORROWER’S KNOWLEDGE, NO IMPROVEMENTS ON THE PROPERTY ARE LOCATED IN AN AREA IDENTIFIED BY THE FEDERAL EMERGENCY MANAGEMENT AGENCY AS AN AREA HAVING SPECIAL FLOOD HAZARDS OR, IF SO LOCATED, THE FLOOD INSURANCE REQUIRED PURSUANT TO SECTION 6.1(A)(I) IS IN FULL FORCE AND EFFECT WITH RESPECT TO THE PROPERTY. 4.1.24              PHYSICAL CONDITION.  EXCEPT AS DISCLOSED IN THE PHYSICAL CONDITIONS REPORT DELIVERED TO LENDER IN CONNECTION WITH THIS LOAN, TO BORROWER’S KNOWLEDGE, THE PROPERTY, INCLUDING, WITHOUT LIMITATION, ALL BUILDINGS, IMPROVEMENTS, PARKING FACILITIES, SIDEWALKS, STORM DRAINAGE SYSTEMS, ROOFS, PLUMBING SYSTEMS, HVAC SYSTEMS, FIRE PROTECTION SYSTEMS, ELECTRICAL SYSTEMS, EQUIPMENT, ELEVATORS, EXTERIOR SIDINGS AND DOORS, LANDSCAPING, IRRIGATION SYSTEMS AND ALL STRUCTURAL COMPONENTS, ARE IN GOOD CONDITION, ORDER AND REPAIR IN ALL MATERIAL RESPECTS; THERE EXISTS NO STRUCTURAL OR OTHER MATERIAL DEFECTS OR DAMAGES IN THE PROPERTY AND BORROWER HAS NOT RECEIVED NOTICE FROM ANY INSURANCE COMPANY OR BONDING COMPANY OF ANY DEFECTS OR INADEQUACIES IN THE PROPERTY, OR ANY PART THEREOF, WHICH WOULD ADVERSELY AFFECT THE INSURABILITY OF THE SAME OR CAUSE THE IMPOSITION OF EXTRAORDINARY PREMIUMS OR CHARGES THEREON OR OF ANY TERMINATION OR THREATENED TERMINATION OF ANY POLICY OF INSURANCE OR BOND. 4.1.25              BOUNDARIES.  TO BORROWER’S KNOWLEDGE, ALL OF THE IMPROVEMENTS WHICH WERE INCLUDED IN DETERMINING THE APPRAISED VALUE OF THE PROPERTY LIE WHOLLY WITHIN THE BOUNDARIES AND BUILDING RESTRICTION LINES OF THE PROPERTY, AND NO IMPROVEMENTS ON ADJOINING PROPERTIES ENCROACH UPON THE PROPERTY, AND NO EASEMENTS OR OTHER ENCUMBRANCES UPON THE PROPERTY ENCROACH UPON ANY OF THE IMPROVEMENTS, SO AS TO AFFECT THE VALUE OR MARKETABILITY OF THE PROPERTY EXCEPT THOSE WHICH ARE INSURED AGAINST BY THE TITLE INSURANCE POLICY. 39 -------------------------------------------------------------------------------- 4.1.26              LEASES.  THE PROPERTY IS NOT SUBJECT TO ANY LEASES OTHER THAN THE LEASES DESCRIBED IN THE RENT ROLL ATTACHED AS SCHEDULE II HERETO AND MADE A PART HEREOF.  BORROWER IS THE OWNER AND LESSOR OF LANDLORD’S INTEREST IN THE LEASES.  NO PERSON HAS ANY POSSESSORY INTEREST IN THE PROPERTY OR RIGHT TO OCCUPY THE SAME EXCEPT UNDER AND PURSUANT TO THE PROVISIONS OF THE LEASES.  THE CURRENT LEASES ARE IN FULL FORCE AND EFFECT AND, TO BORROWER’S KNOWLEDGE, THERE ARE NO DEFAULTS THEREUNDER BY EITHER PARTY AND THERE ARE NO CONDITIONS THAT, WITH THE PASSAGE OF TIME OR THE GIVING OF NOTICE, OR BOTH, WOULD CONSTITUTE DEFAULTS THEREUNDER.  NO RENT (INCLUDING SECURITY DEPOSITS) HAS BEEN PAID MORE THAN ONE (1) MONTH IN ADVANCE OF ITS DUE DATE.  ALL WORK TO BE PERFORMED BY BORROWER UNDER EACH LEASE HAS BEEN PERFORMED AS REQUIRED AND HAS BEEN ACCEPTED BY THE APPLICABLE TENANT, AND ANY PAYMENTS, FREE RENT, PARTIAL RENT, REBATE OF RENT OR OTHER PAYMENTS, CREDITS, ALLOWANCES OR ABATEMENTS REQUIRED TO BE GIVEN BY BORROWER TO ANY TENANT HAS ALREADY BEEN RECEIVED BY SUCH TENANT.  THERE HAS BEEN NO PRIOR SALE, TRANSFER OR ASSIGNMENT, HYPOTHECATION OR PLEDGE OF ANY LEASE OR OF THE RENTS RECEIVED THEREIN WHICH IS OUTSTANDING.  TO BORROWER’S KNOWLEDGE, EXCEPT AS SET FORTH ON SCHEDULE II, NO TENANT LISTED ON SCHEDULE II HAS ASSIGNED ITS LEASE OR SUBLET ALL OR ANY PORTION OF THE PREMISES DEMISED THEREBY, NO SUCH TENANT HOLDS ITS LEASED PREMISES UNDER ASSIGNMENT OR SUBLEASE, NOR DOES ANYONE EXCEPT SUCH TENANT AND ITS EMPLOYEES OCCUPY SUCH LEASED PREMISES.  NO TENANT UNDER ANY LEASE HAS A RIGHT OR OPTION PURSUANT TO SUCH LEASE OR OTHERWISE TO PURCHASE ALL OR ANY PART OF THE LEASED PREMISES OR THE BUILDING OF WHICH THE LEASED PREMISES ARE A PART.  EXCEPT AS SET FORTH IN SCHEDULE II, NO TENANT UNDER ANY LEASE HAS ANY RIGHT OR OPTION FOR ADDITIONAL SPACE IN THE IMPROVEMENTS.  TO BORROWER’S ACTUAL KNOWLEDGE BASED ON THE ENVIRONMENTAL REPORT DELIVERED TO LENDER IN CONNECTION HEREWITH, NO HAZARDOUS WASTES OR TOXIC SUBSTANCES, AS DEFINED BY APPLICABLE FEDERAL, STATE OR LOCAL STATUTES, RULES AND REGULATIONS, HAVE BEEN DISPOSED, STORED OR TREATED BY ANY TENANT UNDER ANY LEASE ON OR ABOUT THE LEASED PREMISES NOR DOES BORROWER HAVE ANY KNOWLEDGE OF ANY TENANT’S INTENTION TO USE ITS LEASED PREMISES FOR ANY ACTIVITY WHICH, DIRECTLY OR INDIRECTLY, INVOLVES THE USE, GENERATION, TREATMENT, STORAGE, DISPOSAL OR TRANSPORTATION OF ANY PETROLEUM PRODUCT OR ANY TOXIC OR HAZARDOUS CHEMICAL, MATERIAL, SUBSTANCE OR WASTE, EXCEPT IN EITHER EVENT, IN COMPLIANCE WITH APPLICABLE FEDERAL, STATE OR LOCAL STATUES, RULES AND REGULATIONS. 4.1.27              SURVEY.  TO BORROWER’S KNOWLEDGE, NO SURVEY FOR THE PROPERTY DELIVERED TO LENDER IN CONNECTION WITH THIS AGREEMENT FAILS TO REFLECT ANY MATERIAL MATTER AFFECTING THE PROPERTY OR THE TITLE THERETO. 4.1.28              INVENTORY.  BORROWER IS THE OWNER OF ALL OF THE EQUIPMENT, FIXTURES AND PERSONAL PROPERTY (AS SUCH TERMS ARE DEFINED IN THE MORTGAGE) LOCATED ON OR AT THE PROPERTY AND SHALL NOT LEASE ANY EQUIPMENT, FIXTURES OR PERSONAL PROPERTY OTHER THAN AS PERMITTED HEREUNDER.  ALL OF THE EQUIPMENT, FIXTURES AND PERSONAL PROPERTY ARE SUFFICIENT TO OPERATE THE PROPERTY IN THE MANNER REQUIRED HEREUNDER AND IN THE MANNER IN WHICH IT IS CURRENTLY OPERATED. 4.1.29              FILING AND RECORDING TAXES.  ALL TRANSFER TAXES, DEED STAMPS, INTANGIBLE TAXES OR OTHER AMOUNTS IN THE NATURE OF TRANSFER TAXES REQUIRED TO BE PAID BY ANY PERSON UNDER APPLICABLE LEGAL REQUIREMENTS CURRENTLY IN EFFECT IN CONNECTION WITH THE ACQUISITION OF THE PROPERTY TO BORROWER HAVE BEEN PAID OR ARE SIMULTANEOUSLY BEING PAID.  ALL MORTGAGE, MORTGAGE RECORDING, STAMP, INTANGIBLE OR OTHER SIMILAR TAX REQUIRED TO BE PAID BY ANY PERSON UNDER APPLICABLE LEGAL REQUIREMENTS CURRENTLY IN EFFECT IN CONNECTION WITH THE EXECUTION, DELIVERY, RECORDATION, FILING, REGISTRATION, PERFECTION OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE MORTGAGE, HAVE BEEN PAID, AND, UNDER CURRENT LEGAL 40 -------------------------------------------------------------------------------- REQUIREMENTS, THE MORTGAGE IS ENFORCEABLE IN ACCORDANCE WITH ITS TERMS BY LENDER (OR ANY SUBSEQUENT HOLDER THEREOF). 4.1.30              SPECIAL PURPOSE ENTITY/SEPARATENESS.  (A)  UNTIL THE DEBT HAS BEEN PAID IN FULL, BORROWER HEREBY REPRESENTS, WARRANTS AND COVENANTS THAT (I) BORROWER IS, SHALL BE AND SHALL CONTINUE TO BE A SPECIAL PURPOSE ENTITY AND (II) PRINCIPAL IS, SHALL BE AND SHALL CONTINUE TO BE A SPECIAL PURPOSE ENTITY (LENDER ACKNOWLEDGES THAT THE SINGLE PURPOSE PROVISIONS CONTAINED IN THE ORGANIZATIONAL DOCUMENTS OF BORROWER AND PRINCIPAL SATISFY THE REQUIREMENTS OF A SPECIAL PURPOSE ENTITY). (B)                                 THE REPRESENTATIONS, WARRANTIES AND COVENANTS SET FORTH IN SECTION 4.1.30(A) SHALL SURVIVE FOR SO LONG AS ANY AMOUNT REMAINS PAYABLE TO LENDER UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. (C)                                  ALL OF THE FACTS STATED AND ALL OF THE ASSUMPTIONS MADE IN THE INSOLVENCY OPINION, INCLUDING, BUT NOT LIMITED TO, IN ANY EXHIBITS ATTACHED THERETO, ARE TRUE AND CORRECT IN ALL RESPECTS.  BORROWER HAS COMPLIED AND WILL COMPLY WITH, AND PRINCIPAL HAS COMPLIED AND BORROWER WILL CAUSE PRINCIPAL TO COMPLY WITH, ALL OF THE ASSUMPTIONS MADE WITH RESPECT TO BORROWER AND PRINCIPAL IN THE INSOLVENCY OPINION.  BORROWER WILL COMPLY WITH ALL OF THE ASSUMPTIONS MADE WITH RESPECT TO BORROWER AND PRINCIPAL IN ANY SUBSEQUENT NON-CONSOLIDATION OPINION REQUIRED TO BE DELIVERED IN CONNECTION WITH THE LOAN DOCUMENTS (AN “ADDITIONAL INSOLVENCY OPINION”).  EACH AFFILIATE OF BORROWER AND PRINCIPAL WITH RESPECT TO WHICH AN ASSUMPTION SHALL BE MADE IN ANY ADDITIONAL INSOLVENCY OPINION WILL COMPLY WITH ALL OF THE ASSUMPTIONS MADE WITH RESPECT TO IT IN ANY ADDITIONAL INSOLVENCY OPINION. 4.1.31              PROPERTY MANAGEMENT AGREEMENT.  THE PROPERTY MANAGEMENT AGREEMENT IS IN FULL FORCE AND EFFECT AND, TO BORROWER’S KNOWLEDGE, THERE ARE NO DEFAULTS THEREUNDER BY ANY PARTY THERETO AND NO EVENT HAS OCCURRED THAT, WITH THE PASSAGE OF TIME AND/OR THE GIVING OF NOTICE WOULD CONSTITUTE A DEFAULT THEREUNDER. 4.1.32              ILLEGAL ACTIVITY.  TO BORROWER’S KNOWLEDGE, NO PORTION OF THE PROPERTY HAS BEEN OR WILL BE PURCHASED WITH PROCEEDS OF ANY ILLEGAL ACTIVITY. 4.1.33              NO CHANGE IN FACTS OR CIRCUMSTANCES; DISCLOSURE.  ALL INFORMATION SUBMITTED BY BORROWER TO LENDER AND IN ALL FINANCIAL STATEMENTS, RENT ROLLS (INCLUDING THE RENT ROLL ATTACHED HERETO AS SCHEDULE II), REPORTS, CERTIFICATES AND OTHER DOCUMENTS SUBMITTED IN CONNECTION WITH THE LOAN OR IN SATISFACTION OF THE TERMS THEREOF AND ALL STATEMENTS OF FACT MADE BY BORROWER IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT, ARE ACCURATE, COMPLETE AND CORRECT IN ALL MATERIAL RESPECTS, PROVIDED, HOWEVER, THAT IF SUCH INFORMATION WAS PROVIDED TO BORROWER BY NON-AFFILIATED THIRD PARTIES, BORROWER REPRESENTS THAT SUCH INFORMATION IS, TO BORROWER’S KNOWLEDGE, ACCURATE, COMPLETE AND CORRECT IN ALL MATERIAL RESPECTS.  TO BORROWER’S KNOWLEDGE, THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN ANY CONDITION, FACT, CIRCUMSTANCE OR EVENT THAT WOULD MAKE ANY SUCH INFORMATION INACCURATE, INCOMPLETE OR OTHERWISE MISLEADING IN ANY MATERIAL RESPECT OR THAT OTHERWISE MATERIALLY AND ADVERSELY AFFECTS OR MIGHT MATERIALLY AND ADVERSELY AFFECT THE PROPERTY OR THE BUSINESS OPERATIONS OR THE FINANCIAL CONDITION OF BORROWER.  TO BORROWER’S KNOWLEDGE, BORROWER HAS DISCLOSED TO LENDER ALL MATERIAL FACTS AND HAS NOT FAILED TO DISCLOSE 41 -------------------------------------------------------------------------------- ANY MATERIAL FACT THAT COULD CAUSE ANY PROVIDED INFORMATION OR REPRESENTATION OR WARRANTY MADE HEREIN TO BE MATERIALLY MISLEADING. 4.1.34              INVESTMENT COMPANY ACT.  BORROWER IS NOT (A) AN “INVESTMENT COMPANY” OR A COMPANY “CONTROLLED” BY AN “INVESTMENT COMPANY,” WITHIN THE MEANING OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED; (B) A “HOLDING COMPANY” OR A “SUBSIDIARY COMPANY” OF A “HOLDING COMPANY” OR AN “AFFILIATE” OF EITHER A “HOLDING COMPANY” OR A “SUBSIDIARY COMPANY” WITHIN THE MEANING OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, AS AMENDED; OR (C) SUBJECT TO ANY OTHER FEDERAL OR STATE LAW OR REGULATION WHICH PURPORTS TO RESTRICT OR REGULATE ITS ABILITY TO BORROW MONEY. 4.1.35              EMBARGOED PERSON.  AS OF THE CLOSING DATE, TO BORROWER’S KNOWLEDGE, (A) NONE OF THE FUNDS OR OTHER ASSETS OF BORROWER CONSTITUTE PROPERTY OF, OR ARE BENEFICIALLY OWNED, DIRECTLY OR INDIRECTLY, BY ANY EMBARGOED PERSON; (B) NO EMBARGOED PERSON HAS ANY INTEREST OF ANY NATURE WHATSOEVER IN BORROWER WITH THE RESULT THAT THE INVESTMENT IN BORROWER (WHETHER DIRECTLY OR INDIRECTLY), IS PROHIBITED BY LAW OR THE LOAN IS IN VIOLATION OF LAW; AND (C) NONE OF THE FUNDS OF BORROWER HAVE BEEN DERIVED FROM ANY UNLAWFUL ACTIVITY WITH THE RESULT THAT THE INVESTMENT IN BORROWER (WHETHER DIRECTLY OR INDIRECTLY), IS PROHIBITED BY LAW OR THE LOAN IS IN VIOLATION OF LAW. 4.1.36              PRINCIPAL PLACE OF BUSINESS; STATE OF ORGANIZATION.  BORROWER’S PRINCIPAL PLACE OF BUSINESS AS OF THE DATE HEREOF IS THE ADDRESS SET FORTH IN THE INTRODUCTORY PARAGRAPH OF THIS AGREEMENT.  THE BORROWER IS ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE. 4.1.37              LOAN TO VALUE.  THE MAXIMUM PRINCIPAL AMOUNT OF THE LOAN DOES NOT EXCEED ONE HUNDRED TWENTY-FIVE PERCENT (125%) OF THE FAIR MARKET VALUE OF THE PROPERTY AS SET FORTH ON THE APPRAISAL OF THE PROPERTY. 4.1.38              MORTGAGE TAXES.  AS OF THE DATE HEREOF, BORROWER REPRESENTS THAT IT HAS PAID OR HAS DEPOSITED WITH THE TITLE COMPANY ISSUING THE TITLE INSURANCE POLICY FUNDS SUFFICIENT TO PAY ALL STATE, COUNTY AND MUNICIPAL RECORDING AND ALL OTHER TAXES IMPOSED UPON THE EXECUTION AND RECORDATION OF THE MORTGAGE. SECTION 4.2                                   SURVIVAL OF REPRESENTATIONS.  BORROWER AGREES THAT ALL OF THE REPRESENTATIONS AND WARRANTIES OF BORROWER SET FORTH IN SECTION 4.1 AND ELSEWHERE IN THIS AGREEMENT AND IN THE OTHER LOAN DOCUMENTS SHALL SURVIVE FOR SO LONG AS ANY AMOUNT REMAINS OWING TO LENDER UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS BY BORROWER.  ALL REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS MADE IN THIS AGREEMENT OR IN THE OTHER LOAN DOCUMENTS BY BORROWER SHALL BE DEEMED TO HAVE BEEN RELIED UPON BY LENDER NOTWITHSTANDING ANY INVESTIGATION HERETOFORE OR HEREAFTER MADE BY LENDER OR ON ITS BEHALF. V.                                    BORROWER COVENANTS SECTION 5.1                                   AFFIRMATIVE COVENANTS.  FROM THE CLOSING DATE AND UNTIL PAYMENT AND PERFORMANCE IN FULL OF ALL OBLIGATIONS OF BORROWER UNDER THE LOAN DOCUMENTS OR THE EARLIER RELEASE OF THE LIEN OF THE MORTGAGE ENCUMBERING THE PROPERTY (AND ALL RELATED OBLIGATIONS) 42 -------------------------------------------------------------------------------- IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, BORROWER HEREBY COVENANTS AND AGREES WITH LENDER THAT: 5.1.1                     EXISTENCE; COMPLIANCE WITH LEGAL REQUIREMENTS; INSURANCE.  BORROWER SHALL DO OR CAUSE TO BE DONE ALL THINGS NECESSARY TO PRESERVE, RENEW AND KEEP IN FULL FORCE AND EFFECT ITS EXISTENCE, RIGHTS, LICENSES, PERMITS AND FRANCHISES AND COMPLY WITH ALL LEGAL REQUIREMENTS APPLICABLE TO IT AND THE PROPERTY.  BORROWER SHALL NOT COMMIT, NOR SHALL BORROWER PERMIT ANY OTHER PERSON IN OCCUPANCY OF OR INVOLVED WITH THE OPERATION OR USE OF THE PROPERTY TO COMMIT ANY ACT OR OMISSION AFFORDING THE FEDERAL GOVERNMENT OR ANY STATE OR LOCAL GOVERNMENT THE RIGHT OF FORFEITURE AS AGAINST THE PROPERTY OR ANY PART THEREOF OR ANY MONIES PAID IN PERFORMANCE OF BORROWER’S OBLIGATIONS UNDER ANY OF THE LOAN DOCUMENTS.  BORROWER HEREBY COVENANTS AND AGREES NOT TO COMMIT, PERMIT OR SUFFER TO EXIST ANY ACT OR OMISSION AFFORDING SUCH RIGHT OF FORFEITURE.  BORROWER SHALL AT ALL TIMES MAINTAIN, PRESERVE AND PROTECT ALL ITS FRANCHISES AND TRADE NAMES AND PRESERVE ALL THE REMAINDER OF ITS PROPERTY USED OR USEFUL IN THE CONDUCT OF ITS BUSINESS AND SHALL KEEP THE PROPERTY IN GOOD WORKING ORDER AND REPAIR, AND FROM TIME TO TIME MAKE, OR CAUSE TO BE MADE, ALL REASONABLY NECESSARY REPAIRS, RENEWALS, REPLACEMENTS, BETTERMENTS AND IMPROVEMENTS THERETO, ALL AS MORE FULLY PROVIDED IN THE MORTGAGE.  BORROWER SHALL KEEP THE PROPERTY INSURED AT ALL TIMES BY FINANCIALLY SOUND AND REPUTABLE INSURERS, TO SUCH EXTENT AND AGAINST SUCH RISKS, AND MAINTAIN LIABILITY AND SUCH OTHER INSURANCE, AS IS MORE FULLY PROVIDED IN THIS AGREEMENT.  BORROWER SHALL OPERATE THE PROPERTY IN ACCORDANCE WITH THE TERMS AND PROVISIONS OF THE O&M AGREEMENT IN ALL MATERIAL RESPECTS.  AFTER PRIOR WRITTEN NOTICE TO LENDER, BORROWER, AT ITS OWN EXPENSE, MAY CONTEST BY APPROPRIATE LEGAL PROCEEDING PROMPTLY INITIATED AND CONDUCTED IN GOOD FAITH AND WITH DUE DILIGENCE, THE VALIDITY OF ANY LEGAL REQUIREMENT, THE APPLICABILITY OF ANY LEGAL REQUIREMENT TO BORROWER OR THE PROPERTY OR ANY ALLEGED VIOLATION OF ANY LEGAL REQUIREMENT, PROVIDED THAT (I) NO DEFAULT OR EVENT OF DEFAULT HAS OCCURRED AND REMAINS UNCURED; (II) INTENTIONALLY OMITTED; (III) SUCH PROCEEDING SHALL BE PERMITTED UNDER AND BE CONDUCTED IN ACCORDANCE WITH THE PROVISIONS OF ANY INSTRUMENT TO WHICH BORROWER IS SUBJECT AND SHALL NOT CONSTITUTE A DEFAULT THEREUNDER AND SUCH PROCEEDING SHALL BE CONDUCTED IN ACCORDANCE WITH ALL APPLICABLE STATUTES, LAWS AND ORDINANCES; (IV) NEITHER THE PROPERTY NOR ANY PART THEREOF OR INTEREST THEREIN WILL BE IN IMMEDIATE DANGER OF BEING SOLD, FORFEITED, TERMINATED, CANCELLED OR LOST; (V) BORROWER SHALL PROMPTLY UPON FINAL DETERMINATION THEREOF COMPLY WITH ANY SUCH LEGAL REQUIREMENT DETERMINED TO BE VALID OR APPLICABLE OR CURE ANY VIOLATION OF ANY LEGAL REQUIREMENT; (VI) SUCH PROCEEDING SHALL SUSPEND THE ENFORCEMENT OF THE CONTESTED LEGAL REQUIREMENT AGAINST BORROWER OR THE PROPERTY; AND (VII) BORROWER SHALL FURNISH SUCH SECURITY AS MAY BE REQUIRED IN THE PROCEEDING, OR AS MAY BE REQUESTED BY LENDER, TO INSURE COMPLIANCE WITH SUCH LEGAL REQUIREMENT, TOGETHER WITH ALL INTEREST AND PENALTIES PAYABLE IN CONNECTION THEREWITH.  LENDER MAY APPLY ANY SUCH SECURITY, AS NECESSARY TO CAUSE COMPLIANCE WITH SUCH LEGAL REQUIREMENT AT ANY TIME WHEN, IN THE REASONABLE JUDGMENT OF LENDER, THE VALIDITY, APPLICABILITY OR VIOLATION OF SUCH LEGAL REQUIREMENT IS FINALLY ESTABLISHED OR THE PROPERTY (OR ANY PART THEREOF OR INTEREST THEREIN) SHALL BE IN DANGER OF BEING SOLD, FORFEITED, TERMINATED, CANCELLED OR LOST.  PROVIDED NO EVENT OF DEFAULT THEN EXISTS, ANY SECURITY DEPOSITED WITH LENDER PURSUANT TO THIS SECTION 5.1.1 MAY BE USED TO SATISFY COMPLIANCE WITH THE RELATED LEGAL REQUIREMENT WITH ANY EXCESS AFTER THE SATISFACTION OF SAME TO BE RETURNED TO BORROWER. 5.1.2                     TAXES AND OTHER CHARGES. BORROWER SHALL PAY OR CAUSE TO BE PAID ALL TAXES AND OTHER CHARGES NOW OR HEREAFTER LEVIED OR ASSESSED OR IMPOSED AGAINST THE PROPERTY OR ANY PART THEREOF AS THE SAME BECOME DUE AND PAYABLE; PROVIDED, HOWEVER, BORROWER’S OBLIGATION 43 -------------------------------------------------------------------------------- TO DIRECTLY PAY TO THE APPROPRIATE TAXING AUTHORITY TAXES SHALL BE SUSPENDED IF BORROWER HAS DEPOSITED AMOUNTS FOR THE PAYMENT OF SUCH TAXES INTO THE TAX AND INSURANCE ESCROW FUND PURSUANT TO OF SECTION 7.2 HEREOF.  BORROWER WILL DELIVER TO LENDER RECEIPTS FOR PAYMENT OR OTHER EVIDENCE SATISFACTORY TO LENDER THAT THE TAXES AND OTHER CHARGES HAVE BEEN SO PAID OR ARE NOT THEN DELINQUENT NO LATER THAN TEN (10) DAYS PRIOR TO THE DATE ON WHICH THE TAXES AND/OR OTHER CHARGES WOULD OTHERWISE BE DELINQUENT IF NOT PAID (PROVIDED, HOWEVER, THAT BORROWER IS NOT REQUIRED TO FURNISH SUCH RECEIPTS FOR PAYMENT OF TAXES IN THE EVENT THAT SUCH TAXES HAVE BEEN PAID BY LENDER PURSUANT TO SECTION 7.2 HEREOF).  IF BORROWER PAYS OR CAUSES TO BE PAID ALL TAXES AND OTHER CHARGES AND PROVIDES A COPY OF THE RECEIPT EVIDENCING THE PAYMENT THEREOF TO LENDER, THEN LENDER SHALL REIMBURSE BORROWER, PROVIDED THAT THERE ARE THEN SUFFICIENT PROCEEDS IN THE TAX AND INSURANCE ESCROW FUND AND PROVIDED THAT THE TAXES ARE BEING PAID PURSUANT TO SECTION 7.2.  UPON WRITTEN REQUEST OF BORROWER, IF LENDER HAS PAID SUCH TAXES PURSUANT TO SECTION 7.2 HEREOF, LENDER SHALL PROVIDE BORROWER WITH EVIDENCE THAT SUCH TAXES HAVE BEEN PAID.  BORROWER SHALL NOT SUFFER AND SHALL PROMPTLY CAUSE TO BE PAID AND DISCHARGED ANY LIEN OR CHARGE WHATSOEVER WHICH MAY BE OR BECOME A LIEN OR CHARGE AGAINST THE PROPERTY, AND SHALL PROMPTLY PAY FOR ALL UTILITY SERVICES PROVIDED TO THE PROPERTY.  AFTER PRIOR WRITTEN NOTICE TO LENDER, BORROWER, AT ITS OWN EXPENSE, MAY CONTEST BY APPROPRIATE LEGAL PROCEEDING, PROMPTLY INITIATED AND CONDUCTED IN GOOD FAITH AND WITH DUE DILIGENCE, THE AMOUNT OR VALIDITY OR APPLICATION IN WHOLE OR IN PART OF ANY TAXES OR OTHER CHARGES, PROVIDED THAT (I)  BORROWER IS PERMITTED TO DO SO UNDER THE PROVISIONS OF ANY MORTGAGE OR DEED OF TRUST SUPERIOR IN LIEN TO THE MORTGAGE; (II) SUCH PROCEEDING SHALL BE PERMITTED UNDER AND BE CONDUCTED IN ACCORDANCE WITH THE PROVISIONS OF ANY OTHER INSTRUMENT TO WHICH BORROWER IS SUBJECT AND SHALL NOT CONSTITUTE A DEFAULT THEREUNDER AND SUCH PROCEEDING SHALL BE CONDUCTED IN ACCORDANCE WITH ALL APPLICABLE STATUTES, LAWS AND ORDINANCES; (III) NEITHER THE PROPERTY NOR ANY PART THEREOF OR INTEREST THEREIN WILL BE IN IMMEDIATE DANGER OF BEING SOLD, FORFEITED, TERMINATED, CANCELLED OR LOST; (IV) BORROWER SHALL PROMPTLY UPON FINAL DETERMINATION THEREOF PAY THE AMOUNT OF ANY SUCH TAXES OR OTHER CHARGES, TOGETHER WITH ALL COSTS, INTEREST AND PENALTIES WHICH MAY BE PAYABLE IN CONNECTION THEREWITH; (V) SUCH PROCEEDING SHALL SUSPEND THE COLLECTION OF SUCH CONTESTED TAXES OR OTHER CHARGES FROM THE PROPERTY; AND (VI) BORROWER SHALL FURNISH SUCH SECURITY AS MAY BE REQUIRED IN THE PROCEEDING, OR AS MAY BE REASONABLY REQUESTED BY LENDER, TO INSURE THE PAYMENT OF ANY SUCH TAXES OR OTHER CHARGES, TOGETHER WITH ALL INTEREST AND PENALTIES THEREON.  LENDER MAY PAY OVER ANY SUCH CASH DEPOSIT OR PART THEREOF HELD BY LENDER TO THE CLAIMANT ENTITLED THERETO AT ANY TIME WHEN, IN THE REASONABLE JUDGMENT OF LENDER, THE ENTITLEMENT OF SUCH CLAIMANT IS ESTABLISHED OR THE PROPERTY (OR PART THEREOF OR INTEREST THEREIN) SHALL BE IN IMMINENT DANGER OF BEING SOLD, FORFEITED, TERMINATED, CANCELLED OR LOST OR THERE SHALL BE ANY DANGER OF THE LIEN OF THE MORTGAGE BEING PRIMED BY ANY RELATED LIEN OTHER THAN A LIEN IN RESPECT OF TAXES BEING CONTESTED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 5.1.2.  PROVIDED NO EVENT OF DEFAULT THEN EXISTS, ANY SECURITY DEPOSITED WITH LENDER PURSUANT TO THIS SECTION 5.1.2 MAY BE USED TO SATISFY THE RELATED TAXES OR OTHER CHARGES WITH ANY EXCESS AFTER THE SATISFACTION OF SAME TO BE RETURNED TO BORROWER. 5.1.3                     LITIGATION.  BORROWER SHALL GIVE PROMPT WRITTEN NOTICE TO LENDER UPON OBTAINING INFORMATION OF ANY LITIGATION OR GOVERNMENTAL PROCEEDINGS PENDING OR THREATENED AGAINST BORROWER AND/OR GUARANTOR WHICH MIGHT MATERIALLY ADVERSELY AFFECT BORROWER’S OR GUARANTOR’S CONDITION (FINANCIAL OR OTHERWISE) OR BUSINESS OR THE PROPERTY. 44 -------------------------------------------------------------------------------- 5.1.4                     ACCESS TO PROPERTY.  BORROWER SHALL PERMIT AGENTS, REPRESENTATIVES AND EMPLOYEES OF LENDER TO INSPECT THE PROPERTY OR ANY PART THEREOF AT REASONABLE HOURS UPON REASONABLE ADVANCE NOTICE, SUBJECT TO THE RIGHTS OF TENANTS UNDER THEIR RESPECTIVE LEASES. 5.1.5                     NOTICE OF DEFAULT.  BORROWER SHALL PROMPTLY ADVISE LENDER OF THE OCCURRENCE OF ANY DEFAULT OR EVENT OF DEFAULT OF WHICH BORROWER HAS KNOWLEDGE. 5.1.6                     COOPERATE IN LEGAL PROCEEDINGS.  BORROWER SHALL COOPERATE FULLY WITH LENDER WITH RESPECT TO ANY PROCEEDINGS BEFORE ANY COURT, BOARD OR OTHER GOVERNMENTAL AUTHORITY WHICH MAY IN ANY WAY AFFECT THE RIGHTS OF LENDER HEREUNDER OR ANY RIGHTS OBTAINED BY LENDER UNDER ANY OF THE OTHER LOAN DOCUMENTS AND, IN CONNECTION THEREWITH, PERMIT LENDER, AT ITS ELECTION, TO PARTICIPATE IN ANY SUCH PROCEEDINGS. 5.1.7                     PERFORM LOAN DOCUMENTS.  BORROWER SHALL OBSERVE, PERFORM AND SATISFY ALL THE TERMS, PROVISIONS, COVENANTS AND CONDITIONS OF, AND SHALL PAY WHEN DUE ALL COSTS, FEES AND EXPENSES TO THE EXTENT REQUIRED UNDER THE LOAN DOCUMENTS EXECUTED AND DELIVERED BY, OR APPLICABLE TO, BORROWER. 5.1.8                     AWARD AND INSURANCE BENEFITS.  BORROWER SHALL COOPERATE WITH LENDER IN OBTAINING FOR LENDER THE BENEFITS OF ANY AWARDS OR INSURANCE PROCEEDS LAWFULLY OR EQUITABLY PAYABLE IN CONNECTION WITH THE PROPERTY, AND LENDER SHALL BE REIMBURSED FOR ANY EXPENSES INCURRED IN CONNECTION THEREWITH (INCLUDING REASONABLE ATTORNEYS’ FEES AND DISBURSEMENTS, AND THE PAYMENT BY BORROWER OF THE EXPENSE OF AN APPRAISAL ON BEHALF OF LENDER IN CASE OF CASUALTY OR CONDEMNATION AFFECTING THE PROPERTY OR ANY PART THEREOF) OUT OF SUCH INSURANCE PROCEEDS. 5.1.9                     FURTHER ASSURANCES. BORROWER SHALL, AT BORROWER’S SOLE COST AND EXPENSE: (A)                                  FURNISH TO LENDER ALL INSTRUMENTS, DOCUMENTS, BOUNDARY SURVEYS, FOOTING OR FOUNDATION SURVEYS, CERTIFICATES, PLANS AND SPECIFICATIONS, APPRAISALS, TITLE AND OTHER INSURANCE REPORTS AND AGREEMENTS, AND EACH AND EVERY OTHER DOCUMENT, CERTIFICATE, AGREEMENT AND INSTRUMENT REQUIRED TO BE FURNISHED BY BORROWER PURSUANT TO THE TERMS OF THE LOAN DOCUMENTS OR REASONABLY REQUESTED BY LENDER IN CONNECTION THEREWITH; (B)                                 EXECUTE AND DELIVER TO LENDER SUCH DOCUMENTS, INSTRUMENTS, CERTIFICATES, ASSIGNMENTS AND OTHER WRITINGS, AND DO SUCH OTHER ACTS NECESSARY OR DESIRABLE, TO EVIDENCE, PRESERVE AND/OR PROTECT THE COLLATERAL AT ANY TIME SECURING OR INTENDED TO SECURE THE OBLIGATIONS OF BORROWER UNDER THE LOAN DOCUMENTS, AS LENDER MAY REASONABLY REQUIRE; AND (C)                                  DO AND EXECUTE ALL AND SUCH FURTHER LAWFUL AND REASONABLE ACTS, CONVEYANCES AND ASSURANCES FOR THE BETTER AND MORE EFFECTIVE CARRYING OUT OF THE INTENTS AND PURPOSES OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS LENDER SHALL REASONABLY REQUIRE FROM TIME TO TIME. 5.1.10              PRINCIPAL PLACE OF BUSINESS, STATE OF ORGANIZATION.  BORROWER WILL NOT CAUSE OR PERMIT ANY CHANGE TO BE MADE IN ITS NAME, IDENTITY (INCLUDING ITS TRADE NAME OR NAMES), PLACE OF ORGANIZATION OR FORMATION (AS SET FORTH IN SECTION 4.1.36 HEREOF) OR BORROWER’S CORPORATE, PARTNERSHIP OR OTHER STRUCTURE UNLESS BORROWER SHALL HAVE FIRST NOTIFIED LENDER IN 45 -------------------------------------------------------------------------------- WRITING OF SUCH CHANGE AT LEAST THIRTY (30) DAYS PRIOR TO THE EFFECTIVE DATE OF SUCH CHANGE, AND SHALL HAVE FIRST TAKEN ALL ACTION REQUIRED BY LENDER FOR THE PURPOSE OF PERFECTING OR PROTECTING THE LIEN AND SECURITY INTERESTS OF LENDER PURSUANT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND, IN THE CASE OF A CHANGE IN BORROWER’S STRUCTURE, WITHOUT FIRST OBTAINING THE PRIOR CONSENT OF LENDER.  UPON LENDER’S REQUEST, BORROWER SHALL EXECUTE AND DELIVER ADDITIONAL FINANCING STATEMENTS, SECURITY AGREEMENTS AND OTHER INSTRUMENTS WHICH MAY BE NECESSARY TO EFFECTIVELY EVIDENCE OR PERFECT LENDER’S SECURITY INTEREST IN THE PROPERTY AS A RESULT OF SUCH CHANGE OF PRINCIPAL PLACE OF BUSINESS OR PLACE OF ORGANIZATION.  BORROWER’S PRINCIPAL PLACE OF BUSINESS AND CHIEF EXECUTIVE OFFICE, AND THE PLACE WHERE BORROWER KEEPS ITS BOOKS AND RECORDS, INCLUDING RECORDED DATA OF ANY KIND OR NATURE, REGARDLESS OF THE MEDIUM OR RECORDING, INCLUDING SOFTWARE, WRITINGS, PLANS, SPECIFICATIONS AND SCHEMATICS, HAS BEEN FOR THE PRECEDING FOUR MONTHS (OR, IF LESS, THE ENTIRE PERIOD OF THE EXISTENCE OF BORROWER) AND WILL CONTINUE TO BE THE ADDRESS OF BORROWER SET FORTH AT THE INTRODUCTORY PARAGRAPH OF THIS AGREEMENT (UNLESS BORROWER NOTIFIES LENDER IN WRITING AT LEAST THIRTY (30) DAYS PRIOR TO THE DATE OF SUCH CHANGE).  BORROWER’S ORGANIZATIONAL IDENTIFICATION NUMBER, IF ANY, ASSIGNED BY THE STATE OF INCORPORATION OR ORGANIZATION IS CORRECTLY SET FORTH IN THE INTRODUCTORY PARAGRAPH OF THIS AGREEMENT.  BORROWER SHALL PROMPTLY NOTIFY LENDER OF ANY CHANGE IN ITS ORGANIZATIONAL IDENTIFICATION NUMBER.  IF BORROWER DOES NOT NOW HAVE AN ORGANIZATIONAL IDENTIFICATION NUMBER AND LATER OBTAINS ONE, BORROWER PROMPTLY SHALL NOTIFY LENDER OF SUCH ORGANIZATIONAL IDENTIFICATION NUMBER. 5.1.11              FINANCIAL REPORTING.  (A)  BORROWER WILL KEEP AND MAINTAIN OR WILL CAUSE TO BE KEPT AND MAINTAINED ON A FISCAL YEAR BASIS, IN ACCORDANCE WITH GAAP (OR SUCH OTHER ACCOUNTING BASIS REASONABLY ACCEPTABLE TO LENDER), RECORDS AND ACCOUNTS REFLECTING ALL OF THE FINANCIAL AFFAIRS OF BORROWER AND ALL ITEMS OF INCOME AND EXPENSE IN CONNECTION WITH THE OPERATION OF THE PROPERTY.  LENDER SHALL HAVE THE RIGHT FROM TIME TO TIME AT ALL TIMES DURING NORMAL BUSINESS HOURS UPON REASONABLE NOTICE TO EXAMINE SUCH BOOKS, RECORDS AND ACCOUNTS AT THE OFFICE OF BORROWER OR OTHER PERSON MAINTAINING SUCH BOOKS, RECORDS AND ACCOUNTS AND TO MAKE SUCH COPIES OR EXTRACTS THEREOF AS LENDER SHALL DESIRE.  AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, BORROWER SHALL PAY ANY COSTS AND EXPENSES INCURRED BY LENDER TO EXAMINE BORROWER’S ACCOUNTING RECORDS WITH RESPECT TO THE PROPERTY, AS LENDER SHALL REASONABLY DETERMINE TO BE NECESSARY OR APPROPRIATE IN THE PROTECTION OF LENDER’S INTEREST. (B)                                 BORROWER WILL FURNISH TO LENDER ANNUALLY, WITHIN ONE HUNDRED TWENTY (120) DAYS FOLLOWING THE END OF EACH FISCAL YEAR OF BORROWER, CERTIFIED ANNUAL FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GAAP (OR SUCH OTHER ACCOUNTING BASIS REASONABLY ACCEPTABLE TO LENDER) COVERING THE PROPERTY FOR SUCH FISCAL YEAR AND CONTAINING STATEMENTS OF PROFIT AND LOSS FOR BORROWER AND THE PROPERTY AND A BALANCE SHEET FOR BORROWER.  SUCH STATEMENTS SHALL SET FORTH THE FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS FOR THE PROPERTY FOR SUCH FISCAL YEAR, AND SHALL INCLUDE, BUT NOT BE LIMITED TO, AMOUNTS REPRESENTING ANNUAL NET CASH FLOW, NET OPERATING INCOME, GROSS INCOME FROM OPERATIONS AND OPERATING EXPENSES.  SUCH ANNUAL FINANCIAL STATEMENTS SHALL BE ACCOMPANIED BY (I) A COMPARISON OF THE BUDGETED INCOME AND EXPENSES AND THE ACTUAL INCOME AND EXPENSES FOR THE PRIOR FISCAL YEAR, (II) AN OFFICER’S CERTIFICATE STATING THAT EACH SUCH ANNUAL FINANCIAL STATEMENT PRESENTS FAIRLY THE FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS OF BORROWER AND THE PROPERTY BEING REPORTED UPON AND HAS BEEN PREPARED IN ACCORDANCE WITH GAAP (OR SUCH OTHER ACCOUNTING BASIS REASONABLY ACCEPTABLE TO LENDER), (III) A LIST OF TENANTS, IF ANY, OCCUPYING MORE THAN TWENTY PERCENT (20%) OF THE TOTAL FLOOR AREA OF THE IMPROVEMENTS, (IV) A BREAKDOWN SHOWING THE YEAR IN WHICH EACH LEASE THEN IN EFFECT 46 -------------------------------------------------------------------------------- EXPIRES AND THE PERCENTAGE OF TOTAL FLOOR AREA OF THE IMPROVEMENTS AND THE PERCENTAGE OF BASE RENT WITH RESPECT TO WHICH LEASES SHALL EXPIRE IN EACH SUCH YEAR, EACH SUCH PERCENTAGE TO BE EXPRESSED ON BOTH A PER YEAR AND CUMULATIVE BASIS, AND (V) A SCHEDULE RECONCILING NET OPERATING INCOME TO NET CASH FLOW (THE “NET CASH FLOW SCHEDULE”), WHICH SHALL ITEMIZE ALL MATERIAL ADJUSTMENTS MADE TO NET OPERATING INCOME TO ARRIVE AT NET CASH FLOW.  TOGETHER WITH BORROWER’S ANNUAL FINANCIAL STATEMENTS, BORROWER SHALL FURNISH TO LENDER AN OFFICER’S CERTIFICATE CERTIFYING TO ITS KNOWLEDGE AS OF THE DATE THEREOF WHETHER THERE EXISTS AN EVENT OR CIRCUMSTANCE WHICH CONSTITUTES A DEFAULT OR EVENT OF DEFAULT UNDER THE LOAN DOCUMENTS EXECUTED AND DELIVERED BY, OR APPLICABLE TO, BORROWER, AND IF SUCH DEFAULT OR EVENT OF DEFAULT EXISTS, THE NATURE THEREOF, THE PERIOD OF TIME IT HAS EXISTED AND THE ACTION THEN BEING TAKEN TO REMEDY THE SAME. (C)                                  BORROWER WILL FURNISH, OR CAUSE TO BE FURNISHED, TO LENDER ON OR BEFORE TWENTY (20) DAYS AFTER THE END OF EACH CALENDAR QUARTER THE FOLLOWING ITEMS, ACCOMPANIED BY AN OFFICER’S CERTIFICATE STATING THAT SUCH ITEMS ARE TRUE, CORRECT, ACCURATE, AND COMPLETE AND FAIRLY PRESENT THE FINANCIAL CONDITION AND RESULTS OF THE OPERATIONS OF BORROWER AND THE PROPERTY (SUBJECT TO NORMAL YEAR-END ADJUSTMENTS) AS APPLICABLE:  (I)  QUARTERLY AND YEAR-TO-DATE OPERATING STATEMENTS (INCLUDING CAPITAL EXPENDITURES) PREPARED FOR EACH CALENDAR QUARTER, NOTING NET OPERATING INCOME, GROSS INCOME FROM OPERATIONS, AND OPERATING EXPENSES (NOT INCLUDING ANY CONTRIBUTIONS TO THE REPLACEMENT RESERVE FUND), AND OTHER INFORMATION NECESSARY AND SUFFICIENT TO FAIRLY REPRESENT THE FINANCIAL POSITION AND RESULTS OF OPERATION OF THE PROPERTY DURING SUCH CALENDAR QUARTER, AND CONTAINING A COMPARISON OF BUDGETED INCOME AND EXPENSES AND THE ACTUAL INCOME AND EXPENSES TOGETHER WITH A DETAILED EXPLANATION OF ANY VARIANCES OF FIVE PERCENT (5%) OR MORE BETWEEN BUDGETED AND ACTUAL AMOUNTS FOR SUCH PERIODS, ALL IN FORM SATISFACTORY TO LENDER; (II) A CALCULATION REFLECTING THE ANNUAL DEBT SERVICE COVERAGE RATIO FOR THE IMMEDIATELY PRECEDING TWELVE (12) MONTH PERIOD AS OF THE LAST DAY OF SUCH QUARTER ACCOMPANIED BY AN OFFICER’S CERTIFICATE WITH RESPECT THERETO; AND (III) A NET CASH FLOW SCHEDULE.  PRIOR TO A SECURITIZATION, BORROWER SHALL PROVIDE THE ITEMS REQUIRED PURSUANT TO THIS SECTION 5.1.11(C) ON A MONTHLY BASIS. (D)                                 FOR THE PARTIAL YEAR PERIOD COMMENCING ON THE CLOSING DATE, AND FOR EACH FISCAL YEAR THEREAFTER, BORROWER SHALL SUBMIT TO LENDER AN ANNUAL BUDGET NOT LATER THAN THIRTY (30) DAYS AFTER THE COMMENCEMENT OF SUCH PERIOD OR FISCAL YEAR IN FORM REASONABLY SATISFACTORY TO LENDER.  THE ANNUAL BUDGET SHALL BE SUBJECT TO LENDER’S WRITTEN APPROVAL IF A CASH SWEEP PERIOD EXISTS (EACH SUCH ANNUAL BUDGET, AN “APPROVED ANNUAL BUDGET”).  IN THE EVENT THAT LENDER OBJECTS TO A PROPOSED ANNUAL BUDGET SUBMITTED BY BORROWER DURING A CASH SWEEP PERIOD, LENDER SHALL ADVISE BORROWER OF SUCH OBJECTIONS WITHIN FIFTEEN (15) DAYS AFTER RECEIPT THEREOF (AND DELIVER TO BORROWER A REASONABLY DETAILED DESCRIPTION OF SUCH OBJECTIONS) AND BORROWER SHALL PROMPTLY REVISE SUCH ANNUAL BUDGET AND RESUBMIT THE SAME TO LENDER.  LENDER SHALL ADVISE BORROWER OF ANY OBJECTIONS TO SUCH REVISED ANNUAL BUDGET WITHIN TEN (10) DAYS AFTER RECEIPT THEREOF (AND DELIVER TO BORROWER A REASONABLY DETAILED DESCRIPTION OF SUCH OBJECTIONS) AND BORROWER SHALL PROMPTLY REVISE THE SAME IN ACCORDANCE WITH THE PROCESS DESCRIBED IN THIS SUBSECTION UNTIL LENDER APPROVES THE ANNUAL BUDGET.  UNTIL SUCH TIME THAT LENDER APPROVES A PROPOSED ANNUAL BUDGET, THE MOST RECENTLY APPROVED ANNUAL BUDGET SHALL APPLY; PROVIDED THAT, SUCH APPROVED ANNUAL BUDGET SHALL BE ADJUSTED TO REFLECT ACTUAL INCREASES IN TAXES, INSURANCE PREMIUMS AND OTHER CHARGES. 47 -------------------------------------------------------------------------------- (E)                                  IN THE EVENT THAT A CASH SWEEP PERIOD EXISTS AND BORROWER MUST INCUR AN EXTRAORDINARY OPERATING EXPENSE OR CAPITAL EXPENSE NOT SET FORTH IN THE APPROVED ANNUAL BUDGET (EACH AN “EXTRAORDINARY EXPENSE”), THEN BORROWER SHALL PROMPTLY DELIVER TO LENDER A REASONABLY DETAILED EXPLANATION OF SUCH PROPOSED EXTRAORDINARY EXPENSE FOR LENDER’S APPROVAL. (F)                                    ANY REPORTS, STATEMENTS OR OTHER INFORMATION REQUIRED TO BE DELIVERED UNDER THIS AGREEMENT SHALL BE DELIVERED (I) IN PAPER FORM, (II) ON A DISKETTE, AND (III) IF REQUESTED BY LENDER AND WITHIN THE CAPABILITIES OF BORROWER’S DATA SYSTEMS WITHOUT CHANGE OR MODIFICATION THERETO, IN ELECTRONIC FORM AND PREPARED USING MICROSOFT WORD FOR WINDOWS OR WORDPERFECT FOR WINDOWS FILES (WHICH FILES MAY BE PREPARED USING A SPREADSHEET PROGRAM AND SAVED AS WORD PROCESSING FILES).  BORROWER AGREES THAT LENDER MAY DISCLOSE INFORMATION REGARDING THE PROPERTY AND BORROWER THAT IS PROVIDED TO LENDER PURSUANT TO THIS SECTION 5.1.11(F) IN CONNECTION WITH THE SECURITIZATION TO SUCH PARTIES REQUESTING SUCH INFORMATION IN CONNECTION WITH SUCH SECURITIZATION. 5.1.12              BUSINESS AND OPERATIONS.  BORROWER WILL CONTINUE TO ENGAGE IN THE BUSINESSES PRESENTLY CONDUCTED BY IT AS AND TO THE EXTENT THE SAME ARE NECESSARY FOR THE OWNERSHIP, MAINTENANCE, MANAGEMENT AND OPERATION OF THE PROPERTY.  BORROWER WILL QUALIFY TO DO BUSINESS AND WILL REMAIN IN GOOD STANDING UNDER THE LAWS OF THE JURISDICTION AS AND TO THE EXTENT THE SAME ARE REQUIRED FOR THE OWNERSHIP, MAINTENANCE, MANAGEMENT AND OPERATION OF THE PROPERTY.  BORROWER SHALL AT ALL TIMES DURING THE TERM OF THE LOAN, CONTINUE TO OWN ALL OF THE EQUIPMENT, FIXTURES AND PERSONAL PROPERTY WHICH ARE NECESSARY TO OPERATE THE PROPERTY IN THE MANNER REQUIRED HEREUNDER AND IN THE MANNER IN WHICH IT IS CURRENTLY OPERATED. 5.1.13              TITLE TO THE PROPERTY.  BORROWER WILL WARRANT AND DEFEND (A) THE TITLE TO THE PROPERTY AND EVERY PART THEREOF, SUBJECT ONLY TO LIENS PERMITTED HEREUNDER (INCLUDING PERMITTED ENCUMBRANCES) AND (B) THE VALIDITY AND PRIORITY OF THE LIEN OF THE MORTGAGE AND THE ASSIGNMENT OF LEASES ON THE PROPERTY, SUBJECT ONLY TO LIENS PERMITTED HEREUNDER (INCLUDING PERMITTED ENCUMBRANCES), IN EACH CASE AGAINST THE CLAIMS OF ALL PERSONS WHOMSOEVER.  BORROWER SHALL REIMBURSE LENDER FOR ANY LOSSES, COSTS, DAMAGES OR EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES AND COURT COSTS) INCURRED BY LENDER IF AN INTEREST IN THE PROPERTY, OTHER THAN AS PERMITTED HEREUNDER, IS CLAIMED BY ANOTHER PERSON. 5.1.14              COSTS OF ENFORCEMENT.  IN THE EVENT (A) THAT THE MORTGAGE ENCUMBERING THE PROPERTY IS FORECLOSED IN WHOLE OR IN PART OR THAT THE MORTGAGE IS PUT INTO THE HANDS OF AN ATTORNEY FOR COLLECTION, SUIT, ACTION OR FORECLOSURE, (B) OF THE FORECLOSURE OF ANY MORTGAGE PRIOR TO OR SUBSEQUENT TO THE MORTGAGE ENCUMBERING THE PROPERTY IN WHICH PROCEEDING LENDER IS MADE A PARTY, OR (C) OF THE BANKRUPTCY, INSOLVENCY, REHABILITATION OR OTHER SIMILAR PROCEEDING IN RESPECT OF BORROWER OR ANY OF ITS CONSTITUENT PERSONS OR AN ASSIGNMENT BY BORROWER OR ANY OF ITS CONSTITUENT PERSONS FOR THE BENEFIT OF ITS CREDITORS, BORROWER, ITS SUCCESSORS OR ASSIGNS, SHALL BE CHARGEABLE WITH AND AGREES TO PAY ALL COSTS OF COLLECTION AND DEFENSE, INCLUDING REASONABLE ATTORNEYS’ FEES AND COSTS, INCURRED BY LENDER OR BORROWER IN CONNECTION THEREWITH AND IN CONNECTION WITH ANY APPELLATE PROCEEDING OR POST-JUDGMENT ACTION INVOLVED THEREIN, TOGETHER WITH ALL REQUIRED SERVICE OR USE TAXES. 5.1.15              ESTOPPEL STATEMENT.  (A)  AFTER REQUEST BY LENDER, BORROWER SHALL FURNISH TO LENDER WITHIN TEN (10) DAYS A STATEMENT, DULY ACKNOWLEDGED AND CERTIFIED, SETTING FORTH (I)  THE AMOUNT OF THE ORIGINAL PRINCIPAL AMOUNT OF THE NOTE, (II) THE UNPAID PRINCIPAL AMOUNT OF THE NOTE, 48 -------------------------------------------------------------------------------- (III) THE INTEREST RATE OF THE NOTE, (IV) THE DATE INSTALLMENTS OF INTEREST AND/OR PRINCIPAL WERE LAST PAID, (V) ANY KNOWN OFFSETS OR DEFENSES TO THE PAYMENT OF THE DEBT, IF ANY, AND (VI) THAT THE NOTE, THIS AGREEMENT, THE MORTGAGE AND THE OTHER LOAN DOCUMENTS ARE VALID, LEGAL AND BINDING OBLIGATIONS AND HAVE NOT BEEN MODIFIED OR IF MODIFIED, GIVING PARTICULARS OF SUCH MODIFICATION. (B)                                 BORROWER SHALL USE COMMERCIALLY REASONABLE EFFORTS TO DELIVER TO LENDER UPON REQUEST, TENANT ESTOPPEL CERTIFICATES FROM EACH COMMERCIAL TENANT LEASING SPACE AT THE PROPERTY IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO LENDER PROVIDED THAT BORROWER SHALL NOT BE REQUIRED TO DELIVER SUCH CERTIFICATES MORE FREQUENTLY THAN ONE (1) TIME IN ANY CALENDAR YEAR. (C)                                  WITHIN THIRTY (30) DAYS OF REQUEST BY BORROWER, LENDER SHALL DELIVER TO BORROWER A STATEMENT SETTING FORTH THE ITEMS DESCRIBED AT (A)(I), (II), (III) AND (IV) OF THIS SECTION 5.1.15. 5.1.16              LOAN PROCEEDS.  BORROWER SHALL USE THE PROCEEDS OF THE LOAN RECEIVED BY IT ON THE CLOSING DATE ONLY FOR THE PURPOSES SET FORTH IN SECTION 2.1.4. 5.1.17              PERFORMANCE BY BORROWER.  BORROWER SHALL IN A TIMELY MANNER OBSERVE, PERFORM AND FULFILL EACH AND EVERY COVENANT, TERM AND PROVISION OF EACH LOAN DOCUMENT EXECUTED AND DELIVERED BY, OR APPLICABLE TO, BORROWER, AND SHALL NOT ENTER INTO OR OTHERWISE SUFFER OR PERMIT ANY AMENDMENT, WAIVER, SUPPLEMENT, TERMINATION OR OTHER MODIFICATION OF ANY LOAN DOCUMENT EXECUTED AND DELIVERED BY, OR APPLICABLE TO, BORROWER WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER. 5.1.18              CONFIRMATION OF REPRESENTATIONS.  BORROWER SHALL DELIVER, IN CONNECTION WITH ANY SECURITIZATION, (A) ONE (1) OR MORE OFFICER’S CERTIFICATES CERTIFYING AS TO THE ACCURACY (OR DISCLOSING ANY INACCURACIES, AS APPLICABLE) OF ALL REPRESENTATIONS MADE BY BORROWER IN THE LOAN DOCUMENTS AS OF THE DATE OF THE CLOSING OF SUCH SECURITIZATION, AND (B) CERTIFICATES OF THE RELEVANT GOVERNMENTAL AUTHORITIES IN ALL RELEVANT JURISDICTIONS INDICATING THE GOOD STANDING AND QUALIFICATION OF BORROWER, PRINCIPAL AND GUARANTOR AS OF THE DATE OF THE SECURITIZATION. 5.1.19              NO JOINT ASSESSMENT. BORROWER SHALL NOT SUFFER, PERMIT OR INITIATE THE JOINT ASSESSMENT OF THE PROPERTY (A) WITH ANY OTHER REAL PROPERTY CONSTITUTING A TAX LOT SEPARATE FROM THE PROPERTY, AND (B) WHICH CONSTITUTES REAL PROPERTY WITH ANY PORTION OF THE PROPERTY WHICH MAY BE DEEMED TO CONSTITUTE PERSONAL PROPERTY, OR ANY OTHER PROCEDURE WHEREBY THE LIEN OF ANY TAXES WHICH MAY BE LEVIED AGAINST SUCH PERSONAL PROPERTY SHALL BE ASSESSED OR LEVIED OR CHARGED TO SUCH REAL PROPERTY PORTION OF THE PROPERTY. 5.1.20              LEASING MATTERS. ANY LEASES WITH RESPECT TO THE PROPERTY WRITTEN AFTER THE CLOSING DATE, FOR MORE THAN THE RELEVANT LEASING THRESHOLD SQUARE FOOTAGE SHALL BE SUBJECT TO THE PRIOR WRITTEN APPROVAL OF LENDER, WHICH APPROVAL MAY BE GIVEN OR WITHHELD IN THE SOLE DISCRETION OF LENDER.  LENDER SHALL APPROVE OR DISAPPROVE ANY SUCH LEASE WITHIN TEN (10) BUSINESS DAYS OF LENDER’S RECEIPT OF A FINAL EXECUTION DRAFT OF SUCH LEASE (INCLUDING ALL EXHIBITS, SCHEDULES, SUPPLEMENTS, ADDENDA OR OTHER AGREEMENTS RELATING THERETO) AND A WRITTEN NOTICE FROM BORROWER REQUESTING LENDER’S APPROVAL TO SUCH LEASE, AND SUCH LEASE SHALL BE DEEMED APPROVED, IF LENDER DOES NOT DISAPPROVE SUCH LEASE WITHIN SAID TEN (10) BUSINESS DAY PERIOD 49 -------------------------------------------------------------------------------- PROVIDED SUCH WRITTEN NOTICE CONSPICUOUSLY STATES, IN LARGE BOLD TYPE, THAT “PURSUANT TO SECTION 5.1.20 OF THE LOAN AGREEMENT, THE LEASE SHALL BE DEEMED APPROVED IF LENDER DOES NOT RESPOND TO THE CONTRARY WITHIN TEN (10) BUSINESS DAYS OF LENDER’S RECEIPT OF SUCH LEASE AND WRITTEN NOTICE”, PROVIDED THAT IN NO EVENT SHALL LENDER’S CONSENT BE DEEMED GIVEN WITH RESPECT TO ANY LEASE FOR 50,000 OR MORE RENTABLE SQUARE FEET.  BORROWER SHALL FURNISH LENDER WITH EXECUTED COPIES OF ALL LEASES.  ALL RENEWALS OF LEASES AND ALL PROPOSED LEASES SHALL PROVIDE FOR RENTAL RATES COMPARABLE TO EXISTING LOCAL MARKET RATES (UNLESS SUCH RENTAL RATES ARE OTHERWISE SET FORTH IN THE LEASES EXECUTED PRIOR TO THE CLOSING DATE).  ALL PROPOSED LEASES SHALL BE ON COMMERCIALLY REASONABLE TERMS AND SHALL NOT CONTAIN ANY TERMS WHICH WOULD MATERIALLY IMPAIR LENDER’S RIGHTS UNDER THE LOAN DOCUMENTS.  ALL LEASES EXECUTED AFTER THE CLOSING DATE SHALL PROVIDE THAT THEY ARE SUBORDINATE TO THE MORTGAGE ENCUMBERING THE PROPERTY AND THAT THE TENANT THEREUNDER AGREES TO ATTORN TO LENDER OR ANY PURCHASER AT A SALE BY FORECLOSURE OR POWER OF SALE.  BORROWER (I) SHALL OBSERVE AND PERFORM THE OBLIGATIONS IMPOSED UPON THE LESSOR UNDER THE LEASES IN A COMMERCIALLY REASONABLE MANNER; (II) SHALL ENFORCE THE TERMS, COVENANTS AND CONDITIONS CONTAINED IN THE LEASES UPON THE PART OF THE TENANT THEREUNDER TO BE OBSERVED OR PERFORMED IN A COMMERCIALLY REASONABLE MANNER AND IN A MANNER NOT TO IMPAIR THE VALUE OF THE PROPERTY INVOLVED EXCEPT THAT NO TERMINATION BY BORROWER OR ACCEPTANCE OF SURRENDER BY A TENANT OF ANY LEASE SHALL BE PERMITTED UNLESS BY REASON OF A TENANT DEFAULT AND THEN ONLY IN A COMMERCIALLY REASONABLE MANNER TO PRESERVE AND PROTECT THE PROPERTY; PROVIDED, HOWEVER, THAT NO SUCH TERMINATION OR SURRENDER OF ANY LEASE COVERING MORE THAN THE RELEVANT LEASING THRESHOLD WILL BE PERMITTED WITHOUT THE WRITTEN CONSENT OF LENDER WHICH CONSENT MAY BE WITHHELD IN THE REASONABLE DISCRETION OF LENDER; (III) SHALL NOT COLLECT ANY OF THE RENTS MORE THAN ONE (1) MONTH IN ADVANCE (OTHER THAN SECURITY DEPOSITS); (IV) SHALL NOT EXECUTE ANY OTHER ASSIGNMENT OF LESSOR’S INTEREST IN THE LEASES OR THE RENTS (EXCEPT AS CONTEMPLATED BY THE LOAN DOCUMENTS); (V) SHALL NOT ALTER, MODIFY OR CHANGE THE TERMS OF THE LEASES IN A MANNER INCONSISTENT WITH THE PROVISIONS OF THE LOAN DOCUMENTS WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER, WHICH CONSENT MAY BE WITHHELD IN THE SOLE DISCRETION OF LENDER; AND (VI) SHALL EXECUTE AND DELIVER AT THE REQUEST OF LENDER ALL SUCH FURTHER ASSURANCES, CONFIRMATIONS AND ASSIGNMENTS IN CONNECTION WITH THE LEASES AS LENDER SHALL FROM TIME TO TIME REASONABLY REQUIRE.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, BORROWER SHALL NOT ENTER INTO A LEASE OF ALL OR SUBSTANTIALLY ALL OF THE PROPERTY WITHOUT LENDER’S PRIOR WRITTEN CONSENT.  NOTWITHSTANDING THE FOREGOING, BORROWER MAY, WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER, TERMINATE ANY LEASE WHICH DEMISES LESS THAN THE RELEVANT LEASING THRESHOLD UNDER ANY OF THE FOLLOWING CIRCUMSTANCES: (I) THE TENANT UNDER SAID LEASE IS IN DEFAULT BEYOND ANY APPLICABLE GRACE AND CURE PERIOD, AND BORROWER HAS THE RIGHT TO TERMINATE SUCH LEASE; (II) SUCH TERMINATION IS PERMITTED BY THE TERMS OF THE LEASE IN QUESTION AND BORROWER HAS SECURED AN OBLIGATION FROM A THIRD PARTY TO LEASE THE SPACE UNDER THE LEASE TO BE TERMINATED AT A RENTAL EQUAL TO OR HIGHER THAN THE RENTAL DUE UNDER THE LEASE TO BE TERMINATED; AND (III) IF THE TENANT UNDER THE LEASE TO BE TERMINATED, HAS EXECUTED A RIGHT UNDER SAID LEASE TO TERMINATE ITS LEASE UPON PAYMENT OF A TERMINATION FEE TO BORROWER, AND HAS IN FACT TERMINATED ITS LEASE AND PAID SAID FEE, BORROWER MAY ACCEPT SAID TERMINATION. 5.1.21              ALTERATIONS. SUBJECT TO THE RIGHTS OF TENANTS TO MAKE ALTERATIONS PURSUANT TO THE TERMS OF THEIR RESPECTIVE LEASES, BORROWER SHALL OBTAIN LENDER’S PRIOR WRITTEN CONSENT TO ANY ALTERATIONS TO ANY IMPROVEMENTS, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED EXCEPT WITH RESPECT TO ALTERATIONS THAT MAY HAVE A MATERIAL ADVERSE EFFECT ON BORROWER’S FINANCIAL CONDITION, THE VALUE OF THE PROPERTY OR THE NET OPERATING INCOME.  NOTWITHSTANDING THE 50 -------------------------------------------------------------------------------- FOREGOING, LENDER’S CONSENT SHALL NOT BE REQUIRED IN CONNECTION WITH ANY ALTERATIONS THAT WILL NOT HAVE A MATERIAL ADVERSE EFFECT ON BORROWER’S FINANCIAL CONDITION, THE VALUE OF THE PROPERTY OR THE NET OPERATING INCOME, PROVIDED THAT SUCH ALTERATIONS ARE MADE IN CONNECTION WITH (A) TENANT IMPROVEMENT WORK PERFORMED PURSUANT TO THE TERMS OF ANY LEASE EXECUTED ON OR BEFORE THE CLOSING DATE, (B) TENANT IMPROVEMENT WORK PERFORMED PURSUANT TO THE TERMS AND PROVISIONS OF A LEASE AND NOT ADVERSELY AFFECTING ANY STRUCTURAL COMPONENT OF ANY IMPROVEMENTS, ANY UTILITY OR HVAC SYSTEM CONTAINED IN ANY IMPROVEMENTS OR THE EXTERIOR OF ANY BUILDING CONSTITUTING A PART OF ANY IMPROVEMENTS, (C) ALTERATIONS PERFORMED IN CONNECTION WITH THE RESTORATION OF THE PROPERTY AFTER THE OCCURRENCE OF A CASUALTY OR CONDEMNATION IN ACCORDANCE WITH THE TERMS AND PROVISIONS OF THIS AGREEMENT OR (D) ANY STRUCTURAL ALTERATION WHICH COSTS LESS THAN $150,000.00 IN THE AGGREGATE FOR ALL COMPONENTS THEREOF WHICH CONSTITUTE SUCH ALTERATION OR ANY NON-STRUCTURAL ALTERATION WHICH COSTS LESS THAN $300,000.00 IN THE AGGREGATE FOR ALL COMPONENTS THEREOF WHICH CONSTITUTE SUCH ALTERATION.  IF THE TOTAL UNPAID AMOUNTS DUE AND PAYABLE WITH RESPECT TO ALTERATIONS TO THE IMPROVEMENTS AT THE PROPERTY (OTHER THAN SUCH AMOUNTS TO BE PAID OR REIMBURSED BY TENANTS UNDER THE LEASES) SHALL AT ANY TIME EQUAL OR EXCEED $300,000.00 (AND SUCH AMOUNT IS NOT BEING PAID FROM ANY RESERVE FUNDS) (THE “THRESHOLD AMOUNT”), BORROWER, UPON LENDER’S REQUEST, SHALL PROMPTLY DELIVER TO LENDER AS SECURITY FOR THE PAYMENT OF SUCH AMOUNTS AND AS ADDITIONAL SECURITY FOR BORROWER’S OBLIGATIONS UNDER THE LOAN DOCUMENTS ANY OF THE FOLLOWING:  (A) CASH, (B) U.S. OBLIGATIONS, (C) OTHER SECURITIES HAVING A RATING ACCEPTABLE TO LENDER AND THAT THE APPLICABLE RATING AGENCIES HAVE CONFIRMED IN WRITING WILL NOT, IN AND OF ITSELF, RESULT IN A DOWNGRADE, WITHDRAWAL OR QUALIFICATION OF THE THEN CURRENT RATINGS ASSIGNED TO ANY SECURITIES OR ANY CLASS THEREOF IN CONNECTION WITH ANY SECURITIZATION OR (D) A COMPLETION AND PERFORMANCE BOND OR AN IRREVOCABLE LETTER OF CREDIT (PAYABLE ON SIGHT DRAFT ONLY) ISSUED BY A FINANCIAL INSTITUTION HAVING A RATING BY S&P OF NOT LESS THAN “A-1+” IF THE TERM OF SUCH BOND OR LETTER OF CREDIT IS NO LONGER THAN THREE (3) MONTHS OR, IF SUCH TERM IS IN EXCESS OF THREE (3) MONTHS, ISSUED BY A FINANCIAL INSTITUTION HAVING A RATING THAT IS ACCEPTABLE TO LENDER AND THAT THE APPLICABLE RATING AGENCIES HAVE CONFIRMED IN WRITING WILL NOT, IN AND OF ITSELF, RESULT IN A DOWNGRADE, WITHDRAWAL OR QUALIFICATION OF THE THEN CURRENT RATINGS ASSIGNED TO ANY SECURITIES OR CLASS THEREOF IN CONNECTION WITH ANY SECURITIZATION.  SUCH SECURITY SHALL BE IN AN AMOUNT EQUAL TO THE EXCESS OF THE TOTAL UNPAID AMOUNTS WITH RESPECT TO ALTERATIONS TO THE IMPROVEMENTS ON THE PROPERTY (OTHER THAN SUCH AMOUNTS TO BE PAID OR REIMBURSED BY TENANTS UNDER THE LEASES) OVER THE THRESHOLD AMOUNT AND, IF CASH, U.S. OBLIGATIONS OR OTHER SECURITIES, MAY BE APPLIED FROM TIME TO TIME, AT THE OPTION OF BORROWER TO PAY FOR SUCH ALTERATIONS.  AT THE OPTION OF LENDER, FOLLOWING THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, LENDER MAY TERMINATE ANY OF THE ALTERATIONS AND USE THE DEPOSIT TO RESTORE THE PROPERTY TO THE EXTENT NECESSARY TO PREVENT ANY MATERIAL ADVERSE EFFECT ON THE VALUE OF THE PROPERTY. 5.1.22              OPERATION OF PROPERTY. (A) BORROWER SHALL CAUSE THE PROPERTY TO BE OPERATED, IN ALL MATERIAL RESPECTS, IN ACCORDANCE WITH THE PROPERTY MANAGEMENT AGREEMENT (OR REPLACEMENT MANAGEMENT AGREEMENT) AS APPLICABLE.  IN THE EVENT THAT THE PROPERTY MANAGEMENT AGREEMENT EXPIRES OR IS TERMINATED (WITHOUT LIMITING ANY OBLIGATION OF BORROWER TO OBTAIN LENDER’S CONSENT TO ANY TERMINATION OR MODIFICATION OF THE PROPERTY MANAGEMENT AGREEMENT IN ACCORDANCE WITH THE TERMS AND PROVISIONS OF THIS AGREEMENT), BORROWER SHALL PROMPTLY ENTER INTO A REPLACEMENT MANAGEMENT AGREEMENT WITH PROPERTY MANAGER OR ANOTHER QUALIFYING PROPERTY MANAGER, AS APPLICABLE. 51 --------------------------------------------------------------------------------  (B)                              BORROWER SHALL:  (I) PROMPTLY PERFORM AND/OR OBSERVE, IN ALL MATERIAL RESPECTS, ALL OF THE COVENANTS AND AGREEMENTS REQUIRED TO BE PERFORMED AND OBSERVED BY IT UNDER THE PROPERTY MANAGEMENT AGREEMENT AND DO ALL THINGS NECESSARY TO PRESERVE AND TO KEEP UNIMPAIRED ITS MATERIAL RIGHTS THEREUNDER; (II) PROMPTLY NOTIFY LENDER OF ANY MATERIAL DEFAULT UNDER THE PROPERTY MANAGEMENT AGREEMENT OF WHICH IT IS AWARE; AND (III) ENFORCE THE PERFORMANCE AND OBSERVANCE OF ALL OF THE COVENANTS AND AGREEMENTS REQUIRED TO BE PERFORMED AND/OR OBSERVED BY PROPERTY MANAGER UNDER THE PROPERTY MANAGEMENT AGREEMENT, IN A COMMERCIALLY REASONABLE MANNER. 5.1.23              SUPPLEMENTAL MORTGAGE AFFIDAVITS. AS OF THE DATE HEREOF, BORROWER REPRESENTS THAT IT HAS PAID OR HAS DEPOSITED WITH THE TITLE COMPANY ISSUING THE TITLE INSURANCE POLICY FUNDS SUFFICIENT TO PAY ALL STATE, COUNTY AND MUNICIPAL RECORDING AND ALL OTHER TAXES IMPOSED UPON THE EXECUTION AND RECORDATION OF THE MORTGAGE.  IF AT ANY TIME LENDER DETERMINES, BASED ON APPLICABLE LAW, THAT LENDER IS NOT BEING AFFORDED THE MAXIMUM AMOUNT OF SECURITY AVAILABLE FROM THE PROPERTY AS A DIRECT OR INDIRECT RESULT OF APPLICABLE TAXES NOT HAVING BEEN PAID WITH RESPECT TO THE PROPERTY, BORROWER AGREES THAT BORROWER WILL EXECUTE, ACKNOWLEDGE AND DELIVER TO LENDER, WITHIN FIFTEEN (15) DAYS OF LENDER’S REQUEST, SUPPLEMENTAL AFFIDAVITS INCREASING THE AMOUNT OF THE DEBT ATTRIBUTABLE TO THE PROPERTY FOR WHICH ALL APPLICABLE TAXES HAVE BEEN PAID TO AN AMOUNT DETERMINED BY LENDER TO BE EQUAL TO THE LESSER OF (A) THE GREATER OF THE FAIR MARKET VALUE OF THE PROPERTY (I) AS OF THE DATE HEREOF AND (II) AS OF THE DATE SUCH SUPPLEMENTAL AFFIDAVITS ARE TO BE DELIVERED TO LENDER, AND (B) THE AMOUNT OF THE DEBT ATTRIBUTABLE TO THE PROPERTY, AND BORROWER SHALL, ON DEMAND, PAY ANY ADDITIONAL TAXES. SECTION 5.2                                   NEGATIVE COVENANTS.  FROM THE CLOSING DATE UNTIL PAYMENT AND PERFORMANCE IN FULL OF ALL OBLIGATIONS OF BORROWER UNDER THE LOAN DOCUMENTS OR THE EARLIER RELEASE OF THE LIEN OF THE MORTGAGE ENCUMBERING THE PROPERTY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, BORROWER COVENANTS AND AGREES WITH LENDER THAT IT WILL NOT DO, DIRECTLY OR INDIRECTLY, ANY OF THE FOLLOWING: 5.2.1                     OPERATION OF PROPERTY.  BORROWER SHALL NOT, WITHOUT LENDER’S PRIOR WRITTEN CONSENT (WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD): (I) SURRENDER, TERMINATE OR CANCEL THE PROPERTY MANAGEMENT AGREEMENT; PROVIDED, THAT BORROWER MAY, WITHOUT LENDER’S CONSENT, REPLACE THE PROPERTY MANAGER SO LONG AS THE REPLACEMENT MANAGER IS A QUALIFYING PROPERTY MANAGER PURSUANT TO A REPLACEMENT MANAGEMENT AGREEMENT; (II) REDUCE OR CONSENT TO THE REDUCTION OF THE TERM OF THE PROPERTY MANAGEMENT AGREEMENT; (III) INCREASE OR CONSENT TO THE INCREASE OF THE AMOUNT OF ANY CHARGES UNDER THE PROPERTY MANAGEMENT AGREEMENT; OR (IV) OTHERWISE MODIFY, CHANGE, SUPPLEMENT, ALTER OR AMEND, OR WAIVE OR RELEASE ANY OF ITS RIGHTS AND REMEDIES UNDER, THE PROPERTY MANAGEMENT AGREEMENT IN ANY MATERIAL RESPECT.  LENDER AGREES THAT ITS CONSENT PURSUANT TO THIS SECTION 5.2.1(A) WILL NOT BE UNREASONABLY WITHHELD, DELAYED OR CONDITIONED PROVIDED THAT IN CONNECTION WITH ANY REPLACEMENT OF THE PROPERTY MANAGER THE PERSON CHOSEN BY BORROWER AS THE REPLACEMENT PROPERTY MANAGER IS A QUALIFYING PROPERTY MANAGER, AND FURTHER AGREES THAT ANY SUCH WRITTEN REQUEST FOR CONSENT THAT INCLUDES EVIDENCE THAT THE REPLACEMENT PROPERTY MANAGER IS A QUALIFYING PROPERTY MANAGER, SHALL BE APPROVED OR DISAPPROVED WITHIN TEN (10) BUSINESS DAYS OF LENDER’S RECEIPT, PROVIDED SUCH WRITTEN REQUEST FROM BORROWER SHALL CONSPICUOUSLY STATE, IN LARGE BOLD TYPE, THAT “PURSUANT TO SECTION 5.2.1 OF THE LOAN AGREEMENT, A RESPONSE IS REQUIRED WITHIN TEN (10) BUSINESS DAYS OF LENDER’S RECEIPT OF THIS WRITTEN 52 -------------------------------------------------------------------------------- NOTICE”.  IF LENDER FAILS TO DISAPPROVE ANY SUCH MATTER WITHIN SUCH PERIOD, BORROWER SHALL PROVIDE A SECOND WRITTEN NOTICE REQUESTING APPROVAL, WHICH WRITTEN NOTICE SHALL CONSPICUOUSLY STATE, IN LARGE BOLD TYPE, THAT “PURSUANT TO SECTION 5.2.1 OF THE LOAN AGREEMENT, THE MATTER DESCRIBED HEREIN SHALL BE DEEMED APPROVED IF LENDER DOES NOT RESPOND TO THE CONTRARY WITHIN FIVE (5) BUSINESS DAYS OF LENDER’S RECEIPT OF THIS WRITTEN NOTICE”.  THEREAFTER, IF LENDER DOES NOT DISAPPROVE SUCH MATTER WITHIN SAID FIVE (5) BUSINESS DAY PERIOD SUCH MATTER SHALL BE DEEMED APPROVED. 5.2.2                     LIENS.  BORROWER SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER, CREATE, INCUR, ASSUME OR SUFFER TO EXIST ANY LIEN ON ANY PORTION OF THE PROPERTY OR PERMIT ANY SUCH ACTION TO BE TAKEN, EXCEPT: (I)                              PERMITTED ENCUMBRANCES; (II)                           LIENS CREATED BY OR PERMITTED PURSUANT TO THE LOAN DOCUMENTS; AND (III)                        LIENS FOR TAXES OR OTHER CHARGES NOT YET DELINQUENT (OR THAT BORROWER IS CONTESTING IN ACCORDANCE WITH THE TERMS OF SECTION 5.1.2 HEREOF). 5.2.3                     DISSOLUTION.  BORROWER SHALL NOT (A) ENGAGE IN ANY DISSOLUTION, LIQUIDATION OR CONSOLIDATION OR MERGER WITH OR INTO ANY OTHER BUSINESS ENTITY, (B) ENGAGE IN ANY BUSINESS ACTIVITY NOT RELATED TO THE OWNERSHIP AND OPERATION OF THE PROPERTY, (C) TRANSFER, LEASE OR SELL, IN ONE TRANSACTION OR ANY COMBINATION OF TRANSACTIONS, THE ASSETS OR ALL OR SUBSTANTIALLY ALL OF THE PROPERTIES OR ASSETS OF BORROWER EXCEPT TO THE EXTENT PERMITTED BY THE LOAN DOCUMENTS, (D) MODIFY, AMEND, WAIVE OR TERMINATE ITS ORGANIZATIONAL DOCUMENTS OR ITS QUALIFICATION AND GOOD STANDING IN ANY JURISDICTION IN WHICH IT IS ORGANIZED OR THE PROPERTY IS LOCATED OR (E) CAUSE THE PRINCIPAL TO (I) DISSOLVE, WIND UP OR LIQUIDATE OR TAKE ANY ACTION, OR OMIT TO TAKE AN ACTION, AS A RESULT OF WHICH THE PRINCIPAL WOULD BE DISSOLVED, WOUND UP OR LIQUIDATED IN WHOLE OR IN PART, OR (II) AMEND, MODIFY, WAIVE OR TERMINATE THE CERTIFICATE OF FORMATION OR OPERATING AGREEMENT OF THE PRINCIPAL, IN EACH CASE, WITHOUT OBTAINING THE PRIOR WRITTEN CONSENT OF LENDER OR LENDER’S DESIGNEE. 5.2.4                     CHANGE IN BUSINESS.  BORROWER SHALL NOT ENTER INTO ANY LINE OF BUSINESS OTHER THAN THE OWNERSHIP AND OPERATION OF THE PROPERTY, OR MAKE ANY MATERIAL CHANGE IN THE SCOPE OR NATURE OF ITS BUSINESS OBJECTIVES, PURPOSES OR OPERATIONS, OR UNDERTAKE OR PARTICIPATE IN ACTIVITIES OTHER THAN THE CONTINUANCE OF ITS PRESENT BUSINESS.  NOTHING CONTAINED IN THIS SECTION 5.2.4 IS INTENDED TO EXPAND THE RIGHTS OF BORROWER CONTAINED IN SECTION 5.2.10(D) HEREOF. 5.2.5                     DEBT CANCELLATION.  BORROWER SHALL NOT CANCEL OR OTHERWISE FORGIVE OR RELEASE ANY CLAIM OR DEBT (OTHER THAN TERMINATION OF LEASES IN ACCORDANCE HEREWITH) OWED TO BORROWER BY ANY PERSON, EXCEPT FOR ADEQUATE CONSIDERATION AND IN THE ORDINARY COURSE OF BORROWER’S BUSINESS. 5.2.6                     ZONING.  BORROWER SHALL NOT INITIATE OR CONSENT TO ANY ZONING RECLASSIFICATION OF ANY PORTION OF THE PROPERTY OR SEEK ANY VARIANCE UNDER ANY EXISTING ZONING ORDINANCE OR USE OR PERMIT THE USE OF ANY PORTION OF THE PROPERTY IN ANY MANNER THAT COULD RESULT 53 -------------------------------------------------------------------------------- IN SUCH USE BECOMING A NON-CONFORMING USE UNDER ANY ZONING ORDINANCE OR ANY OTHER APPLICABLE LAND USE LAW, RULE OR REGULATION, WITHOUT THE PRIOR CONSENT OF LENDER. 5.2.7                     INTENTIONALLY OMITTED. 5.2.8                     INTENTIONALLY OMITTED. 5.2.9                     ERISA.  (A) BORROWER SHALL NOT ENGAGE IN ANY TRANSACTION WHICH WOULD CAUSE ANY OBLIGATION, OR ACTION TAKEN OR TO BE TAKEN, HEREUNDER (OR THE EXERCISE BY LENDER OF ANY OF ITS RIGHTS UNDER THE NOTE, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS) TO BE A NON-EXEMPT (UNDER A STATUTORY OR ADMINISTRATIVE CLASS EXEMPTION) PROHIBITED TRANSACTION UNDER ERISA. (B)                                 DURING THE TERM OF THE LOAN OR ANY OBLIGATION OR RIGHT HEREUNDER, BORROWER SHALL NOT BE A PLAN AND NONE OF THE ASSETS OF BORROWER SHALL CONSTITUTE OF A PLAN WITHIN THE MEANING OF SECTION 29C.F.R. §2510.3-101, AS MODIFIED BY SECTION 3(42) OF ERISA.  BORROWER FURTHER COVENANTS AND AGREES TO DELIVER TO LENDER SUCH CERTIFICATIONS OR OTHER EVIDENCE FROM TIME TO TIME THROUGHOUT THE TERM OF THE LOAN, AS REQUESTED BY LENDER IN ITS SOLE DISCRETION, THAT (I) BORROWER IS NOT A PLAN, OR A “GOVERNMENTAL PLAN” WITHIN THE MEANING OF SECTION 3(32) OF ERISA; (II) BORROWER IS NOT SUBJECT TO ANY STATE STATUTE REGULATING INVESTMENTS OF, OR FIDUCIARY OBLIGATIONS WITH RESPECT TO, GOVERNMENTAL PLANS; AND (III) ONE OR MORE OF THE FOLLOWING CIRCUMSTANCES IS TRUE: (I)                              EQUITY INTERESTS IN BORROWER ARE PUBLICLY OFFERED SECURITIES, WITHIN THE MEANING OF 29 C.F.R. §2510.3-101(B)(2); (II)                           NONE OF THE ASSETS OF THE BORROWER ARE, WITH THE APPLICATION OF 29 C.F.R. §2510.3-101, AS MODIFIED BY SECTION 3(42) OF ERISA, REGARDED AS ASSETS OF ANY PLAN; OR (III)                        BORROWER QUALIFIES AS AN “OPERATING COMPANY” OR A “REAL ESTATE OPERATING COMPANY” WITHIN THE MEANING OF 29 C.F.R. §2510.3-101(C) OR (E). (C)                                  “PLAN” SHALL MEAN AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF ERISA) SUBJECT TO TITLE I OF ERISA OR A PLAN OR ANOTHER ARRANGEMENT (WITHIN THE MEANING OF SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND THE RELATED TREASURY DEPARTMENT REGULATIONS, INCLUDING TEMPORARY REGULATIONS), SUBJECT TO SECTION 4975 OF THE CODE. 5.2.10              TRANSFERS.  (A) BORROWER ACKNOWLEDGES THAT LENDER HAS EXAMINED AND RELIED ON THE EXPERIENCE OF BORROWER AND ITS STOCKHOLDERS, GENERAL PARTNERS, MEMBERS, PRINCIPALS AND (IF BORROWER IS A TRUST) BENEFICIAL OWNERS IN OWNING AND OPERATING PROPERTIES SUCH AS THE PROPERTY IN AGREEING TO MAKE THE LOAN, AND WILL CONTINUE TO RELY ON BORROWER’S OWNERSHIP OF THE PROPERTY AS A MEANS OF MAINTAINING THE VALUE OF THE PROPERTY AS SECURITY FOR REPAYMENT OF THE DEBT AND THE PERFORMANCE OF THE OTHER OBLIGATIONS.  BORROWER ACKNOWLEDGES THAT LENDER HAS A VALID INTEREST IN MAINTAINING THE VALUE OF THE PROPERTY SO AS TO ENSURE THAT, SHOULD BORROWER DEFAULT IN THE REPAYMENT OF THE DEBT OR THE PERFORMANCE OF THE OTHER OBLIGATIONS, LENDER CAN RECOVER THE DEBT BY A SALE OF THE PROPERTY. (B)                                 WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER, AND EXCEPT TO THE EXTENT OTHERWISE SET FORTH IN THIS SECTION 5.2.10, BORROWER SHALL NOT, AND SHALL NOT PERMIT ANY RESTRICTED PARTY DO ANY OF THE FOLLOWING (COLLECTIVELY, A “TRANSFER”): (I) SELL, CONVEY, MORTGAGE, GRANT, 54 -------------------------------------------------------------------------------- BARGAIN, ENCUMBER, PLEDGE, ASSIGN, GRANT OPTIONS WITH RESPECT TO, OR OTHERWISE TRANSFER OR DISPOSE OF (DIRECTLY OR INDIRECTLY, VOLUNTARILY OR INVOLUNTARILY, BY OPERATION OF LAW OR OTHERWISE, AND WHETHER OR NOT FOR CONSIDERATION OR OF RECORD) THE PROPERTY OR ANY PART THEREOF OR ANY LEGAL OR BENEFICIAL INTEREST THEREIN OR (II) PERMIT A SALE OR PLEDGE OF AN INTEREST IN ANY RESTRICTED PARTY, OTHER THAN PURSUANT TO LEASES OF SPACE IN THE IMPROVEMENTS TO TENANTS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.1.20. (C)                                  A TRANSFER SHALL INCLUDE, BUT NOT BE LIMITED TO, (I) AN INSTALLMENT SALES AGREEMENT WHEREIN BORROWER AGREES TO SELL THE PROPERTY OR ANY PART THEREOF FOR A PRICE TO BE PAID IN INSTALLMENTS; (II) AN AGREEMENT BY BORROWER LEASING ALL OR A SUBSTANTIAL PART OF THE PROPERTY FOR OTHER THAN ACTUAL OCCUPANCY BY A SPACE TENANT THEREUNDER OR A SALE, ASSIGNMENT OR OTHER TRANSFER OF, OR THE GRANT OF A SECURITY INTEREST IN, BORROWER’S RIGHT, TITLE AND INTEREST IN AND TO ANY LEASES OR ANY RENTS; (III) IF A RESTRICTED PARTY IS A CORPORATION, ANY MERGER, CONSOLIDATION OR SALE OR PLEDGE OF SUCH CORPORATION’S STOCK OR THE CREATION OR ISSUANCE OF NEW STOCK; (IV) IF A RESTRICTED PARTY IS A LIMITED OR GENERAL PARTNERSHIP OR JOINT VENTURE, ANY MERGER OR CONSOLIDATION OR THE CHANGE, REMOVAL, RESIGNATION OR ADDITION OF A GENERAL PARTNER OR THE SALE OR PLEDGE OF THE PARTNERSHIP INTEREST OF ANY GENERAL PARTNER OR ANY PROFITS OR PROCEEDS RELATING TO SUCH PARTNERSHIP INTEREST, OR THE SALE OR PLEDGE OF LIMITED PARTNERSHIP INTERESTS OR ANY PROFITS OR PROCEEDS RELATING TO SUCH LIMITED PARTNERSHIP INTEREST OR THE CREATION OR ISSUANCE OF NEW LIMITED PARTNERSHIP INTERESTS; (V) IF A RESTRICTED PARTY IS A LIMITED LIABILITY COMPANY, ANY MERGER OR CONSOLIDATION OR THE CHANGE, REMOVAL, RESIGNATION OR ADDITION OF A MANAGING MEMBER OR NON-MEMBER MANAGER (OR IF NO MANAGING MEMBER, ANY MEMBER) OR THE SALE OR PLEDGE OF THE MEMBERSHIP INTEREST OF A MANAGING MEMBER (OR IF NO MANAGING MEMBER, ANY MEMBER) OR ANY PROFITS OR PROCEEDS RELATING TO SUCH MEMBERSHIP INTEREST, OR THE SALE OR PLEDGE OF NON-MANAGING MEMBERSHIP INTERESTS OR THE CREATION OR ISSUANCE OF NEW NON-MANAGING MEMBERSHIP INTERESTS; (VI) IF A RESTRICTED PARTY IS A TRUST OR NOMINEE TRUST, ANY MERGER, CONSOLIDATION OR THE SALE OR PLEDGE OF THE LEGAL OR BENEFICIAL INTEREST IN A RESTRICTED PARTY OR THE CREATION OR ISSUANCE OF NEW LEGAL OR BENEFICIAL INTERESTS; OR (VII) THE REMOVAL OR THE RESIGNATION OF THE MANAGING AGENT (INCLUDING, WITHOUT LIMITATION, AN AFFILIATED MANAGER) OTHER THAN IN ACCORDANCE WITH SECTION 5.1.22 HEREOF. (D)                                 NOTWITHSTANDING THE PROVISIONS OF THIS SECTION 5.2.10, LENDER’S CONSENT SHALL NOT BE REQUIRED IN CONNECTION WITH (I) ONE OR A SERIES OF TRANSFERS, OF UP TO FORTY-NINE PERCENT (49%) OF THE STOCK IN A RESTRICTED PARTY, THE LIMITED PARTNERSHIP INTERESTS OR NON-MANAGING MEMBERSHIP INTERESTS (AS THE CASE MAY BE) IN A RESTRICTED PARTY (II) ANY TRANSFER TO BEHRINGER HARVARD FUNDS OR AN AFFILIATE OF BEHRINGER HARVARD FUNDS (III) ANY TRANSFER OF AN EQUITY INTEREST IN BEHRINGER HARVARD FUNDS OR ANY AFFILIATE THEREOF OR THE ISSUANCE OF ADDITIONAL EQUITY INTERESTS IN BEHRINGER HOLDINGS OR ANY AFFILIATE THEREOF OR (IV) ANY TRANSFER OF A DIRECT OR INDIRECT EQUITY INTEREST IN BORROWER TO A NEWLY FORMED ENTITY FORMED TO BE THE MEZZANINE BORROWER PURSUANT TO SECTION 5.2.10(H) BELOW; PROVIDED, HOWEVER, NO SUCH TRANSFER SHALL RESULT IN THE CHANGE OF CONTROL IN BORROWER, GUARANTOR OR PROPERTY MANAGER.  IF AFTER GIVING EFFECT TO ANY SUCH TRANSFER, MORE THAN FORTY-NINE PERCENT (49%) IN THE AGGREGATE OF DIRECT OR INDIRECT INTERESTS IN A RESTRICTED PARTY ARE OWNED BY ANY PERSON AND ITS AFFILIATES THAT OWNED LESS THAN FORTY-NINE PERCENT (49%) DIRECT OR INDIRECT INTEREST IN SUCH RESTRICTED PARTY AS OF THE CLOSING DATE, BORROWER SHALL, NO LESS THAN THIRTY (30) DAYS PRIOR TO THE EFFECTIVE DATE OF ANY SUCH TRANSFER, DELIVER TO LENDER AN ADDITIONAL INSOLVENCY OPINION ACCEPTABLE TO LENDER AND THE RATING AGENCIES.  IN ADDITION, AS A CONDITION TO ANY TRANSFER PURSUANT TO THIS SECTION 5.2.10(D), AT 55 -------------------------------------------------------------------------------- ALL TIMES, GUARANTOR MUST CONTINUE TO CONTROL BORROWER AND OWN, DIRECTLY OR INDIRECTLY, AT LEAST A 51% LEGAL AND BENEFICIAL INTEREST IN BORROWER. (E)                                  NO CONSENT TO ANY ASSUMPTION OF THE LOAN SHALL OCCUR ON OR BEFORE THE FIRST (1ST) ANNIVERSARY OF THE FIRST (1ST) PAYMENT DATE. THEREAFTER, LENDER’S CONSENT TO TRANSFERS OF THE PROPERTY SHALL NOT BE UNREASONABLY WITHHELD PROVIDED THAT LENDER RECEIVES SIXTY (60) DAYS PRIOR WRITTEN NOTICE OF SUCH TRANSFER AND NO EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, AND FURTHER PROVIDED THAT THE FOLLOWING ADDITIONAL REQUIREMENTS ARE SATISFIED: (I)                              BORROWER SHALL PAY LENDER A TRANSFER FEE EQUAL TO ONE-QUARTER OF ONE PERCENT (0.25%) OF THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN AT THE TIME OF THE FIRST SUCH TRANSFER AND A TRANSFER FEE EQUAL TO ONE-HALF OF ONE PERCENT (0.5%) OF THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN AT THE TIME OF EACH SUBSEQUENT TRANSFER (PROVIDED THAT NO TRANSFER FEE SHALL BE PAYABLE IN CONNECTION WITH ANY TRANSFER TO BEHRINGER HARVARD FUNDS OR AN AFFILIATE OF BEHRINGER HARVARD FUNDS); (II)                           BORROWER SHALL PAY ANY AND ALL REASONABLE OUT-OF-POCKET COSTS INCURRED IN CONNECTION WITH SUCH TRANSFER (INCLUDING, WITHOUT LIMITATION, LENDER’S COUNSEL FEES AND DISBURSEMENTS AND ALL RECORDING FEES, TITLE INSURANCE PREMIUMS AND MORTGAGE AND INTANGIBLE TAXES AND THE FEES AND EXPENSES OF THE RATING AGENCIES PURSUANT TO CLAUSE (X) BELOW); (III)                        THE PROPOSED TRANSFEREE (THE “TRANSFEREE”) OR TRANSFEREE’S PRINCIPALS MUST HAVE DEMONSTRATED EXPERTISE IN OWNING AND OPERATING PROPERTIES SIMILAR IN LOCATION, SIZE, CLASS AND OPERATION TO THE PROPERTY, WHICH EXPERTISE SHALL BE REASONABLY DETERMINED BY LENDER; (IV)                       TRANSFEREE AND TRANSFEREE’S PRINCIPALS SHALL, AS OF THE DATE OF SUCH TRANSFER, HAVE AN AGGREGATE NET WORTH AND LIQUIDITY REASONABLY ACCEPTABLE TO LENDER; (V)                          TRANSFEREE, TRANSFEREE’S PRINCIPALS AND ALL OTHER ENTITIES WHICH MAY BE OWNED OR CONTROLLED DIRECTLY OR INDIRECTLY BY TRANSFEREE’S PRINCIPALS (“RELATED ENTITIES”) MUST NOT HAVE BEEN PARTY TO ANY BANKRUPTCY PROCEEDINGS, VOLUNTARY OR INVOLUNTARY, MADE AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS OR TAKEN ADVANTAGE OF ANY INSOLVENCY ACT, OR ANY ACT FOR THE BENEFIT OF DEBTORS WITHIN SEVEN (7) YEARS PRIOR TO THE DATE OF THE PROPOSED TRANSFER; (VI)                       TRANSFEREE SHALL ASSUME ALL OF THE OBLIGATIONS OF BORROWER UNDER THE LOAN DOCUMENTS IN A MANNER SATISFACTORY TO LENDER IN ALL RESPECTS, INCLUDING, WITHOUT LIMITATION, BY ENTERING INTO AN ASSUMPTION AGREEMENT IN FORM AND SUBSTANCE SATISFACTORY TO LENDER; (VII)                    THERE SHALL BE NO MATERIAL LITIGATION OR REGULATORY ACTION PENDING OR THREATENED AGAINST TRANSFEREE, TRANSFEREE’S PRINCIPALS OR RELATED ENTITIES WHICH IS NOT REASONABLY ACCEPTABLE TO LENDER; 56 -------------------------------------------------------------------------------- (VIII)                 TRANSFEREE, TRANSFEREE’S PRINCIPALS AND RELATED ENTITIES SHALL NOT HAVE DEFAULTED UNDER ITS OR THEIR OBLIGATIONS WITH RESPECT TO ANY OTHER INDEBTEDNESS IN A MANNER WHICH IS NOT REASONABLY ACCEPTABLE TO LENDER; (IX)                         TRANSFEREE AND TRANSFEREE’S PRINCIPALS MUST BE ABLE TO SATISFY ALL THE REPRESENTATIONS AND COVENANTS SET FORTH IN SECTIONS 4.1.30 AND 5.2.9 OF THIS AGREEMENT, NO DEFAULT OR EVENT OF DEFAULT SHALL OTHERWISE OCCUR AS A RESULT OF SUCH TRANSFER, AND TRANSFEREE AND TRANSFEREE’S PRINCIPALS SHALL DELIVER (A) ALL ORGANIZATIONAL DOCUMENTATION REASONABLY REQUESTED BY LENDER, WHICH SHALL BE REASONABLY SATISFACTORY TO LENDER AND (B) ALL CERTIFICATES, AGREEMENTS AND COVENANTS REASONABLY REQUIRED BY LENDER; (X)                            TRANSFEREE SHALL BE APPROVED BY THE RATING AGENCIES SELECTED BY LENDER, WHICH APPROVAL, IF REQUIRED BY LENDER, SHALL TAKE THE FORM OF A CONFIRMATION IN WRITING FROM SUCH RATING AGENCIES TO THE EFFECT THAT SUCH TRANSFER WILL NOT RESULT IN A REQUALIFICATION, REDUCTION, DOWNGRADE OR WITHDRAWAL OF THE RATINGS IN EFFECT IMMEDIATELY PRIOR TO SUCH ASSUMPTION OR TRANSFER FOR THE SECURITIES OR ANY CLASS THEREOF ISSUED IN CONNECTION WITH A SECURITIZATION WHICH ARE THEN OUTSTANDING; (XI)                         BORROWER OR TRANSFEREE, AT ITS SOLE COST AND EXPENSE, SHALL DELIVER TO LENDER AN ADDITIONAL INSOLVENCY OPINION REFLECTING SUCH TRANSFER SATISFACTORY IN FORM AND SUBSTANCE TO LENDER; (XII)                      PRIOR TO ANY RELEASE OF GUARANTOR, ONE (1) OR MORE SUBSTITUTE GUARANTORS REASONABLY ACCEPTABLE TO LENDER SHALL HAVE ASSUMED ALL OF THE LIABILITIES AND OBLIGATIONS OF GUARANTOR UNDER THE GUARANTY AND ENVIRONMENTAL INDEMNITY AND ANY GUARANTY OF PAYMENT EXECUTED BY GUARANTOR OR EXECUTE A REPLACEMENT GUARANTY, ENVIRONMENTAL INDEMNITY AND GUARANTY OF PAYMENT REASONABLY SATISFACTORY TO LENDER (PROVIDED THAT WITH RESPECT TO A GUARANTY OF PAYMENT ANY SUBSTITUTE GUARANTOR SHALL BE SUBJECT TO THE NET WORTH REQUIREMENT SET FORTH IN SECTION 7.5.3 HEREOF UNLESS OTHERWISE AGREED TO BY LENDER IN ITS SOLE DISCRETION); (XIII)                   BORROWER OR TRANSFEREE SHALL DELIVER, AT ITS SOLE COST AND EXPENSE, AN ENDORSEMENT TO THE TITLE INSURANCE POLICY, AS MODIFIED BY THE ASSUMPTION AGREEMENT, AS A VALID FIRST LIEN ON THE PROPERTY AND NAMING THE TRANSFEREE AS OWNER OF THE PROPERTY, WHICH ENDORSEMENT SHALL INSURE THAT, AS OF THE DATE OF THE RECORDING OF THE ASSUMPTION AGREEMENT, THE PROPERTY SHALL NOT BE SUBJECT TO ANY ADDITIONAL EXCEPTIONS OR LIENS OTHER THAN THOSE CONTAINED IN THE TITLE POLICY ISSUED ON THE DATE HEREOF AND OTHER PERMITTED ENCUMBRANCES; AND (XIV)                  THE PROPERTY SHALL BE MANAGED BY A QUALIFYING PROPERTY MANAGER PURSUANT TO A REPLACEMENT MANAGEMENT AGREEMENT. Immediately upon a Transfer to such Transferee and the satisfaction of all of the above requirements, the named Borrower and Guarantor herein shall be released from all liability under 57 -------------------------------------------------------------------------------- this Agreement, the Note, the Mortgage and the other Loan Documents accruing after such Transfer.  The foregoing release shall be effective upon the date of such Transfer, but Lender agrees to provide written evidence thereof reasonably requested by Borrower. (F)                                    BORROWER, WITHOUT THE CONSENT OF LENDER, MAY GRANT EASEMENTS, RESTRICTIONS, COVENANTS, RESERVATIONS AND RIGHTS OF WAY IN THE ORDINARY COURSE OF BUSINESS FOR WATER AND SEWER LINES, TELEPHONE AND TELEGRAPH LINES, ELECTRIC LINES AND OTHER UTILITIES OR FOR OTHER SIMILAR PURPOSES, PROVIDED THAT NO TRANSFER, CONVEYANCE OR ENCUMBRANCE SHALL MATERIALLY IMPAIR THE UTILITY AND OPERATION OF THE PROPERTY OR MATERIALLY ADVERSELY AFFECT THE VALUE OF THE PROPERTY OR THE NET OPERATING INCOME OF THE PROPERTY.  IF BORROWER SHALL RECEIVE ANY CONSIDERATION IN CONNECTION WITH ANY OF SAID DESCRIBED TRANSFERS OR CONVEYANCES, BORROWER SHALL HAVE THE RIGHT TO USE ANY SUCH PROCEEDS IN CONNECTION WITH ANY ALTERATIONS PERFORMED IN CONNECTION THEREWITH, OR REQUIRED THEREBY.  IN CONNECTION WITH ANY TRANSFER, CONVEYANCE OR ENCUMBRANCE PERMITTED ABOVE, THE LENDER SHALL EXECUTE AND DELIVER ANY INSTRUMENT REASONABLY NECESSARY OR APPROPRIATE TO EVIDENCE ITS CONSENT TO SAID ACTION OR TO SUBORDINATE THE LIEN OF THE RELATED MORTGAGE TO SUCH EASEMENTS, RESTRICTIONS, COVENANTS, RESERVATIONS AND RIGHTS OF WAY OR OTHER SIMILAR GRANTS UPON RECEIPT BY THE LENDER OF: (A) A COPY OF THE INSTRUMENT OF TRANSFER; AND (B) AN OFFICER’S CERTIFICATE STATING WITH RESPECT TO ANY TRANSFER DESCRIBED ABOVE, THAT SUCH TRANSFER DOES NOT MATERIALLY IMPAIR THE UTILITY AND OPERATION OF THE PROPERTY OR MATERIALLY REDUCE THE VALUE OF THE PROPERTY OR THE NET OPERATING INCOME OF THE PROPERTY. (G)                                 LENDER SHALL NOT BE REQUIRED TO DEMONSTRATE ANY ACTUAL IMPAIRMENT OF ITS SECURITY OR ANY INCREASED RISK OF DEFAULT HEREUNDER IN ORDER TO DECLARE THE DEBT IMMEDIATELY DUE AND PAYABLE UPON BORROWER’S TRANSFER WITHOUT LENDER’S CONSENT.  THIS PROVISION SHALL APPLY TO EVERY TRANSFER REGARDLESS OF WHETHER VOLUNTARY OR NOT, OR WHETHER OR NOT LENDER HAS CONSENTED TO ANY PREVIOUS TRANSFER. (H)                                 NOTWITHSTANDING THE PROVISIONS OF THIS SECTION 5.2.10, LENDER’S CONSENT SHALL NOT BE REQUIRED IN CONNECTION WITH TRANSFERS IN THE NATURE OF A PLEDGE BY A MEZZANINE BORROWER (AS DEFINED BELOW) OF ITS DIRECT AND/OR INDIRECT EQUITY INTEREST IN BORROWER (BUT NOT OF ANY DIRECT INTEREST IN THE PROPERTY) TO A PERMITTED MEZZANINE LENDER (DEFINED BELOW) AS SECURITY FOR A LOAN TO SUCH MEZZANINE BORROWER (A “MEZZANINE LOAN”) PROVIDED THAT THE FOLLOWING TERMS AND CONDITIONS ARE SATISFIED: (I)                              NO EVENT OF DEFAULT SHALL THEN EXIST; (II)                           LENDER SHALL HAVE RECEIVED AT LEAST THIRTY (30) AND NO MORE THAN SIXTY (60) DAYS’ PRIOR WRITTEN NOTICE OF THE PROPOSED MEZZANINE LOAN; (III)                        THE AGGREGATE AMOUNT OF THE LOAN AND THE MEZZANINE LOAN (AS OF THE EFFECTIVE DATE OF THE MEZZANINE LOAN) SHALL NOT EXCEED EIGHTY PERCENT (80%) OF THE FAIR MARKET VALUE OF THE PROPERTY AS DETERMINED BY AN INDEPENDENT MAI APPRAISAL DATED NOT MORE THAN NINETY (90) DAYS PRIOR TO THE EFFECTIVE DATE OF THE MEZZANINE LOAN AND OTHERWISE ACCEPTABLE TO LENDER; (IV)                       THE AGGREGATE DEBT SERVICE COVERAGE RATIO OF THE LOAN AND SUCH MEZZANINE LOAN IS AT LEAST 1.20 TO 1.0; 58 -------------------------------------------------------------------------------- (V)                          BORROWER SHALL NOT BE OBLIGATED TO REPAY THE MEZZANINE LOAN NOR INCUR ANY OBLIGATION OR LIABILITY TO THE PERMITTED MEZZANINE LENDER OR ANY OTHER PERSON WITH RESPECT TO THE MEZZANINE LOAN, AND THE TERMS AND CONDITIONS OF THE MEZZANINE LOAN, THE COLLATERAL PLEDGED AS SECURITY THEREFOR, AND THE DOCUMENTS EVIDENCING THE MEZZANINE LOAN, SHALL BE SATISFACTORY TO LENDER; (VI)                       A NEW SINGLE PURPOSE ENTITY SHALL HAVE BEEN FORMED THAT WILL DIRECTLY OR INDIRECTLY OWN 100% OF THE EQUITY INTERESTS IN BORROWER AND PRINCIPAL (THE “MEZZANINE BORROWER”), THE ORGANIZATIONAL DOCUMENTS OF BORROWER, SUCH MEZZANINE BORROWER, AND THEIR RESPECTIVE CONSTITUENT OWNERS SHALL BE SATISFACTORY TO LENDER, AND BORROWER AND SUCH MEZZANINE BORROWER SHALL OTHERWISE SATISFY ALL APPLICABLE RATING AGENCY CRITERIA FOR SINGLE-PURPOSE ENTITIES, BANKRUPTCY REMOTENESS, AND MEZZANINE BORROWERS; (VII)                    THE PERMITTED MEZZANINE LENDER SHALL HAVE EXECUTED AND DELIVERED TO LENDER AN INTERCREDITOR AGREEMENT ACCEPTABLE TO LENDER IN ITS SOLE AND ABSOLUTE DISCRETION, PROVIDED THAT LENDER’S APPROVAL OF SUCH INTERCREDITOR AGREEMENT SHALL NOT BE UNREASONABLY WITHHELD, CONDITIONED OR DELAYED SO LONG AS IT IS OTHERWISE IN CONFORMANCE WITH RATING AGENCY APPROVED FORMS FOR INTERCREDITOR AGREEMENTS (EXCEPT THAT LENDER SHALL NOT BE REQUIRED TO USE ANY RATING AGENCY APPROVED FORM OF INTERCREDITOR AGREEMENT IF THE PERMITTED MEZZANINE LENDER IS AN AFFILIATE OF BORROWER); (VIII)                 BORROWER, PRINCIPAL AND GUARANTOR SHALL HAVE EXECUTED SUCH ADDITIONAL LOAN DOCUMENTS AND SUCH AMENDMENTS TO AND REAFFIRMATIONS OF THE EXISTING LOAN DOCUMENTS AS LENDER MAY REQUIRE, INCLUDING ENTERING INTO A CASH MANAGEMENT ARRANGEMENT WITH LENDER (OR MODIFYING ANY EXISTING CASH MANAGEMENT REQUIREMENT) TO PROVIDE FOR, AMONG OTHER THINGS, THE PAYMENT OF LENDER-APPROVED OPERATING EXPENSES AND CAPITAL EXPENSES PRIOR TO THE PAYMENT OF DEBT SERVICE ON THE MEZZANINE LOAN; (IX)                         THE LENDER UNDER THE MEZZANINE LOAN SHALL BE EITHER (A) ANY PERSON OR ENTITY SATISFYING THE DEFINITION OF “QUALIFIED TRANSFEREE” UNDER CLAUSE (II) OF THE DEFINITION OF “QUALIFIED TRANSFEREE” SET FORTH IN THE FORM INTERCREDITOR AGREEMENT ATTACHED AS APPENDIX VI TO THE STANDARD & POOR’S U.S. CMBS LEGAL AND STRUCTURAL FINANCE CRITERIA PUBLISHED MAY 1, 2003, BASED ON THE DEFAULT VALUES FOR MINIMUM TOTAL ASSETS AND CAPITAL/STATUTORY SURPLUS OR SHAREHOLDERS’ EQUITY INCLUDED IN THE DEFINITION OF “ELIGIBILITY REQUIREMENTS” IN SUCH PUBLICATION OR (B) A THIRD-PARTY INSTITUTIONAL LENDER, INDIVIDUAL INVESTOR OR AFFILIATE OF BORROWER THAT IN ANY SUCH CASE IS ACCEPTABLE TO LENDER (EITHER OF THE FOREGOING, A “PERMITTED MEZZANINE LENDER”); AND (X)                            BORROWER SHALL HAVE PAID OR REIMBURSED LENDER FOR ALL OF ITS COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES AND DISBURSEMENTS) INCURRED IN CONNECTION WITH THE FOREGOING. 59 -------------------------------------------------------------------------------- VI.                                 INSURANCE; CASUALTY; CONDEMNATION SECTION 6.1                                   INSURANCE.  (A)  BORROWER SHALL OBTAIN AND MAINTAIN, OR CAUSE TO BE MAINTAINED, INSURANCE FOR BORROWER AND THE PROPERTY PROVIDING AT LEAST THE FOLLOWING COVERAGES: (I)                              COMPREHENSIVE ALL RISK INSURANCE (“SPECIAL FORM”) INCLUDING, BUT NOT LIMITED TO, LOSS CAUSED BY ANY TYPE OF WINDSTORM OR HAIL ON THE IMPROVEMENTS AND THE PERSONAL PROPERTY, (A) IN AN AMOUNT EQUAL TO ONE HUNDRED PERCENT (100%) OF THE “FULL REPLACEMENT COST,” WHICH FOR PURPOSES OF THIS AGREEMENT SHALL MEAN ACTUAL REPLACEMENT VALUE (EXCLUSIVE OF COSTS OF EXCAVATIONS, FOUNDATIONS, UNDERGROUND UTILITIES AND FOOTINGS) WITH A WAIVER OF DEPRECIATION; (B) CONTAINING AN AGREED AMOUNT ENDORSEMENT WITH RESPECT TO THE IMPROVEMENTS AND PERSONAL PROPERTY WAIVING ALL CO-INSURANCE PROVISIONS; (C) PROVIDING FOR NO DEDUCTIBLE IN EXCESS OF TWENTY-FIVE THOUSAND AND NO/100 DOLLARS ($25,000) FOR ALL SUCH INSURANCE COVERAGE EXCLUDING WINDSTORM AND EARTHQUAKE AND (D)  CONTAINING AN “ORDINANCE OR LAW COVERAGE” OR “ENFORCEMENT” ENDORSEMENT IF ANY OF THE IMPROVEMENTS OR THE USE OF THE PROPERTY SHALL AT ANY TIME CONSTITUTE LEGAL NON-CONFORMING STRUCTURES OR USES.  IN ADDITION, BORROWER SHALL OBTAIN:  (Y) IF ANY PORTION OF THE IMPROVEMENTS IS CURRENTLY OR AT ANY TIME IN THE FUTURE LOCATED IN A “SPECIAL FLOOD HAZARD AREA,” AS DESIGNATED BY THE FEDERAL EMERGENCY MANAGEMENT AGENCY OR SUCH OTHER APPLICABLE FEDERAL AGENCY, FLOOD HAZARD INSURANCE IN AN AMOUNT EQUAL TO THE MAXIMUM AMOUNT AVAILABLE UNDER THE NATIONAL FLOOD INSURANCE PROGRAM AND IN ADDITION TO THE MAXIMUM AVAILABLE UNDER THE NATIONAL FLOOD PROGRAM, ANY EXCESS LIMITS AS DETERMINED BY LENDER IN ITS SOLE AND ABSOLUTE DISCRETION; AND (Z) EARTHQUAKE INSURANCE IN AMOUNTS AND IN FORM AND SUBSTANCE SATISFACTORY TO LENDER IN THE EVENT THE PROPERTY IS LOCATED IN AN AREA WITH A HIGH DEGREE OF SEISMIC ACTIVITY, WITH A PROBABLE MAXIMUM LOSS EXCEEDING TWENTY PERCENT (20%), PROVIDED THAT THE INSURANCE PURSUANT TO CLAUSES (Y) AND (Z) HEREOF SHALL BE ON TERMS CONSISTENT WITH THE COMPREHENSIVE ALL RISK INSURANCE POLICY REQUIRED UNDER THIS SUBSECTION (I). (II)                           BUSINESS INCOME INSURANCE (A) WITH LOSS PAYABLE TO LENDER; (B) COVERING ALL RISKS REQUIRED TO BE COVERED BY THE INSURANCE PROVIDED FOR IN SUBSECTION (I) ABOVE; (C) IN AN AMOUNT EQUAL TO ONE HUNDRED PERCENT (100%) OF THE PROJECTED GROSS REVENUES FROM THE OPERATION OF THE PROPERTY (AS REDUCED TO REFLECT EXPENSES NOT INCURRED DURING A PERIOD OF RESTORATION) FOR A PERIOD OF AT LEAST EIGHTEEN (18) MONTHS AFTER THE DATE OF THE CASUALTY; AND (D) CONTAINING AN EXTENDED PERIOD OF INDEMNITY ENDORSEMENT WHICH PROVIDES THAT AFTER THE PHYSICAL LOSS TO THE IMPROVEMENTS AND PERSONAL PROPERTY HAS BEEN REPAIRED, THE CONTINUED LOSS OF INCOME WILL BE INSURED UNTIL SUCH INCOME EITHER RETURNS TO THE SAME LEVEL IT WAS AT PRIOR TO THE LOSS, OR THE EXPIRATION OF TWELVE (12) MONTHS FROM THE DATE THAT THE PROPERTY IS REPAIRED OR REPLACED AND OPERATIONS ARE RESUMED, WHICHEVER FIRST OCCURS, AND NOTWITHSTANDING THAT THE POLICY MAY EXPIRE PRIOR TO THE END OF SUCH PERIOD.  THE AMOUNT OF SUCH BUSINESS INCOME INSURANCE SHALL BE DETERMINED PRIOR TO THE CLOSING DATE AND AT LEAST ONCE EACH YEAR THEREAFTER BASED ON BORROWER’S REASONABLE ESTIMATE OF THE GROSS INCOME FROM THE PROPERTY FOR THE SUCCEEDING EIGHTEEN (18) MONTH PERIOD.  ALL PROCEEDS PAYABLE TO LENDER PURSUANT TO THIS 60 -------------------------------------------------------------------------------- SUBSECTION SHALL BE HELD BY LENDER AND SHALL BE APPLIED TO THE OBLIGATIONS SECURED BY THE LOAN DOCUMENTS FROM TIME TO TIME DUE AND PAYABLE HEREUNDER AND UNDER THE NOTE; PROVIDED, HOWEVER, THAT NOTHING HEREIN CONTAINED SHALL BE DEEMED TO RELIEVE BORROWER OF ITS OBLIGATIONS TO PAY THE OBLIGATIONS SECURED BY THE LOAN DOCUMENTS ON THE RESPECTIVE DATES OF PAYMENT PROVIDED FOR IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS EXCEPT TO THE EXTENT SUCH AMOUNTS ARE ACTUALLY PAID OUT OF THE PROCEEDS OF SUCH BUSINESS INCOME INSURANCE; (III)                        AT ALL TIMES DURING WHICH STRUCTURAL CONSTRUCTION, REPAIRS OR ALTERATIONS ARE BEING MADE WITH RESPECT TO THE IMPROVEMENTS, AND ONLY IF THE PROPERTY COVERAGE FORM DOES NOT OTHERWISE APPLY, (A) OWNER’S CONTINGENT OR PROTECTIVE LIABILITY INSURANCE, OTHERWISE KNOWN AS OWNER CONTRACTOR’S PROTECTIVE LIABILITY, COVERING CLAIMS NOT COVERED BY OR UNDER THE TERMS OR PROVISIONS OF THE ABOVE MENTIONED COMMERCIAL GENERAL LIABILITY INSURANCE POLICY; AND (B) THE INSURANCE PROVIDED FOR IN SUBSECTION (I) ABOVE WRITTEN IN A SO-CALLED BUILDER’S RISK COMPLETED VALUE FORM (1) ON A NON-REPORTING BASIS, (2) AGAINST ALL RISKS INSURED AGAINST PURSUANT TO SUBSECTION (I) ABOVE, (3) INCLUDING PERMISSION TO OCCUPY THE PROPERTY, AND (4) WITH AN AGREED AMOUNT ENDORSEMENT WAIVING CO-INSURANCE PROVISIONS; (IV)                       COMPREHENSIVE BOILER AND MACHINERY INSURANCE, IF APPLICABLE, IN AMOUNTS AS SHALL BE REASONABLY REQUIRED BY LENDER ON TERMS CONSISTENT WITH THE COMMERCIAL PROPERTY INSURANCE POLICY REQUIRED UNDER SUBSECTION (I) ABOVE; (V)                          COMMERCIAL GENERAL LIABILITY INSURANCE AGAINST CLAIMS FOR PERSONAL INJURY, BODILY INJURY, DEATH OR PROPERTY DAMAGE OCCURRING UPON, IN OR ABOUT THE PROPERTY, SUCH INSURANCE (A) TO BE ON THE SO-CALLED “OCCURRENCE” FORM WITH A COMBINED LIMIT OF NOT LESS THAN TWO MILLION AND 00/100 DOLLARS ($2,000,000.00) IN THE AGGREGATE AND ONE MILLION AND 00/100 DOLLARS ($1,000,000.00) PER OCCURRENCE; (B) TO CONTINUE AT NOT LESS THAN THE AFORESAID LIMIT UNTIL REQUIRED TO BE CHANGED BY LENDER IN WRITING BY REASON OF CHANGED ECONOMIC CONDITIONS MAKING SUCH PROTECTION INADEQUATE AND (C) TO COVER AT LEAST THE FOLLOWING HAZARDS:  (1) PREMISES AND OPERATIONS; (2) PRODUCTS AND COMPLETED OPERATIONS ON AN “IF ANY” BASIS; (3) INDEPENDENT CONTRACTORS; (4) BLANKET CONTRACTUAL LIABILITY FOR ALL WRITTEN CONTRACTS AND (5) CONTRACTUAL LIABILITY COVERING THE INDEMNITIES CONTAINED IN ARTICLE 9 OF THE MORTGAGE TO THE EXTENT THE SAME IS AVAILABLE; (VI)                       AUTOMOBILE LIABILITY COVERAGE FOR ALL OWNED AND NON-OWNED VEHICLES, INCLUDING RENTED AND LEASED VEHICLES CONTAINING MINIMUM LIMITS PER OCCURRENCE OF ONE MILLION DOLLARS AND 00/100 DOLLARS ($1,000,000.00); (VII)                    WORKER’S COMPENSATION AND EMPLOYEE’S LIABILITY SUBJECT TO THE WORKER’S COMPENSATION LAWS OF THE APPLICABLE STATE; (VIII)                 UMBRELLA AND EXCESS LIABILITY INSURANCE IN AN AMOUNT NOT LESS THAN FIFTY MILLION AND 00/100 DOLLARS ($50,000,000.00) PER OCCURRENCE ON TERMS CONSISTENT WITH THE COMMERCIAL GENERAL LIABILITY INSURANCE POLICY REQUIRED UNDER 61 -------------------------------------------------------------------------------- SUBSECTION (V) ABOVE, INCLUDING, BUT NOT LIMITED TO, SUPPLEMENTAL COVERAGE FOR EMPLOYER LIABILITY AND AUTOMOBILE LIABILITY, WHICH UMBRELLA LIABILITY COVERAGE SHALL APPLY IN EXCESS OF THE AUTOMOBILE LIABILITY COVERAGE IN CLAUSE (VI) ABOVE; (IX)                         THE INSURANCE REQUIRED UNDER SECTION 6.1(A)(I) AND (II) ABOVE SHALL COVER PERILS OF TERRORISM AND ACTS OF TERRORISM AND BORROWER SHALL MAINTAIN INSURANCE FOR LOSS RESULTING FROM PERILS AND ACTS OF TERRORISM ON TERMS (INCLUDING AMOUNTS) CONSISTENT WITH THOSE REQUIRED UNDER SECTION 6.1(A)(I) AND (II) ABOVE AT ALL TIMES DURING THE TERM OF THE LOAN; PROVIDED, HOWEVER, BORROWER SHALL NOT BE REQUIRED TO PAY ANNUAL PREMIUMS IN EXCESS OF THE REQUIRED AMOUNT FOR THE COVERAGE REQUIRED UNDER THIS SECTION 6.1.1(A)(IX).  IF FULL COVERAGE FOR ACTS OF TERRORISM SATISFYING SUCH REQUIREMENTS IS NOT AVAILABLE FOR AN AMOUNT EQUAL TO OR LESS THAN THE REQUIRED AMOUNT (BUT COVERAGE FOR ACTS OF TERRORISM NOT FULLY SATISFYING SUCH REQUIREMENTS IS AVAILABLE), BORROWER SHALL BE REQUIRED TO SPEND AN AMOUNT EQUAL TO THE REQUIRED AMOUNT FOR COVERAGE FOR ACTS OF TERRORISM, AND THE SCOPE, FORM, DEDUCTIBLE AND CARRIER WITH RESPECT TO SUCH COVERAGE SHALL BE ACCEPTABLE TO LENDER IN ITS SOLE DISCRETION; AND (X)                            UPON SIXTY (60) DAYS WRITTEN NOTICE, SUCH OTHER REASONABLE INSURANCE AND IN SUCH REASONABLE AMOUNTS AS LENDER FROM TIME TO TIME MAY REASONABLY REQUEST AGAINST SUCH OTHER INSURABLE HAZARDS WHICH AT THE TIME ARE COMMONLY INSURED AGAINST FOR PROPERTY SIMILAR TO THE PROPERTY LOCATED IN OR AROUND THE REGION IN WHICH THE PROPERTY IS LOCATED. (B)                                 ALL INSURANCE PROVIDED FOR IN SECTION 6.1(A) SHALL BE OBTAINED UNDER VALID AND ENFORCEABLE POLICIES (COLLECTIVELY, THE “POLICIES” OR IN THE SINGULAR, THE “POLICY”), AND SHALL BE SUBJECT TO THE APPROVAL OF LENDER AS TO INSURANCE COMPANIES, AMOUNTS, DEDUCTIBLES, LOSS PAYEES AND INSUREDS.  THE POLICIES SHALL BE ISSUED BY FINANCIALLY SOUND AND RESPONSIBLE INSURANCE COMPANIES AUTHORIZED TO DO BUSINESS IN THE STATE AND HAVING A CLAIMS PAYING ABILITY RATING OF “A” OR BETTER (AND THE EQUIVALENT THEREOF) BY AT LEAST TWO (2) OF THE RATING AGENCIES RATING THE SECURITIES (ONE (1) OF WHICH SHALL BE S&P IF THEY ARE RATING THE SECURITIES AND ONE (1) OF WHICH WILL BE MOODY’S IF THEY ARE RATING THE SECURITIES), OR IF ONLY ONE (1) RATING AGENCY IS RATING THE SECURITIES, THEN ONLY BY SUCH RATING AGENCY.  THE POLICIES DESCRIBED IN SECTION 6.1 (OTHER THAN THOSE STRICTLY LIMITED TO LIABILITY PROTECTION) SHALL DESIGNATE LENDER AS LOSS PAYEE.  NOT LESS THAN THIRTY (30) DAYS PRIOR TO THE EXPIRATION DATES OF THE POLICIES THERETOFORE FURNISHED TO LENDER, CERTIFICATES OF INSURANCE EVIDENCING THE POLICIES ACCOMPANIED BY EVIDENCE SATISFACTORY TO LENDER OF PAYMENT OF THE PREMIUMS DUE THEREUNDER (THE “INSURANCE PREMIUMS”), SHALL BE DELIVERED BY BORROWER TO LENDER. (C)                                  ANY BLANKET INSURANCE POLICY SHALL SPECIFICALLY ALLOCATE TO THE PROPERTY THE AMOUNT OF COVERAGE FROM TIME TO TIME REQUIRED HEREUNDER AND SHALL OTHERWISE PROVIDE THE SAME PROTECTION AS WOULD A SEPARATE POLICY INSURING ONLY THE PROPERTY IN COMPLIANCE WITH THE PROVISIONS OF SECTION 6.1(A). (D)                                 ALL POLICIES OF INSURANCE PROVIDED FOR OR CONTEMPLATED BY SECTION 6.1(A), EXCEPT FOR THE POLICY REFERENCED IN SECTION 6.1(A)(VII) OF THIS AGREEMENT, SHALL NAME BORROWER, OR THE TENANT, AS THE INSURED AND LENDER AS THE ADDITIONAL INSURED, AS ITS INTERESTS MAY APPEAR, 62 -------------------------------------------------------------------------------- AND IN THE CASE OF PROPERTY DAMAGE, BOILER AND MACHINERY, FLOOD AND EARTHQUAKE INSURANCE, SHALL CONTAIN A SO-CALLED NEW YORK STANDARD NON-CONTRIBUTING MORTGAGEE CLAUSE IN FAVOR OF LENDER PROVIDING THAT THE LOSS THEREUNDER SHALL BE PAYABLE TO LENDER. (E)                                  ALL POLICIES OF INSURANCE PROVIDED FOR IN SECTION 6.1(A) SHALL CONTAIN CLAUSES OR ENDORSEMENTS TO THE EFFECT THAT: (I)                              NO ACT OR NEGLIGENCE OF BORROWER, OR ANYONE ACTING FOR BORROWER, OR OF ANY TENANT OR OTHER OCCUPANT, OR FAILURE TO COMPLY WITH THE PROVISIONS OF ANY POLICY, WHICH MIGHT OTHERWISE RESULT IN A FORFEITURE OF THE INSURANCE OR ANY PART THEREOF, SHALL IN ANY WAY AFFECT THE VALIDITY OR ENFORCEABILITY OF THE INSURANCE INSOFAR AS LENDER IS CONCERNED; (II)                           THE POLICY SHALL NOT BE MATERIALLY CHANGED (OTHER THAN TO INCREASE THE COVERAGE PROVIDED THEREBY) OR CANCELED WITHOUT AT LEAST THIRTY (30) DAYS WRITTEN NOTICE TO LENDER AND ANY OTHER PARTY NAMED THEREIN AS AN ADDITIONAL INSURED; (III)                        THE ISSUERS THEREOF SHALL GIVE WRITTEN NOTICE TO LENDER IF THE POLICY HAS NOT BEEN RENEWED FIFTEEN (15) DAYS PRIOR TO ITS EXPIRATION; AND (IV)                       LENDER SHALL NOT BE LIABLE FOR ANY INSURANCE PREMIUMS THEREON OR SUBJECT TO ANY ASSESSMENTS THEREUNDER. (F)                                    IF AT ANY TIME LENDER IS NOT IN RECEIPT OF WRITTEN EVIDENCE THAT ALL INSURANCE REQUIRED HEREUNDER IS IN FULL FORCE AND EFFECT, LENDER SHALL HAVE THE RIGHT, WITHOUT NOTICE TO BORROWER, TO TAKE SUCH ACTION AS LENDER DEEMS NECESSARY TO PROTECT ITS INTEREST IN THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE OBTAINING OF SUCH INSURANCE COVERAGE AS LENDER IN ITS REASONABLE DISCRETION DEEMS APPROPRIATE AFTER THREE (3) BUSINESS DAYS NOTICE TO BORROWER IF PRIOR TO THE DATE UPON WHICH ANY SUCH COVERAGE WILL LAPSE OR AT ANY TIME LENDER DEEMS NECESSARY (REGARDLESS OF PRIOR NOTICE TO BORROWER) TO AVOID THE LAPSE OF ANY SUCH COVERAGE.  ALL PREMIUMS INCURRED BY LENDER IN CONNECTION WITH SUCH ACTION OR IN OBTAINING SUCH INSURANCE AND KEEPING IT IN EFFECT SHALL BE PAID BY BORROWER TO LENDER UPON DEMAND AND, UNTIL PAID, SHALL BE SECURED BY THE MORTGAGE AND SHALL BEAR INTEREST AT THE DEFAULT RATE.  IF BORROWER FAILS IN SO INSURING THE PROPERTY OR IN SO ASSIGNING AND DELIVERING THE POLICY, LENDER MAY, AT ITS OPTION, OBTAIN SUCH INSURANCE USING SUCH CARRIERS AND AGENCIES AS LENDER SHALL ELECT FROM YEAR TO YEAR AND PAY THE PREMIUMS THEREFOR, AND BORROWER WILL REIMBURSE LENDER FOR ANY PREMIUM SO PAID, WITH INTEREST THEREON AS STATED IN THE NOTE FROM THE TIME OF PAYMENT, ON DEMAND, AND THE AMOUNT SO OWING TO LENDER SHALL BE SECURED BY THE MORTGAGE.  THE INSURANCE OBTAINED BY LENDER MAY, BUT NEED NOT, PROTECT BORROWER’S INTEREST AND THE COVERAGE THAT LENDER PURCHASES MAY NOT PAY ANY CLAIM THAT BORROWER MAKES OR ANY CLAIM THAT IS MADE AGAINST BORROWER IN CONNECTION WITH THE PROPERTY. SECTION 6.2                                   CASUALTY.  IF THE PROPERTY SHALL BE DAMAGED OR DESTROYED, IN WHOLE OR IN PART, BY FIRE OR OTHER CASUALTY (A “CASUALTY”), BORROWER (A) SHALL GIVE TO LENDER PROMPT NOTICE OF SUCH DAMAGE REASONABLY ESTIMATED BY BORROWER TO COST MORE THAN TWO HUNDRED THOUSAND DOLLARS ($200,000.00) TO REPAIR, AND (B) SHALL PROMPTLY COMMENCE AND DILIGENTLY PROSECUTE THE COMPLETION OF THE RESTORATION OF THE PROPERTY PURSUANT TO SECTION 6.4 HEREOF AS NEARLY AS POSSIBLE TO THE CONDITION THE PROPERTY WAS IN IMMEDIATELY PRIOR TO SUCH CASUALTY, WITH 63 -------------------------------------------------------------------------------- SUCH ALTERATIONS AS MAY BE REASONABLY APPROVED BY LENDER AND OTHERWISE IN ACCORDANCE WITH SECTION 6.4 HEREOF.  BORROWER SHALL PAY, OR CAUSE TO BE PAID, ALL COSTS OF SUCH RESTORATION WHETHER OR NOT SUCH COSTS ARE COVERED BY INSURANCE.  LENDER MAY, BUT SHALL NOT BE OBLIGATED TO MAKE PROOF OF LOSS IF NOT MADE PROMPTLY BY BORROWER.  IN ADDITION, LENDER MAY PARTICIPATE IN ANY SETTLEMENT DISCUSSIONS WITH ANY INSURANCE COMPANIES (AND SHALL APPROVE THE FINAL SETTLEMENT, WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED) WITH RESPECT TO ANY CASUALTY IN WHICH THE NET PROCEEDS OR THE COSTS OF COMPLETING THE RESTORATION ARE EQUAL TO OR GREATER THAN TWO HUNDRED THOUSAND AND 00/100 DOLLARS ($200,000.00) AND BORROWER SHALL DELIVER TO LENDER ALL INSTRUMENTS REQUIRED BY LENDER TO PERMIT SUCH PARTICIPATION. SECTION 6.3                                   CONDEMNATION.  BORROWER SHALL PROMPTLY GIVE LENDER NOTICE OF THE ACTUAL OR THREATENED COMMENCEMENT OF ANY PROCEEDING FOR THE CONDEMNATION OF THE PROPERTY UPON OBTAINING INFORMATION OF SUCH PROCEEDING AND SHALL DELIVER TO LENDER COPIES OF ANY AND ALL PAPERS SERVED IN CONNECTION WITH SUCH PROCEEDINGS.  LENDER MAY PARTICIPATE IN ANY SUCH PROCEEDINGS IF AN EVENT OF DEFAULT EXISTS OR IF THE AMOUNT OF THE AWARD EXCEEDS THREE PERCENT 3% OF THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN, AND BORROWER SHALL FROM TIME TO TIME DELIVER TO LENDER ALL INSTRUMENTS REQUESTED BY IT TO PERMIT SUCH PARTICIPATION.  BORROWER SHALL, AT ITS EXPENSE, DILIGENTLY PROSECUTE ANY SUCH PROCEEDINGS, AND SHALL CONSULT WITH LENDER, ITS ATTORNEYS AND EXPERTS, AND COOPERATE WITH THEM IN THE CARRYING ON OR DEFENSE OF ANY SUCH PROCEEDINGS.  NOTWITHSTANDING ANY TAKING BY ANY PUBLIC OR QUASI-PUBLIC AUTHORITY THROUGH CONDEMNATION OR OTHERWISE (INCLUDING, BUT NOT LIMITED TO, ANY TRANSFER MADE IN LIEU OF OR IN ANTICIPATION OF THE EXERCISE OF SUCH TAKING), BORROWER SHALL CONTINUE TO PAY THE DEBT AT THE TIME AND IN THE MANNER PROVIDED FOR ITS PAYMENT IN THE NOTE AND IN THIS AGREEMENT AND THE DEBT SHALL NOT BE REDUCED UNTIL ANY AWARD SHALL HAVE BEEN ACTUALLY RECEIVED AND APPLIED BY LENDER, AFTER THE DEDUCTION OF EXPENSES OF COLLECTION, TO THE REDUCTION OR DISCHARGE OF THE DEBT.  LENDER SHALL NOT BE LIMITED TO THE INTEREST PAID ON THE AWARD BY THE CONDEMNING AUTHORITY BUT SHALL BE ENTITLED TO RECEIVE OUT OF THE AWARD INTEREST AT THE RATE OR RATES PROVIDED HEREIN OR IN THE NOTE.  IF THE PROPERTY OR ANY PORTION THEREOF IS TAKEN BY A CONDEMNING AUTHORITY, BORROWER SHALL PROMPTLY COMMENCE AND DILIGENTLY PROSECUTE THE RESTORATION OF THE PROPERTY OR ANY PORTION THEREOF PURSUANT TO SECTION 6.4 HEREOF AND OTHERWISE COMPLY WITH THE PROVISIONS OF SECTION 6.4 HEREOF.  IF THE PROPERTY IS SOLD, THROUGH FORECLOSURE OR OTHERWISE, PRIOR TO THE RECEIPT BY LENDER OF THE AWARD, LENDER SHALL HAVE THE RIGHT, WHETHER OR NOT A DEFICIENCY JUDGMENT ON THE NOTE SHALL HAVE BEEN SOUGHT, RECOVERED OR DENIED, TO RECEIVE THE AWARD, OR A PORTION THEREOF SUFFICIENT TO PAY THE DEBT. SECTION 6.4                                   RESTORATION.  THE FOLLOWING PROVISIONS SHALL APPLY IN CONNECTION WITH THE RESTORATION OF THE PROPERTY: (A)                                  IF THE NET PROCEEDS SHALL BE LESS THAN THE RELEVANT RESTORATION THRESHOLD AND THE COSTS OF COMPLETING THE RESTORATION SHALL BE LESS THAN THE RELEVANT RESTORATION THRESHOLD, THE NET PROCEEDS WILL BE DISBURSED BY LENDER TO BORROWER UPON RECEIPT, PROVIDED THAT ALL OF THE CONDITIONS SET FORTH IN SECTION 6.4(B)(I) BELOW ARE MET AND BORROWER DELIVERS TO LENDER A WRITTEN UNDERTAKING TO EXPEDITIOUSLY COMMENCE AND TO SATISFACTORILY COMPLETE WITH DUE DILIGENCE THE RESTORATION IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. (B)                                 IF THE NET PROCEEDS ARE EQUAL TO OR GREATER THAN THE RELEVANT RESTORATION THRESHOLD OR THE COSTS OF COMPLETING THE RESTORATION IS EQUAL TO OR GREATER THAN THE RELEVANT RESTORATION THRESHOLD, THEN IN EITHER CASE LENDER SHALL MAKE THE NET PROCEEDS AVAILABLE FOR THE 64 -------------------------------------------------------------------------------- RESTORATION IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 6.4(B).  THE TERM “NET PROCEEDS” FOR PURPOSES OF THIS SECTION 6.4 SHALL MEAN:  (X) THE NET AMOUNT OF ALL INSURANCE PROCEEDS RECEIVED BY LENDER PURSUANT TO SECTION 6.1 (A)(I), (IV), (IX) AND (X) AS A RESULT OF SUCH DAMAGE OR DESTRUCTION, AFTER DEDUCTION OF ITS REASONABLE COSTS AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE COUNSEL FEES), IF ANY, IN COLLECTING SAME (“INSURANCE PROCEEDS”), OR (Y) THE NET AMOUNT OF THE AWARD, AFTER DEDUCTION OF ITS REASONABLE COSTS AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE COUNSEL FEES), IF ANY, IN COLLECTING SAME (“CONDEMNATION PROCEEDS”), WHICHEVER THE CASE MAY BE. (I)                              THE NET PROCEEDS SHALL BE MADE AVAILABLE TO BORROWER FOR RESTORATION PROVIDED THAT EACH OF THE FOLLOWING CONDITIONS ARE MET: (A)      NO EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING; (B)        (1) IN THE EVENT THE NET PROCEEDS ARE INSURANCE PROCEEDS, LESS THAN TWENTY-FIVE PERCENT (25%) OF THE TOTAL FLOOR AREA OF THE IMPROVEMENTS ON THE PROPERTY HAS BEEN DAMAGED, DESTROYED OR RENDERED UNUSABLE AS A RESULT OF SUCH CASUALTY OR (2) IN THE EVENT THE NET PROCEEDS ARE CONDEMNATION PROCEEDS, LESS THAN TEN PERCENT (10%) OF THE LAND CONSTITUTING THE PROPERTY IS TAKEN, AND SUCH LAND IS LOCATED ALONG THE PERIMETER OR PERIPHERY OF THE PROPERTY, AND NO PORTION OF THE IMPROVEMENTS IS LOCATED ON SUCH LAND; (C)        LEASES DEMISING IN THE AGGREGATE A PERCENTAGE AMOUNT EQUAL TO OR GREATER THAN THE RENTABLE SPACE PERCENTAGE OF THE TOTAL RENTABLE SPACE IN THE PROPERTY WHICH HAS BEEN DEMISED UNDER EXECUTED AND DELIVERED LEASES IN EFFECT AS OF THE DATE OF THE OCCURRENCE OF SUCH CASUALTY OR CONDEMNATION, WHICHEVER THE CASE MAY BE, SHALL REMAIN IN FULL FORCE AND EFFECT DURING AND AFTER THE COMPLETION OF THE RESTORATION, NOTWITHSTANDING THE OCCURRENCE OF ANY SUCH CASUALTY OR CONDEMNATION, WHICHEVER THE CASE MAY BE, AND BORROWER AND/OR TENANT, AS APPLICABLE UNDER THE RESPECTIVE LEASE, WILL MAKE ALL NECESSARY REPAIRS AND RESTORATIONS THERETO AT THEIR SOLE COST AND EXPENSE.  THE TERM “RENTABLE SPACE PERCENTAGE” SHALL MEAN A PERCENTAGE AMOUNT EQUAL TO SIXTY-FIVE PERCENT (65%); (D)       BORROWER SHALL COMMENCE THE RESTORATION AS SOON AS REASONABLY PRACTICABLE (BUT IN NO EVENT LATER THAN ONE HUNDRED TWENTY (120) DAYS AFTER SUCH CASUALTY OR CONDEMNATION OR OBTAINING BUILDING PERMITS, WHICHEVER THE CASE MAY BE, OCCURS) AND SHALL DILIGENTLY PURSUE THE SAME TO SATISFACTORY COMPLETION; (E)         LENDER SHALL BE SATISFIED THAT ANY OPERATING DEFICITS, INCLUDING ALL SCHEDULED PAYMENTS OF PRINCIPAL AND INTEREST UNDER THE NOTE, WHICH WILL BE INCURRED WITH RESPECT TO THE PROPERTY AS A RESULT OF THE OCCURRENCE OF ANY SUCH CASUALTY OR CONDEMNATION, WHICHEVER THE CASE MAY BE, WILL BE COVERED OUT OF (1) THE NET PROCEEDS, (2) THE INSURANCE COVERAGE REFERRED 65 -------------------------------------------------------------------------------- TO IN SECTION 6.1(A)(II) HEREOF, IF APPLICABLE, OR (3) BY OTHER FUNDS OF BORROWER; (F)         LENDER SHALL BE SATISFIED THAT THE RESTORATION WILL BE COMPLETED ON OR BEFORE THE EARLIEST TO OCCUR OF (1) SIX (6) MONTHS PRIOR TO THE MATURITY DATE, (2) THE EARLIEST DATE REQUIRED FOR SUCH COMPLETION UNDER THE TERMS OF ANY LEASES, (3) SUCH TIME AS MAY BE REQUIRED UNDER ALL APPLICABLE LEGAL REQUIREMENTS IN ORDER TO REPAIR AND RESTORE THE PROPERTY TO THE CONDITION IT WAS IN IMMEDIATELY PRIOR TO SUCH CASUALTY OR TO AS NEARLY AS POSSIBLE THE CONDITION IT WAS IN IMMEDIATELY PRIOR TO SUCH CONDEMNATION, AS APPLICABLE, OR (4) THE EXPIRATION OF THE INSURANCE COVERAGE REFERRED TO IN SECTION 6.1(A)(II) HEREOF; (G)        THE PROPERTY AND THE USE THEREOF AFTER THE RESTORATION WILL BE IN COMPLIANCE WITH AND PERMITTED UNDER ALL APPLICABLE LEGAL REQUIREMENTS; (H)       THE RESTORATION SHALL BE DONE AND COMPLETED BY BORROWER IN AN EXPEDITIOUS AND DILIGENT FASHION AND IN COMPLIANCE WITH ALL APPLICABLE LEGAL REQUIREMENTS; (I)            SUCH CASUALTY OR CONDEMNATION, AS APPLICABLE, DOES NOT RESULT IN THE LOSS OF ACCESS TO THE PROPERTY OR THE IMPROVEMENTS; (J)           THE DEBT SERVICE COVERAGE RATIO FOR THE PROPERTY, AFTER GIVING EFFECT TO THE RESTORATION, SHALL BE EQUAL TO OR GREATER THAN 1.30 TO 1.0; (K)       BORROWER SHALL DELIVER, OR CAUSE TO BE DELIVERED, TO LENDER A SIGNED DETAILED BUDGET APPROVED IN WRITING BY BORROWER’S ARCHITECT OR ENGINEER STATING THE ENTIRE COST OF COMPLETING THE RESTORATION, WHICH BUDGET SHALL BE APPROVED BY LENDER, WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD; AND (L)         THE NET PROCEEDS TOGETHER WITH ANY CASH OR CASH EQUIVALENT DEPOSITED BY BORROWER WITH LENDER ARE SUFFICIENT IN LENDER’S DISCRETION TO COVER THE COST OF THE RESTORATION. (II)                           THE NET PROCEEDS SHALL BE HELD BY LENDER IN AN INTEREST-BEARING ACCOUNT AND, UNTIL DISBURSED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 6.4(B), SHALL CONSTITUTE ADDITIONAL SECURITY FOR THE DEBT AND OTHER OBLIGATIONS UNDER THE LOAN DOCUMENTS.  THE NET PROCEEDS SHALL BE DISBURSED BY LENDER TO, OR AS DIRECTED BY, BORROWER FROM TIME TO TIME DURING THE COURSE OF THE RESTORATION, UPON RECEIPT OF EVIDENCE SATISFACTORY TO LENDER THAT (A) ALL MATERIALS INSTALLED AND WORK AND LABOR PERFORMED (EXCEPT TO THE EXTENT THAT THEY ARE TO BE PAID FOR OUT OF THE REQUESTED DISBURSEMENT) IN CONNECTION WITH THE RESTORATION HAVE BEEN PAID FOR IN FULL OR WILL BE PAID IN FULL UPON SUCH DISBURSEMENT, AND (B) THERE EXIST NO NOTICES OF PENDENCY, STOP ORDERS, MECHANIC’S OR MATERIALMAN’S LIENS OR NOTICES OF INTENTION TO FILE SAME, OR ANY OTHER LIENS OR ENCUMBRANCES OF ANY NATURE WHATSOEVER ON THE PROPERTY WHICH HAVE NOT EITHER BEEN FULLY BONDED TO 66 -------------------------------------------------------------------------------- THE SATISFACTION OF LENDER AND DISCHARGED OF RECORD OR IN THE ALTERNATIVE FULLY INSURED TO THE SATISFACTION OF LENDER BY THE TITLE COMPANY ISSUING THE TITLE INSURANCE POLICY. (III)                        ALL PLANS AND SPECIFICATIONS REQUIRED IN CONNECTION WITH THE RESTORATION, THE COST OF WHICH EXCEEDS THE RELEVANT RESTORATION THRESHOLD, SHALL BE SUBJECT TO PRIOR REVIEW AND ACCEPTANCE IN ALL RESPECTS BY LENDER AND BY AN INDEPENDENT CONSULTING ENGINEER SELECTED BY LENDER (THE “CASUALTY CONSULTANT”), SUCH REVIEW AND ACCEPTANCE NOT TO BE UNREASONABLY WITHHELD OR DELAYED.  LENDER SHALL HAVE THE USE OF THE PLANS AND SPECIFICATIONS AND ALL PERMITS, LICENSES AND APPROVALS REQUIRED OR OBTAINED IN CONNECTION WITH THE RESTORATION.  THE IDENTITY OF THE CONTRACTORS, SUBCONTRACTORS AND MATERIALMEN ENGAGED IN THE RESTORATION, AS WELL AS THE CONTRACTS UNDER WHICH THEY HAVE BEEN ENGAGED, SHALL BE SUBJECT TO PRIOR REVIEW AND ACCEPTANCE BY LENDER AND THE CASUALTY CONSULTANT, SUCH REVIEW AND ACCEPTANCE NOT TO BE UNREASONABLY WITHHELD OR DELAYED.  ALL COSTS AND EXPENSES INCURRED BY LENDER IN CONNECTION WITH MAKING THE NET PROCEEDS AVAILABLE FOR THE RESTORATION INCLUDING, WITHOUT LIMITATION, REASONABLE COUNSEL FEES AND DISBURSEMENTS AND THE CASUALTY CONSULTANT’S FEES, SHALL BE PAID BY BORROWER. (IV)                       IN NO EVENT SHALL LENDER BE OBLIGATED TO MAKE DISBURSEMENTS OF THE NET PROCEEDS IN EXCESS OF AN AMOUNT EQUAL TO THE COSTS ACTUALLY INCURRED FROM TIME TO TIME FOR WORK IN PLACE AS PART OF THE RESTORATION, AS CERTIFIED BY THE CASUALTY CONSULTANT, MINUS THE CASUALTY RETAINAGE.  THE TERM “CASUALTY RETAINAGE” SHALL MEAN AN AMOUNT EQUAL TO TEN PERCENT (10%) OF THE COSTS ACTUALLY INCURRED FOR WORK IN PLACE AS PART OF THE RESTORATION, AS CERTIFIED BY THE CASUALTY CONSULTANT, UNTIL THE RESTORATION HAS BEEN COMPLETED.  THE CASUALTY RETAINAGE SHALL IN NO EVENT, AND NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH ABOVE IN THIS SECTION 6.4(B), BE LESS THAN THE AMOUNT ACTUALLY HELD BACK BY BORROWER FROM CONTRACTORS, SUBCONTRACTORS AND MATERIALMEN ENGAGED IN THE RESTORATION.  THE CASUALTY RETAINAGE SHALL NOT BE RELEASED UNTIL THE CASUALTY CONSULTANT CERTIFIES TO LENDER THAT THE RESTORATION HAS BEEN COMPLETED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 6.4(B) AND THAT ALL APPROVALS NECESSARY FOR THE RE-OCCUPANCY AND USE OF THE PROPERTY HAVE BEEN OBTAINED FROM ALL APPROPRIATE GOVERNMENTAL AND QUASI-GOVERNMENTAL AUTHORITIES, AND LENDER RECEIVES EVIDENCE SATISFACTORY TO LENDER THAT THE COSTS OF THE RESTORATION HAVE BEEN PAID IN FULL OR WILL BE PAID IN FULL OUT OF THE CASUALTY RETAINAGE; PROVIDED, HOWEVER, THAT LENDER WILL RELEASE THE PORTION OF THE CASUALTY RETAINAGE BEING HELD WITH RESPECT TO ANY CONTRACTOR, SUBCONTRACTOR OR MATERIALMAN ENGAGED IN THE RESTORATION AS OF THE DATE UPON WHICH THE CASUALTY CONSULTANT CERTIFIES TO LENDER THAT THE CONTRACTOR, SUBCONTRACTOR OR MATERIALMAN HAS SATISFACTORILY COMPLETED ALL WORK AND HAS SUPPLIED ALL MATERIALS IN ACCORDANCE WITH THE PROVISIONS OF THE CONTRACTOR’S, SUBCONTRACTOR’S OR MATERIALMAN’S CONTRACT, THE CONTRACTOR, SUBCONTRACTOR OR MATERIALMAN DELIVERS THE LIEN WAIVERS AND EVIDENCE OF PAYMENT IN FULL OF ALL SUMS DUE TO THE CONTRACTOR, SUBCONTRACTOR OR MATERIALMAN AS MAY BE REASONABLY REQUESTED BY LENDER OR BY THE TITLE COMPANY ISSUING THE TITLE INSURANCE POLICY, AND LENDER RECEIVES AN ENDORSEMENT TO THE TITLE INSURANCE POLICY INSURING THE 67 -------------------------------------------------------------------------------- CONTINUED PRIORITY OF THE LIEN OF THE MORTGAGE AND EVIDENCE OF PAYMENT OF ANY PREMIUM PAYABLE FOR SUCH ENDORSEMENT.  IF REQUIRED BY LENDER, THE RELEASE OF ANY SUCH PORTION OF THE CASUALTY RETAINAGE SHALL BE APPROVED BY THE SURETY COMPANY, IF ANY, WHICH HAS ISSUED A PAYMENT OR PERFORMANCE BOND WITH RESPECT TO THE CONTRACTOR, SUBCONTRACTOR OR MATERIALMAN. (V)                          LENDER SHALL NOT BE OBLIGATED TO MAKE DISBURSEMENTS OF THE NET PROCEEDS MORE FREQUENTLY THAN ONCE EVERY CALENDAR MONTH. (VI)                       IF AT ANY TIME THE NET PROCEEDS OR THE UNDISBURSED BALANCE THEREOF SHALL NOT, IN THE REASONABLE OPINION OF LENDER IN CONSULTATION WITH THE CASUALTY CONSULTANT, BE SUFFICIENT TO PAY IN FULL THE BALANCE OF THE COSTS WHICH ARE ESTIMATED BY THE CASUALTY CONSULTANT TO BE INCURRED IN CONNECTION WITH THE COMPLETION OF THE RESTORATION, BORROWER SHALL DEPOSIT THE DEFICIENCY (THE “NET PROCEEDS DEFICIENCY”) WITH LENDER BEFORE ANY FURTHER DISBURSEMENT OF THE NET PROCEEDS SHALL BE MADE.  THE NET PROCEEDS DEFICIENCY DEPOSITED WITH LENDER SHALL BE HELD BY LENDER AND SHALL BE DISBURSED FOR COSTS ACTUALLY INCURRED IN CONNECTION WITH THE RESTORATION ON THE SAME CONDITIONS APPLICABLE TO THE DISBURSEMENT OF THE NET PROCEEDS, AND UNTIL SO DISBURSED PURSUANT TO THIS SECTION 6.4(B) SHALL CONSTITUTE ADDITIONAL SECURITY FOR THE DEBT AND OTHER OBLIGATIONS UNDER THE LOAN DOCUMENTS. (VII)                    THE EXCESS, IF ANY, OF THE NET PROCEEDS (AND THE REMAINING BALANCE, IF ANY, OF THE NET PROCEEDS DEFICIENCY) DEPOSITED WITH LENDER AFTER THE CASUALTY CONSULTANT CERTIFIES TO LENDER THAT THE RESTORATION HAS BEEN COMPLETED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 6.4(B), AND THE RECEIPT BY LENDER OF EVIDENCE SATISFACTORY TO LENDER THAT ALL COSTS INCURRED IN CONNECTION WITH THE RESTORATION HAVE BEEN PAID IN FULL, SHALL BE REMITTED BY LENDER TO BORROWER, PROVIDED NO EVENT OF DEFAULT SHALL HAVE OCCURRED AND SHALL BE CONTINUING UNDER THE NOTE, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. (C)                                  ALL NET PROCEEDS NOT REQUIRED (I) TO BE MADE AVAILABLE FOR THE RESTORATION OR (II) TO BE RETURNED TO BORROWER AS EXCESS NET PROCEEDS PURSUANT TO SECTION 6.4(B)(VII) MAY BE RETAINED AND APPLIED BY LENDER TOWARD THE PAYMENT OF THE DEBT WHETHER OR NOT THEN DUE AND PAYABLE IN SUCH ORDER, PRIORITY AND PROPORTIONS AS LENDER IN ITS SOLE DISCRETION SHALL DEEM PROPER (PROVIDED NO EVENT OF DEFAULT EXISTS, BORROWER SHALL NOT BE REQUIRED TO PAY ANY PREPAYMENT CONSIDERATION IN CONNECTION WITH SUCH PAYMENT), OR, AT THE DISCRETION OF LENDER, THE SAME MAY BE PAID, EITHER IN WHOLE OR IN PART, TO BORROWER FOR SUCH PURPOSES AS LENDER SHALL DESIGNATE, IN ITS DISCRETION. (D)                                 IN THE EVENT OF FORECLOSURE OF THE MORTGAGE, OR OTHER TRANSFER OF TITLE TO THE PROPERTY IN EXTINGUISHMENT IN WHOLE OR IN PART OF THE DEBT ALL RIGHT, TITLE AND INTEREST OF BORROWER IN AND TO THE POLICIES THAT ARE NOT BLANKET POLICIES THEN IN FORCE CONCERNING THE PROPERTY AND ALL PROCEEDS PAYABLE THEREUNDER SHALL THEREUPON VEST IN THE PURCHASER AT SUCH FORECLOSURE OR LENDER OR OTHER TRANSFEREE IN THE EVENT OF SUCH OTHER TRANSFER OF TITLE. 68 -------------------------------------------------------------------------------- (E)                                  LENDER SHALL WITH REASONABLE PROMPTNESS FOLLOWING ANY CASUALTY OR CONDEMNATION NOTIFY BORROWER WHETHER OR NOT NET PROCEEDS ARE REQUIRED TO BE MADE AVAILABLE TO BORROWER FOR RESTORATION PURSUANT TO THIS SECTION 6.4.  ALL NET PROCEEDS NOT REQUIRED TO BE MADE AVAILABLE FOR RESTORATION SHALL BE RETAINED AND APPLIED BY LENDER IN ACCORDANCE WITH SECTION 2.4.2 HEREOF (A “NET PROCEEDS PREPAYMENT”).  IF SUCH NET PROCEEDS PREPAYMENT SHALL BE EQUAL TO OR GREATER THAN FIVE MILLION AND 00/100 DOLLARS ($5,000,000.00), BORROWER SHALL HAVE THE RIGHT TO ELECT TO PREPAY THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN (LESS THE NET PROCEEDS PREPAYMENT) FOR THE PROPERTY (A “CASUALTY/CONDEMNATION PREPAYMENT”) WITHOUT PAYMENT OF THE YIELD MAINTENANCE PREMIUM UPON SATISFACTION OF THE FOLLOWING CONDITIONS:  (I) WITHIN THIRTY (30) DAYS FOLLOWING THE DATE OF THE NET PROCEEDS PREPAYMENT, BORROWER SHALL PROVIDE LENDER WITH WRITTEN NOTICE OF BORROWER’S INTENTION TO PAY THE NOTE IN FULL (WITH A CREDIT FOR THE AMOUNT OF THE NET PROCEEDS PREPAYMENT), (II) BORROWER SHALL PREPAY THE NOTE IN SUCH AMOUNT ON OR BEFORE THE THIRD (3RD) PAYMENT DATE OCCURRING FOLLOWING THE DATE OF THE NET PROCEEDS PREPAYMENT (PROVIDED THAT IF ANY SUCH PREPAYMENT IS MADE ON A DATE OTHER THAN A PAYMENT DATE, BORROWER SHALL PAY LENDER ALL INTEREST WHICH WOULD HAVE ACCRUED ON THE AMOUNT BEING PREPAID THROUGH THE NEXT PAYMENT DATE), AND (III) NO EVENT OF DEFAULT SHALL EXIST ON THE DATE OF SUCH CASUALTY/CONDEMNATION PREPAYMENT.  NOTWITHSTANDING ANYTHING IN SECTION 6.2 OR SECTION 6.3 TO THE CONTRARY, BORROWER SHALL HAVE NO OBLIGATION TO COMMENCE RESTORATION OF THE PROPERTY UPON DELIVERY OF THE WRITTEN NOTICE SET FORTH IN CLAUSE (I) OF THE PRECEDING SENTENCE (UNLESS BORROWER SUBSEQUENTLY SHALL FAIL TO SATISFY THE REQUIREMENT OF CLAUSE (II) OF THE PRECEDING SENTENCE). VII.                            RESERVE FUNDS SECTION 7.1                                   REQUIRED REPAIRS.  BORROWER SHALL PERFORM THE REPAIRS AT THE PROPERTY, AS MORE PARTICULARLY SET FORTH ON SCHEDULE III HERETO (SUCH REPAIRS HEREINAFTER REFERRED TO AS “REQUIRED REPAIRS”).  BORROWER SHALL COMPLETE THE REQUIRED REPAIRS ON OR BEFORE THE REQUIRED DEADLINE FOR EACH REPAIR AS SET FORTH ON SCHEDULE III.  IT SHALL BE AN EVENT OF DEFAULT UNDER THIS AGREEMENT IF BORROWER DOES NOT COMPLETE THE REQUIRED REPAIRS AT THE PROPERTY BY THE REQUIRED DEADLINE FOR EACH REPAIR AS SET FORTH ON SCHEDULE III; PROVIDED, HOWEVER, THAT LENDER IN ITS SOLE AND ABSOLUTE DISCRETION MAY AGREE TO EXTEND THE TIME TO COMPLETE THE REQUIRED REPAIRS IF BORROWER, DESPITE ITS GOOD FAITH EFFORTS, HAS FAILED TO COMPLETE THE REQUIRED REPAIRS WITHIN SUCH PERIOD.  THE PARTIES HEREBY ACKNOWLEDGE AND AGREE THAT AS OF THE DATE HEREOF, AGL INVESTMENTS NO. 2 LIMITED PARTNERSHIP L.L.L.P., BORROWER, LENDER AND LANDAMERICA PARTNERS TITLE COMPANY HAVE ENTERED INTO THAT CERTAIN ESCROW INSTRUCTIONS FOR ORDER NO.: GF#2711000981 (THE “ESCROW AGREEMENT”) WITH RESPECT TO CERTAIN COSTS AND EXPENSES RELATED TO THE COMPLETION OF THE REQUIRED REPAIRS.  BORROWER (I) SHALL OBSERVE AND PERFORM THE OBLIGATIONS IMPOSED UPON IT UNDER THE ESCROW AGREEMENT IN A COMMERCIALLY REASONABLE MANNER; (II) SHALL ENFORCE THE TERMS, COVENANTS AND CONDITIONS CONTAINED IN THE ESCROW AGREEMENT UPON THE PART OF THE OTHER PARTIES THERETO TO BE OBSERVED OR PERFORMED IN A COMMERCIALLY REASONABLE MANNER, (III) SHALL NOT AMEND, MODIFY OR TERMINATE THE ESCROW AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER AND (IV) SHALL NOT SUBMIT ANY DISBURSEMENT REQUEST (AS DEFINED IN THE ESCROW AGREEMENT) PURSUANT TO SECTION 3 OF THE ESCROW AGREEMENT UNLESS SUCH DISBURSEMENT REQUEST HAS BEEN APPROVED BY LENDER, SUCH APPROVAL NOT TO BE UNREASONABLY WITHHELD, CONDITIONED OR DELAYED.  IF BORROWER SUBMITS TO LENDER FOR ITS APPROVAL A DISBURSEMENT REQUEST, TOGETHER WITH ALL SUPPORTING DOCUMENTATION REASONABLY REQUIRED BY LENDER, AND LENDER DOES NOT RESPOND TO BORROWER WITH ITS APPROVAL, DENIAL OR REQUEST FOR ADDITIONAL INFORMATION WITHIN FIVE (5) BUSINESS DAYS OF LENDER’S RECEIPT OF SAID DISBURSEMENT REQUEST, SUCH DISBURSEMENT REQUEST SHALL BE DEEMED APPROVED BY 69 -------------------------------------------------------------------------------- LENDER PROVIDED THAT THE SUBMISSION TO LENDER IS MARKED IN BOLD LETTERING WITH THE FOLLOWING:  “LENDER’S RESPONSE IS REQUIRED WITHIN 5 BUSINESS DAYS OF RECEIPT OF THIS NOTICE PURSUANT TO THE TERMS OF SECTION 7.1 OF A LOAN AGREEMENT BETWEEN THE UNDERSIGNED AND LENDER”. SECTION 7.2                                   TAX AND INSURANCE ESCROW FUND.  BORROWER SHALL PAY TO LENDER ON EACH PAYMENT DATE (A) ONE-TWELFTH (1/12) OF THE TAXES THAT LENDER ESTIMATES WILL BE PAYABLE DURING THE NEXT ENSUING TWELVE (12) MONTHS IN ORDER TO ACCUMULATE WITH LENDER SUFFICIENT FUNDS TO PAY ALL SUCH TAXES AT LEAST THIRTY (30) DAYS PRIOR TO THEIR RESPECTIVE DUE DATES, AND (B) ONE-TWELFTH (1/12) OF THE INSURANCE PREMIUMS THAT LENDER ESTIMATES WILL BE PAYABLE FOR THE RENEWAL OF THE COVERAGE AFFORDED BY THE POLICIES UPON THE EXPIRATION THEREOF IN ORDER TO ACCUMULATE WITH LENDER SUFFICIENT FUNDS TO PAY ALL SUCH INSURANCE PREMIUMS AT LEAST THIRTY (30) DAYS PRIOR TO THE EXPIRATION OF THE POLICIES (SAID AMOUNTS IN (A) AND (B) ABOVE ARE HEREINAFTER CALLED THE “TAX AND INSURANCE ESCROW FUND”).  THE TAX AND INSURANCE ESCROW FUND AND THE MONTHLY DEBT SERVICE PAYMENT AMOUNT, SHALL BE ADDED TOGETHER AND SHALL BE PAID AS AN AGGREGATE SUM BY BORROWER TO LENDER.  LENDER WILL APPLY THE TAX AND INSURANCE ESCROW FUND TO PAYMENTS OF TAXES AND INSURANCE PREMIUMS REQUIRED TO BE MADE BY BORROWER PURSUANT TO THIS AGREEMENT AND UNDER THE MORTGAGE.  IN MAKING ANY PAYMENT RELATING TO THE TAX AND INSURANCE ESCROW FUND, LENDER MAY DO SO ACCORDING TO ANY BILL, STATEMENT OR ESTIMATE PROCURED FROM THE APPROPRIATE PUBLIC OFFICE (WITH RESPECT TO TAXES) OR INSURER OR AGENT (WITH RESPECT TO INSURANCE PREMIUMS) OR FROM BORROWER WITHOUT INQUIRY INTO THE ACCURACY OF SUCH BILL, STATEMENT OR ESTIMATE OR INTO THE VALIDITY OF ANY TAX, ASSESSMENT, SALE, FORFEITURE, TAX LIEN OR TITLE OR CLAIM THEREOF, PROVIDED, HOWEVER, LENDER SHALL USE REASONABLE EFFORTS TO PAY SUCH REAL PROPERTY TAXES SUFFICIENTLY EARLY TO OBTAIN THE BENEFIT OF ANY AVAILABLE DISCOUNTS OF WHICH IT HAS KNOWLEDGE.  IF THE AMOUNT OF THE TAX AND INSURANCE ESCROW FUND SHALL EXCEED THE AMOUNTS DUE FOR TAXES AND INSURANCE PREMIUMS, LENDER SHALL, IN ITS SOLE DISCRETION, RETURN ANY EXCESS TO BORROWER OR CREDIT SUCH EXCESS AGAINST FUTURE PAYMENTS TO BE MADE TO THE TAX AND INSURANCE ESCROW FUND.  ANY AMOUNT REMAINING IN THE TAX AND INSURANCE ESCROW FUND AFTER THE DEBT HAS BEEN PAID IN FULL SHALL BE RETURNED TO BORROWER.  IN ALLOCATING SUCH EXCESS, LENDER MAY DEAL WITH THE PERSON SHOWN ON THE RECORDS OF LENDER TO BE THE OWNER OF THE PROPERTY.  IF AT ANY TIME LENDER REASONABLY DETERMINES THAT THE TAX AND INSURANCE ESCROW FUND IS NOT OR WILL NOT BE SUFFICIENT TO PAY TAXES AND INSURANCE PREMIUMS BY THE DATES SET FORTH ABOVE, LENDER SHALL NOTIFY BORROWER OF SUCH DETERMINATION AND BORROWER SHALL INCREASE ITS MONTHLY PAYMENTS TO LENDER BY THE AMOUNT THAT LENDER ESTIMATES IS SUFFICIENT TO MAKE UP THE DEFICIENCY AT LEAST THIRTY (30) DAYS PRIOR TO DELINQUENCY OF THE TAXES OR INSURANCE PREMIUMS.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, BORROWER SHALL NOT BE REQUIRED TO MAKE MONTHLY DEPOSITS WITH RESPECT TO THE TAX AND INSURANCE ESCROW FUND PROVIDED THAT: (I) NO EVENT OF DEFAULT HAS OCCURRED, AND (II) BORROWER PAYS ALL TAXES PRIOR TO DELINQUENCY AND INSURANCE PREMIUMS AS THE SAME BECOME DUE AND PAYABLE AND DELIVERS TO LENDER EVIDENCE OF SUCH PAYMENT PURSUANT TO SECTION 5.1.2 HEREOF. SECTION 7.3                                   REPLACEMENTS AND REPLACEMENT RESERVE. 7.3.1                     REPLACEMENT RESERVE FUND.  BORROWER SHALL PAY TO LENDER ON EACH PAYMENT DATE THE SUM OF $9,360.50 (THE “REPLACEMENT RESERVE MONTHLY DEPOSIT”) FOR REPLACEMENTS AND REPAIRS REQUIRED TO BE MADE TO THE PROPERTY DURING THE CALENDAR YEAR (COLLECTIVELY, THE “REPLACEMENTS”).  AMOUNTS SO DEPOSITED SHALL HEREINAFTER BE REFERRED TO AS BORROWER’S “REPLACEMENT RESERVE FUND” AND THE ACCOUNT IN WHICH SUCH AMOUNTS ARE HELD SHALL 70 -------------------------------------------------------------------------------- HEREINAFTER BE REFERRED TO AS BORROWER’S “REPLACEMENT RESERVE ACCOUNT”.  LENDER MAY REASSESS ITS ESTIMATE OF THE AMOUNT NECESSARY FOR THE REPLACEMENT RESERVE FUND FROM TIME TO TIME, AND MAY INCREASE THE MONTHLY AMOUNTS REQUIRED TO BE DEPOSITED INTO THE REPLACEMENT RESERVE FUND UPON THIRTY (30) DAYS NOTICE TO BORROWER IF LENDER DETERMINES IN ITS COMMERCIALLY REASONABLE DISCRETION BASED UPON UPDATED ENGINEERING REPORTS OR INSPECTIONS OF THE PROPERTY THAT AN INCREASE IS NECESSARY TO MAINTAIN THE PROPER MAINTENANCE AND OPERATION OF THE PROPERTY.  ANY AMOUNT HELD IN THE REPLACEMENT RESERVE ACCOUNT AND ALLOCATED FOR THE PROPERTY SHALL BE RETAINED BY LENDER AND CREDITED TOWARD THE FUTURE REPLACEMENT RESERVES MONTHLY DEPOSITS REQUIRED BY LENDER HEREUNDER IN THE EVENT THE PROPERTY IS RELEASED FROM THE LIEN OF THE MORTGAGE IN ACCORDANCE WITH SECTION 2.5 HEREOF.  NOTWITHSTANDING THE FOREGOING, BORROWER’S OBLIGATION TO MAKE MONTHLY DEPOSITS TO THE REPLACEMENT RESERVE FUND SHALL BE SUSPENDED PROVIDED THAT NO EVENT OF DEFAULT OCCURS. 7.3.2                     DISBURSEMENTS FROM REPLACEMENT RESERVE ACCOUNT.  (A)  LENDER SHALL MAKE DISBURSEMENTS FROM THE REPLACEMENT RESERVE ACCOUNT TO PAY BORROWER ONLY FOR THE COSTS OF THE REPLACEMENTS.  LENDER SHALL NOT BE OBLIGATED TO MAKE DISBURSEMENTS FROM THE REPLACEMENT RESERVE ACCOUNT TO REIMBURSE BORROWER FOR THE COSTS OF ROUTINE MAINTENANCE TO THE PROPERTY, REPLACEMENTS OF INVENTORY OR FOR COSTS WHICH ARE TO BE REIMBURSED FROM THE ROLLOVER RESERVE FUND. (B)                                 LENDER SHALL, UPON WRITTEN REQUEST FROM BORROWER AND SATISFACTION OF THE REQUIREMENTS SET FORTH IN THIS SECTION 7.3.2, DISBURSE TO BORROWER AMOUNTS FROM THE REPLACEMENT RESERVE ACCOUNT NECESSARY TO PAY FOR THE ACTUAL APPROVED COSTS OF REPLACEMENTS OR TO REIMBURSE BORROWER THEREFOR, UPON COMPLETION OF SUCH REPLACEMENTS (OR, UPON PARTIAL COMPLETION IN THE CASE OF REPLACEMENTS MADE PURSUANT TO SECTION 7.3.2(E)) AS DETERMINED BY LENDER.  IN NO EVENT SHALL LENDER BE OBLIGATED TO DISBURSE FUNDS FROM THE REPLACEMENT RESERVE ACCOUNT IF A DEFAULT OR AN EVENT OF DEFAULT EXISTS. (C)                                  EACH REQUEST FOR DISBURSEMENT FROM THE REPLACEMENT RESERVE ACCOUNT SHALL BE IN A FORM SPECIFIED OR APPROVED BY LENDER AND SHALL SPECIFY (I) THE SPECIFIC REPLACEMENTS FOR WHICH THE DISBURSEMENT IS REQUESTED, (II) THE QUANTITY AND PRICE OF EACH ITEM PURCHASED, IF THE REPLACEMENT INCLUDES THE PURCHASE OR REPLACEMENT OF SPECIFIC ITEMS, (III) THE PRICE OF ALL MATERIALS (GROUPED BY TYPE OR CATEGORY) USED IN ANY REPLACEMENT OTHER THAN THE PURCHASE OR REPLACEMENT OF SPECIFIC ITEMS, AND (IV) THE COST OF ALL CONTRACTED LABOR OR OTHER SERVICES APPLICABLE TO EACH REPLACEMENT FOR WHICH SUCH REQUEST FOR DISBURSEMENT IS MADE.  WITH EACH REQUEST BORROWER SHALL CERTIFY THAT ALL REPLACEMENTS HAVE BEEN MADE IN ACCORDANCE WITH ALL APPLICABLE LEGAL REQUIREMENTS OF ANY GOVERNMENTAL AUTHORITY HAVING JURISDICTION OVER THE PROPERTY AND, UNLESS LENDER HAS AGREED TO ISSUE JOINT CHECKS AS DESCRIBED BELOW, EACH REQUEST SHALL INCLUDE EVIDENCE OF PAYMENT OF ALL SUCH AMOUNTS.  EACH REQUEST FOR DISBURSEMENT SHALL INCLUDE COPIES OF INVOICES FOR ALL ITEMS OR MATERIALS PURCHASED AND ALL CONTRACTED LABOR OR SERVICES PROVIDED.  EXCEPT AS PROVIDED IN SECTION 7.3.2(E), EACH REQUEST FOR DISBURSEMENT FROM THE REPLACEMENT RESERVE ACCOUNT SHALL BE MADE ONLY AFTER COMPLETION OF THE REPLACEMENT FOR WHICH DISBURSEMENT IS REQUESTED.  BORROWER SHALL PROVIDE LENDER EVIDENCE OF COMPLETION OF THE SUBJECT REPLACEMENT SATISFACTORY TO LENDER IN ITS REASONABLE JUDGMENT. (D)                                 BORROWER SHALL PAY ALL INVOICES IN CONNECTION WITH THE REPLACEMENTS WITH RESPECT TO WHICH A DISBURSEMENT IS REQUESTED PRIOR TO SUBMITTING SUCH REQUEST FOR DISBURSEMENT 71 -------------------------------------------------------------------------------- FROM THE REPLACEMENT RESERVE ACCOUNT OR, AT THE REQUEST OF BORROWER, LENDER WILL ISSUE JOINT CHECKS, PAYABLE TO BORROWER AND THE CONTRACTOR, SUPPLIER, MATERIALMAN, MECHANIC, SUBCONTRACTOR OR OTHER PARTY TO WHOM PAYMENT IS DUE IN CONNECTION WITH A REPLACEMENT.  IN THE CASE OF PAYMENTS MADE BY JOINT CHECK, LENDER MAY REQUIRE A WAIVER OF LIEN FROM EACH PERSON RECEIVING PAYMENT PRIOR TO LENDER’S DISBURSEMENT FROM THE REPLACEMENT RESERVE ACCOUNT.  IN ADDITION, AS A CONDITION TO ANY DISBURSEMENT, LENDER MAY REQUIRE BORROWER TO OBTAIN LIEN WAIVERS FROM EACH CONTRACTOR, SUPPLIER, MATERIALMAN, MECHANIC OR SUBCONTRACTOR WHO RECEIVES PAYMENT IN AN AMOUNT EQUAL TO OR GREATER THAN $100,000 FOR COMPLETION OF ITS WORK OR DELIVERY OF ITS MATERIALS.  ANY LIEN WAIVER DELIVERED HEREUNDER SHALL CONFORM TO THE REQUIREMENTS OF APPLICABLE LAW AND SHALL COVER ALL WORK PERFORMED AND MATERIALS SUPPLIED (INCLUDING EQUIPMENT AND FIXTURES) FOR THE PROPERTY BY THAT CONTRACTOR, SUPPLIER, SUBCONTRACTOR, MECHANIC OR MATERIALMAN THROUGH THE DATE COVERED BY THE CURRENT REIMBURSEMENT REQUEST (OR, IN THE EVENT THAT PAYMENT TO SUCH CONTRACTOR, SUPPLIER, SUBCONTRACTOR, MECHANIC OR MATERIALMEN IS TO BE MADE BY A JOINT CHECK, THE RELEASE OF LIEN SHALL BE EFFECTIVE THROUGH THE DATE COVERED BY THE PREVIOUS RELEASE OF FUNDS REQUEST). (E)                                  IF (I) THE COST OF A REPLACEMENT EXCEEDS $100,000, (II) THE CONTRACTOR PERFORMING SUCH REPLACEMENT REQUIRES PERIODIC PAYMENTS PURSUANT TO TERMS OF A WRITTEN CONTRACT, AND (III) LENDER HAS APPROVED IN WRITING IN ADVANCE SUCH PERIODIC PAYMENTS, A REQUEST FOR REIMBURSEMENT FROM THE REPLACEMENT RESERVE ACCOUNT MAY BE MADE AFTER COMPLETION OF A PORTION OF THE WORK UNDER SUCH CONTRACT, PROVIDED (A) SUCH CONTRACT REQUIRES PAYMENT UPON COMPLETION OF SUCH PORTION OF THE WORK, (B) THE MATERIALS FOR WHICH THE REQUEST IS MADE ARE ON SITE AT THE PROPERTY AND ARE PROPERLY SECURED OR HAVE BEEN INSTALLED IN THE PROPERTY, (C) ALL OTHER CONDITIONS IN THIS AGREEMENT FOR DISBURSEMENT HAVE BEEN SATISFIED, (D) FUNDS REMAINING IN THE REPLACEMENT RESERVE ACCOUNT ARE, IN LENDER’S JUDGMENT, SUFFICIENT TO COMPLETE SUCH REPLACEMENT AND OTHER REPLACEMENTS WHEN REQUIRED, AND (E) IF REQUIRED BY LENDER, EACH CONTRACTOR OR SUBCONTRACTOR RECEIVING PAYMENTS UNDER SUCH CONTRACT SHALL PROVIDE A WAIVER OF LIEN WITH RESPECT TO AMOUNTS WHICH HAVE BEEN PAID TO THAT CONTRACTOR OR SUBCONTRACTOR. (F)                                    BORROWER SHALL NOT MAKE A REQUEST FOR DISBURSEMENT FROM THE REPLACEMENT RESERVE ACCOUNT MORE FREQUENTLY THAN ONCE IN ANY CALENDAR MONTH AND (EXCEPT IN CONNECTION WITH THE FINAL DISBURSEMENT) THE TOTAL COST OF ALL REPLACEMENTS IN ANY REQUEST SHALL NOT BE LESS THAN $15,000.00. 7.3.3                     PERFORMANCE OF REPLACEMENTS.  (A)  BORROWER SHALL MAKE REPLACEMENTS WHEN REQUIRED IN ORDER TO KEEP THE PROPERTY IN CONDITION AND REPAIR CONSISTENT WITH OTHER SIMILAR PROPERTIES IN THE SAME MARKET SEGMENT IN THE METROPOLITAN AREA IN WHICH THE PROPERTY IS LOCATED, AND TO KEEP THE PROPERTY OR ANY PORTION THEREOF FROM DETERIORATING.  BORROWER SHALL COMPLETE ALL REPLACEMENTS IN A GOOD AND WORKMANLIKE MANNER AS SOON AS PRACTICABLE FOLLOWING THE COMMENCEMENT OF MAKING EACH SUCH REPLACEMENT. (B)                                 LENDER RESERVES THE RIGHT, AT ITS OPTION, TO APPROVE ALL CONTRACTS OR WORK ORDERS WITH MATERIALMEN, MECHANICS, SUPPLIERS, SUBCONTRACTORS, CONTRACTORS OR OTHER PARTIES PROVIDING LABOR OR MATERIALS UNDER CONTRACTS FOR AN AMOUNT IN EXCESS OF $100,000 IN CONNECTION WITH THE REPLACEMENTS PERFORMED BY BORROWER.  UPON LENDER’S REQUEST, BORROWER SHALL ASSIGN ANY CONTRACT OR SUBCONTRACT TO LENDER. 72 -------------------------------------------------------------------------------- (C)                                  IN THE EVENT LENDER DETERMINES IN ITS REASONABLE DISCRETION THAT ANY REPLACEMENT IS NOT BEING PERFORMED IN A WORKMANLIKE OR TIMELY MANNER OR THAT ANY REPLACEMENT HAS NOT BEEN COMPLETED IN A WORKMANLIKE OR TIMELY MANNER, AND SUCH FAILURE CONTINUES TO EXIST FOR MORE THAN THIRTY (30) DAYS AFTER NOTICE FROM LENDER TO BORROWER, LENDER SHALL HAVE THE OPTION, UPON TEN (10) DAYS NOTICE TO BORROWER (EXCEPT IN THE CASE OF AN EMERGENCY), TO WITHHOLD DISBURSEMENT FOR SUCH UNSATISFACTORY REPLACEMENT AND TO PROCEED UNDER EXISTING CONTRACTS OR TO CONTRACT WITH THIRD PARTIES TO COMPLETE SUCH REPLACEMENT AND TO APPLY THE REPLACEMENT RESERVE FUND TOWARD THE LABOR AND MATERIALS NECESSARY TO COMPLETE SUCH REPLACEMENT, AND TO EXERCISE ANY AND ALL OTHER REMEDIES AVAILABLE TO LENDER UPON AN EVENT OF DEFAULT HEREUNDER. (D)                                 IN ORDER TO FACILITATE LENDER’S COMPLETION OR MAKING OF THE REPLACEMENTS PURSUANT TO SECTION 7.3.3(C) ABOVE, BORROWER GRANTS LENDER THE RIGHT TO ENTER ONTO THE PROPERTY AND PERFORM ANY AND ALL WORK AND LABOR NECESSARY TO COMPLETE OR MAKE THE REPLACEMENTS AND/OR EMPLOY WATCHMEN TO PROTECT THE PROPERTY FROM DAMAGE, SUBJECT TO THE RIGHTS OF TENANTS.  ALL SUMS SO EXPENDED BY LENDER, TO THE EXTENT NOT FROM THE REPLACEMENT RESERVE FUND, SHALL BE DEEMED TO HAVE BEEN ADVANCED UNDER THE LOAN TO BORROWER AND SECURED BY THE MORTGAGE.  FOR THIS PURPOSE BORROWER CONSTITUTES AND APPOINTS LENDER ITS TRUE AND LAWFUL ATTORNEY-IN-FACT WITH FULL POWER OF SUBSTITUTION TO COMPLETE OR UNDERTAKE THE REPLACEMENTS IN THE NAME OF BORROWER.  SUCH POWER OF ATTORNEY SHALL BE DEEMED TO BE A POWER COUPLED WITH AN INTEREST AND CANNOT BE REVOKED BUT SHALL ONLY BE EFFECTIVE FOLLOWING AN EVENT OF DEFAULT.  BORROWER EMPOWERS SAID ATTORNEY-IN-FACT AS FOLLOWS:  (I) TO USE ANY FUNDS IN THE REPLACEMENT RESERVE ACCOUNT FOR THE PURPOSE OF MAKING OR COMPLETING THE REPLACEMENTS; (II) TO MAKE SUCH ADDITIONS, CHANGES AND CORRECTIONS TO THE REPLACEMENTS AS SHALL BE NECESSARY OR DESIRABLE TO COMPLETE THE REPLACEMENTS; (III) TO EMPLOY SUCH CONTRACTORS, SUBCONTRACTORS, AGENTS, ARCHITECTS AND INSPECTORS AS SHALL BE REQUIRED FOR SUCH PURPOSES; (IV) TO PAY, SETTLE OR COMPROMISE ALL EXISTING BILLS AND CLAIMS WHICH ARE OR MAY BECOME LIENS AGAINST THE PROPERTY, OR AS MAY BE NECESSARY OR DESIRABLE FOR THE COMPLETION OF THE REPLACEMENTS, OR FOR CLEARANCE OF TITLE; (V) TO EXECUTE ALL APPLICATIONS AND CERTIFICATES IN THE NAME OF BORROWER WHICH MAY BE REQUIRED BY ANY OF THE CONTRACT DOCUMENTS; (VI) TO PROSECUTE AND DEFEND ALL ACTIONS OR PROCEEDINGS IN CONNECTION WITH THE PROPERTY OR THE REHABILITATION AND REPAIR OF THE PROPERTY; AND (VII) TO DO ANY AND EVERY ACT WHICH BORROWER MIGHT DO IN ITS OWN BEHALF TO FULFILL THE TERMS OF THIS AGREEMENT. (E)                                  NOTHING IN THIS SECTION 7.3.3 SHALL:  (I) MAKE LENDER RESPONSIBLE FOR MAKING OR COMPLETING THE REPLACEMENTS; (II) REQUIRE LENDER TO EXPEND FUNDS IN ADDITION TO THE REPLACEMENT RESERVE FUND TO MAKE OR COMPLETE ANY REPLACEMENT; (III) OBLIGATE LENDER TO PROCEED WITH THE REPLACEMENTS; OR (IV) OBLIGATE LENDER TO DEMAND FROM BORROWER ADDITIONAL SUMS TO MAKE OR COMPLETE ANY REPLACEMENT. (F)                                    BORROWER SHALL PERMIT LENDER AND LENDER’S AGENTS AND REPRESENTATIVES (INCLUDING, WITHOUT LIMITATION, LENDER’S ENGINEER, ARCHITECT, OR INSPECTOR) OR THIRD PARTIES MAKING REPLACEMENTS PURSUANT TO THIS SECTION 7.3.3 TO ENTER ONTO THE PROPERTY DURING NORMAL BUSINESS HOURS (SUBJECT TO THE RIGHTS OF TENANTS UNDER THEIR LEASES) TO INSPECT THE PROGRESS OF ANY REPLACEMENTS AND ALL MATERIALS BEING USED IN CONNECTION THEREWITH, TO EXAMINE ALL PLANS AND SHOP DRAWINGS RELATING TO SUCH REPLACEMENTS WHICH ARE OR MAY BE KEPT AT THE PROPERTY, AND TO COMPLETE ANY REPLACEMENTS MADE PURSUANT TO THIS SECTION 7.3.3.  BORROWER SHALL CAUSE ALL CONTRACTORS AND SUBCONTRACTORS TO COOPERATE WITH LENDER OR LENDER’S REPRESENTATIVES OR SUCH 73 -------------------------------------------------------------------------------- OTHER PERSONS DESCRIBED ABOVE IN CONNECTION WITH INSPECTIONS DESCRIBED IN THIS SECTION 7.3.3(F) OR THE COMPLETION OF REPLACEMENTS PURSUANT TO THIS SECTION 7.3.3. (G)                                 LENDER MAY REQUIRE AN INSPECTION OF THE PROPERTY AT BORROWER’S EXPENSE PRIOR TO MAKING A MONTHLY DISBURSEMENT IN EXCESS OF $100,000 FROM THE REPLACEMENT RESERVE ACCOUNT IN ORDER TO VERIFY COMPLETION OF THE REPLACEMENTS FOR WHICH REIMBURSEMENT IS SOUGHT.  LENDER MAY REQUIRE THAT SUCH INSPECTION BE CONDUCTED BY AN APPROPRIATE INDEPENDENT QUALIFIED PROFESSIONAL SELECTED BY LENDER AND/OR MAY REQUIRE A COPY OF A CERTIFICATE OF COMPLETION BY AN INDEPENDENT QUALIFIED PROFESSIONAL ACCEPTABLE TO LENDER PRIOR TO THE DISBURSEMENT OF ANY AMOUNTS FROM THE REPLACEMENT RESERVE ACCOUNT.  BORROWER SHALL PAY THE EXPENSE OF THE INSPECTION AS REQUIRED HEREUNDER, WHETHER SUCH INSPECTION IS CONDUCTED BY LENDER OR BY AN INDEPENDENT QUALIFIED PROFESSIONAL. (H)                                 THE REPLACEMENTS AND ALL MATERIALS, EQUIPMENT, FIXTURES, OR ANY OTHER ITEM COMPRISING A PART OF ANY REPLACEMENT SHALL BE CONSTRUCTED, INSTALLED OR COMPLETED, AS APPLICABLE, FREE AND CLEAR OF ALL MECHANIC’S, MATERIALMAN’S OR OTHER LIENS (EXCEPT FOR THOSE LIENS EXISTING ON THE DATE OF THIS AGREEMENT WHICH HAVE BEEN APPROVED IN WRITING BY LENDER). (I)                                     BEFORE EACH DISBURSEMENT IN EXCESS OF $100,000 FROM THE REPLACEMENT RESERVE ACCOUNT, LENDER MAY REQUIRE BORROWER TO PROVIDE LENDER WITH A SEARCH OF TITLE TO THE PROPERTY EFFECTIVE TO THE DATE OF THE DISBURSEMENT, WHICH SEARCH SHOWS THAT NO MECHANIC’S OR MATERIALMEN’S LIENS OR OTHER LIENS OF ANY NATURE HAVE BEEN PLACED AGAINST THE PROPERTY SINCE THE DATE OF RECORDATION OF THE RELATED MORTGAGE AND THAT TITLE TO THE PROPERTY IS FREE AND CLEAR OF ALL LIENS (OTHER THAN THE LIEN OF THE RELATED MORTGAGE AND ANY OTHER LIENS PREVIOUSLY APPROVED IN WRITING BY LENDER, IF ANY). (J)                                     ALL REPLACEMENTS SHALL COMPLY WITH ALL APPLICABLE LEGAL REQUIREMENTS OF ALL GOVERNMENTAL AUTHORITIES HAVING JURISDICTION OVER THE PROPERTY AND APPLICABLE INSURANCE REQUIREMENTS INCLUDING, WITHOUT LIMITATION, APPLICABLE BUILDING CODES, SPECIAL USE PERMITS, ENVIRONMENTAL REGULATIONS, AND REQUIREMENTS OF INSURANCE UNDERWRITERS. (K)                                  IN ADDITION TO ANY INSURANCE REQUIRED UNDER THE LOAN DOCUMENTS, BORROWER SHALL PROVIDE OR CAUSE TO BE PROVIDED WORKMEN’S COMPENSATION INSURANCE, BUILDER’S RISK, AND PUBLIC LIABILITY INSURANCE AND OTHER INSURANCE TO THE EXTENT REQUIRED UNDER APPLICABLE LAW IN CONNECTION WITH A PARTICULAR REPLACEMENT.  ALL SUCH POLICIES SHALL BE IN FORM AND AMOUNT REASONABLY SATISFACTORY TO LENDER.  ALL SUCH POLICIES WHICH CAN BE ENDORSED WITH STANDARD MORTGAGEE CLAUSES MAKING LOSS PAYABLE TO LENDER OR ITS ASSIGNS SHALL BE SO ENDORSED.  CERTIFIED COPIES OF SUCH POLICIES SHALL BE DELIVERED TO LENDER. 7.3.4                     FAILURE TO MAKE REPLACEMENTS.  (A)  IT SHALL BE AN EVENT OF DEFAULT UNDER THIS AGREEMENT IF BORROWER FAILS TO COMPLY WITH ANY PROVISION OF THIS SECTION 7.3 AND SUCH FAILURE IS NOT CURED WITHIN THIRTY (30) DAYS AFTER NOTICE FROM LENDER; PROVIDED, HOWEVER, IF SUCH FAILURE IS NOT CAPABLE OF BEING CURED WITHIN SAID THIRTY (30) DAY PERIOD, THEN PROVIDED THAT BORROWER COMMENCES ACTION TO COMPLETE SUCH CURE AND THEREAFTER DILIGENTLY PROCEEDS TO COMPLETE SUCH CURE, SUCH THIRTY (30) DAY PERIOD SHALL BE EXTENDED FOR SUCH TIME AS IS REASONABLY NECESSARY FOR BORROWER, IN THE EXERCISE OF DUE DILIGENCE, TO CURE SUCH FAILURE, BUT SUCH ADDITIONAL PERIOD OF TIME SHALL NOT EXCEED NINETY (90) DAYS.  UPON THE OCCURRENCE OF SUCH AN EVENT OF 74 -------------------------------------------------------------------------------- DEFAULT, LENDER MAY USE THE REPLACEMENT RESERVE FUND (OR ANY PORTION THEREOF) FOR ANY PURPOSE, INCLUDING BUT NOT LIMITED TO COMPLETION OF THE REPLACEMENTS AS PROVIDED IN SECTION 7.3.3, OR FOR ANY OTHER REPAIR OR REPLACEMENT TO THE PROPERTY OR TOWARD PAYMENT OF THE DEBT IN SUCH ORDER, PROPORTION AND PRIORITY AS LENDER MAY DETERMINE IN ITS SOLE DISCRETION.  LENDER’S RIGHT TO WITHDRAW AND APPLY THE REPLACEMENT RESERVE FUND SHALL BE IN ADDITION TO ALL OTHER RIGHTS AND REMEDIES PROVIDED TO LENDER UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. (B)                                 NOTHING IN THIS AGREEMENT SHALL OBLIGATE LENDER TO APPLY ALL OR ANY PORTION OF THE REPLACEMENT RESERVE FUND ON ACCOUNT OF AN EVENT OF DEFAULT TO PAYMENT OF THE DEBT OR IN ANY SPECIFIC ORDER OR PRIORITY. 7.3.5                     BALANCE IN THE REPLACEMENT RESERVE ACCOUNT.  THE INSUFFICIENCY OF ANY BALANCE IN THE REPLACEMENT RESERVE ACCOUNT SHALL NOT RELIEVE BORROWER FROM ITS OBLIGATION TO FULFILL ALL PRESERVATION AND MAINTENANCE COVENANTS IN THE LOAN DOCUMENTS. 7.3.6                     INDEMNIFICATION.  BORROWER SHALL INDEMNIFY LENDER AND HOLD LENDER HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, SUITS, CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES, OBLIGATIONS AND COSTS AND EXPENSES (INCLUDING LITIGATION COSTS AND REASONABLE ATTORNEYS FEES AND EXPENSES) ARISING FROM OR IN ANY WAY CONNECTED WITH THE PERFORMANCE OF THE REPLACEMENTS UNLESS THE SAME ARE SOLELY DUE TO GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDER.  BORROWER SHALL ASSIGN TO LENDER ALL RIGHTS AND CLAIMS BORROWER MAY HAVE AGAINST ALL PERSONS OR ENTITIES SUPPLYING LABOR OR MATERIALS IN CONNECTION WITH THE REPLACEMENTS; PROVIDED, HOWEVER, THAT LENDER MAY NOT PURSUE ANY SUCH RIGHT OR CLAIM UNLESS AN EVENT OF DEFAULT HAS OCCURRED AND REMAINS UNCURED. SECTION 7.4                                   ROLLOVER RESERVE. 7.4.1                     DEPOSITS TO ROLLOVER RESERVE FUND.  BORROWER SHALL PAY TO LENDER ON EACH PAYMENT DATE THE SUM OF $32,761.83, WHICH AMOUNTS SHALL BE DEPOSITED WITH AND HELD BY LENDER FOR TENANT IMPROVEMENT AND LEASING COMMISSION OBLIGATIONS INCURRED FOLLOWING THE DATE HEREOF.  ADDITIONALLY, BORROWER SHALL DEPOSIT WITH LENDER ANY LEASE TERMINATION FEES.  AMOUNTS SO DEPOSITED SHALL HEREINAFTER BE REFERRED TO AS THE “ROLLOVER RESERVE FUND”.  NOTWITHSTANDING THE FOREGOING, BORROWER’S OBLIGATION TO MAKE MONTHLY DEPOSITS TO THE ROLLOVER RESERVE FUND SHALL BE SUSPENDED PROVIDED THAT NO EVENT OF DEFAULT OCCURS. 7.4.2                     WITHDRAWAL OF ROLLOVER RESERVE FUNDS.  LENDER SHALL MAKE DISBURSEMENTS FROM THE ROLLOVER RESERVE FUND FOR TENANT IMPROVEMENT AND LEASING COMMISSION OBLIGATIONS INCURRED BY BORROWER.  ALL SUCH EXPENSES SHALL BE APPROVED BY LENDER IN ITS COMMERCIALLY REASONABLE DISCRETION, EXCEPT THAT LENDER’S APPROVAL OF SUCH EXPENSES SHALL NOT BE REQUIRED (A) IF LENDER HAS SEPARATELY APPROVED (BUT WAS NOT DEEMED TO HAVE APPROVED) THE RELATED LEASE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.1.20 OF THIS AGREEMENT OR (B) WITH RESPECT TO TENANT IMPROVEMENT EXPENSES THAT ARE LESS THAN $25.00 PER SQUARE FOOT.  LENDER SHALL MAKE DISBURSEMENTS AS REQUESTED BY BORROWER ON A MONTHLY BASIS IN INCREMENTS OF NO LESS THAN $5,000.00 UPON DELIVERY BY BORROWER OF LENDER’S STANDARD FORM OF DRAW REQUEST ACCOMPANIED BY COPIES OF PAID INVOICES FOR THE AMOUNTS REQUESTED AND, IF REQUIRED BY LENDER, LIEN WAIVERS AND RELEASES FROM ALL PARTIES FURNISHING MATERIALS AND/OR SERVICES IN CONNECTION WITH THE REQUESTED 75 -------------------------------------------------------------------------------- PAYMENT.  LENDER MAY REQUIRE AN INSPECTION OF THE PROPERTY AT BORROWER’S EXPENSE PRIOR TO MAKING A MONTHLY DISBURSEMENT IN ORDER TO VERIFY COMPLETION OF IMPROVEMENTS FOR WHICH REIMBURSEMENT IS SOUGHT.  ANY LEASE TERMINATION FEE SHALL BE APPLIED FIRST TO TENANT IMPROVEMENT AND LEASING COMMISSION OBLIGATIONS INCURRED IN CONNECTION WITH THE RELETTING OF THE SPACE FOR WHICH SUCH LEASE TERMINATION FEE WAS PAID PURSUANT TO A LEASE APPROVED BY LENDER IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, AND ANY REMAINING PORTION OF SUCH LEASE TERMINATION FEE SHALL BE RELEASED TO BORROWER PROVIDED THAT NO EVENT OF DEFAULT EXISTS AND LENDER SHALL HAVE RECEIVED A TENANT ESTOPPEL CERTIFICATE IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO LENDER. SECTION 7.5                                   EXCELLERX LEASE. 7.5.1                     UNLESS THE EXCELLERX LEASE IS EXTENDED ON TERMS ACCEPTABLE TO LENDER PRIOR TO MARCH 31, 2014, A CASH SWEEP PERIOD SHALL BE IMPLEMENTED PURSUANT TO THE CASH MANAGEMENT AGREEMENT UNTIL SUCH TIME AS $980,000 OF EXCESS CASH HAS BEEN COLLECTED OR ANOTHER “CASH SWEEP CURE” HAS OCCURRED UNDER THE CASH MANAGEMENT AGREEMENT.  ANY CASH, LETTER OF CREDIT OR GUARANTY OF PAYMENT, AS APPLICABLE, DEPOSITED WITH LENDER PURSUANT TO THIS SECTION 7.5 SHALL BE RELEASED, AND ANY RELATED CASH SWEEP PERIOD SHALL TERMINATE, AT SUCH TIME AS (I) EITHER (A) THE EXCELLERX LEASE IS EXTENDED ON MARKET TERMS AND CONDITIONS ACCEPTABLE TO LENDER OR (B) BORROWER ENTERS INTO A NEW LEASE OR LEASES WITH A REPLACEMENT TENANT OR TENANTS FOR THE RELATED SPACE AND SUCH REPLACEMENT TENANT IS IN OCCUPANCY AND PAYING RENT (AS EVIDENCED BY AN ESTOPPEL CERTIFICATE IN FORM AND SUBSTANCE ACCEPTABLE TO LENDER) PROVIDED BOTH THE TENANT(S) AND THE LEASE(S) ARE PRE-APPROVED BY LENDER IN ITS SOLE AND ABSOLUTE DISCRETION BASED UPON LENDER’S THEN CURRENT UNDERWRITING CRITERIA (PROVIDED THAT IF THE PROPERTY IS LEASED TO MORE THAN ONE TENANT, THE APPROVAL OF THE REPLACEMENT LEASES SHALL BE GOVERNED BY THE PROVISIONS OF SECTION 5.1.20 HEREOF), (II) THE PROPERTY HAS MAINTAINED MINIMUM OCCUPANCY OF EIGHTY PERCENT (80%) OR GREATER FOR AT LEAST ONE CALENDAR QUARTER AND (III) THE DEBT SERVICE COVERAGE RATIO EQUALS OR EXCEEDS 1.20 TO 1.0 BASED ON A THIRTY (30) YEAR AMORTIZATION PERIOD.  PRIOR TO BEING RELEASED TO BORROWER, HOWEVER, ANY CASH OR LETTER OF CREDIT DEPOSITED PURSUANT TO THIS SECTION 7.5.1 SHALL BE APPLIED FIRST TO ANY TENANT IMPROVEMENT AND LEASING COMMISSION OBLIGATIONS INCURRED BY BORROWER IN CONNECTION WITH ANY RELETTING OF THE PROPERTY OR EXTENSION OF THE EXCELLERX LEASE IN THE SAME MANNER AS ROLLOVER RESERVE FUNDS PURSUANT TO SECTION 7.4 OF THIS AGREEMENT. 7.5.2                     NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IN NO EVENT SHALL BORROWER HAVE THE RIGHT TO DELIVER A GUARANTY OF PAYMENT IN LIEU OF CASH OR A LETTER OF CREDIT PURSUANT TO THIS SECTION 7.5 IF (A) THE TANGIBLE NET WORTH OF GUARANTOR IS LESS THAN $300,000,000 OR (B) THE LIQUIDITY OF GUARANTOR IS LESS THAN THE GREATER OF (I) $10,000,000 OR (II) TWENTY-FIVE PERCENT (25%) OF GUARANTOR’S CONTINGENT LIABILITIES.  IF AT ANY TIME WHEN A GUARANTY OF PAYMENT IS OUTSTANDING THE GUARANTOR DOES NOT SATISFY THE FOREGOING TANGIBLE NET WORTH AND LIQUIDITY REQUIREMENTS, BORROWER SHALL WITHIN FIVE (5) BUSINESS DAYS AFTER NOTICE FROM LENDER DELIVER CASH OR A LETTER OF CREDIT IN THE APPLICABLE AMOUNT.  FOR PURPOSES OF THIS AGREEMENT, “TANGIBLE NET WORTH” MEANS, AS OF A GIVEN DATE, GUARANTOR’S EQUITY CALCULATED IN CONFORMANCE WITH GAAP BY SUBTRACTING TOTAL LIABILITIES FROM TOTAL TANGIBLE ASSETS AND “LIQUIDITY” MEANS, AS OF A GIVEN DATE, OF GUARANTOR’S UNRESTRICTED CASH AND AMOUNTS THEN AVAILABLE UNDER GUARANTOR’S WORKING CAPITAL LINES OF CREDIT. 76 -------------------------------------------------------------------------------- SECTION 7.6                                   LEASE OBLIGATION FUND.  ON THE CLOSING DATE, BORROWER SHALL DEPOSIT WITH LENDER THE AMOUNT OF FOUR HUNDRED NINETY-SEVEN THOUSAND NINE HUNDRED TWELVE AND NO/100 DOLLARS ($497,912.00) AS A RESERVE FOR FREE RENT TENANT ALLOWANCES SET FORTH ON SCHEDULE VI HERETO (THE “LEASE OBLIGATIONS”).  AMOUNTS SO DEPOSITED SHALL HEREINAFTER BE REFERRED TO AS THE “LEASE OBLIGATION FUND”.  LENDER SHALL DISBURSE TO BORROWER THE LEASE OBLIGATION FUNDS AS SET FORTH ON SCHEDULE VI HERETO UPON DELIVERY BY BORROWER OF LENDER’S STANDARD FORM OF DRAW REQUEST. SECTION 7.7                                   RESERVE FUNDS, GENERALLY. BORROWER GRANTS TO LENDER A FIRST-PRIORITY PERFECTED SECURITY INTEREST IN EACH OF THE RESERVE FUNDS AND ANY AND ALL MONIES NOW OR HEREAFTER DEPOSITED IN EACH RESERVE FUND AS ADDITIONAL SECURITY FOR PAYMENT OF THE DEBT.  UNTIL EXPENDED OR APPLIED IN ACCORDANCE HEREWITH, THE RESERVE FUNDS SHALL CONSTITUTE ADDITIONAL SECURITY FOR THE DEBT.  UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, LENDER MAY, IN ADDITION TO ANY AND ALL OTHER RIGHTS AND REMEDIES AVAILABLE TO LENDER, APPLY ANY SUMS THEN PRESENT IN ANY OR ALL OF THE RESERVE FUNDS TO THE PAYMENT OF THE DEBT IN ANY ORDER IN ITS SOLE DISCRETION.  THE RESERVE FUNDS SHALL NOT CONSTITUTE TRUST FUNDS AND MAY BE COMMINGLED WITH OTHER MONIES HELD BY LENDER.  AMOUNTS DEPOSITED IN THE REPLACEMENT RESERVE FUND AND THE ROLLOVER RESERVE FUND SHALL BEAR INTEREST AT THE THIRTY DAY MONEY MARKET RATE PUBLISHED BY THE BANK USED BY LENDER TO HOLD ESCROW DEPOSITS, AND SHALL BE HELD AND RELEASED BY LENDER, AND USED BY BORROWER, IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT.  LENDER SHALL BE ENTITLED TO A SERVICING FEE IN THE AMOUNT OF .25% PER ANNUM MULTIPLIED BY THE AVERAGE DAILY BALANCE ON DEPOSIT IN THE REPLACEMENT RESERVE FUND AND THE ROLLOVER RESERVE FUND (BUT IN NO EVENT SHALL LENDER BE ENTITLED TO A SERVICING FEE IN AN AMOUNT GREATER THAN THE AMOUNT OF INTEREST EARNED THEREON), AND LENDER IS HEREBY AUTHORIZED TO DEDUCT SUCH SERVICING FEE FROM THE REPLACEMENT RESERVE FUND AND THE ROLLOVER RESERVE FUND ON A MONTHLY BASIS.  ALL INTEREST OR OTHER INCOME IN CONNECTION WITH THE DEPOSIT OR PLACEMENT OF THE REPLACEMENT RESERVE FUND AND THE ROLLOVER RESERVE FUND, LESS THE SERVICING FEE, SHALL BE REPORTED UNDER BORROWER’S TAX IDENTIFICATION NUMBER, AND SHALL ONLY BE DISBURSED AS SET FORTH IN THIS AGREEMENT.  ALL INTEREST ON ANY RESERVE FUND OTHER THAN THE REPLACEMENT RESERVE FUND OR ROLLOVER RESERVE FUND SHALL NOT BE ADDED TO OR BECOME A PART THEREOF AND SHALL BE THE SOLE PROPERTY OF AND SHALL BE PAID TO LENDER.  BORROWER SHALL BE RESPONSIBLE FOR PAYMENT OF ANY FEDERAL, STATE OR LOCAL INCOME OR OTHER TAX APPLICABLE TO THE INTEREST EARNED ON THE RESERVE FUNDS CREDITED OR PAID TO BORROWER.  BORROWER SHALL NOT, WITHOUT OBTAINING THE PRIOR WRITTEN CONSENT OF LENDER, FURTHER PLEDGE, ASSIGN OR GRANT ANY SECURITY INTEREST IN ANY RESERVE FUND OR THE MONIES DEPOSITED THEREIN OR PERMIT ANY LIEN OR ENCUMBRANCE TO ATTACH THERETO, OR ANY LEVY TO BE MADE THEREON, OR ANY UCC-1 FINANCING STATEMENTS, EXCEPT THOSE NAMING LENDER AS THE SECURED PARTY, TO BE FILED WITH RESPECT THERETO.  LENDER SHALL NOT BE LIABLE FOR ANY LOSS SUSTAINED ON THE INVESTMENT OF ANY FUNDS CONSTITUTING THE RESERVE FUNDS.  BORROWER SHALL INDEMNIFY LENDER AND HOLD LENDER HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, SUITS, CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES, OBLIGATIONS AND COSTS AND EXPENSES (INCLUDING LITIGATION COSTS AND REASONABLE ATTORNEYS FEES AND EXPENSES) ARISING FROM OR IN ANY WAY CONNECTED WITH THE PERFORMANCE OF THE OBLIGATIONS FOR WHICH THE RESERVE FUNDS WERE ESTABLISHED.  BORROWER SHALL ASSIGN TO LENDER ALL RIGHTS AND CLAIMS BORROWER MAY HAVE AGAINST ALL PERSONS OR ENTITIES SUPPLYING LABOR, MATERIALS OR OTHER SERVICES WHICH ARE TO BE PAID FROM OR SECURED BY THE RESERVE FUNDS; PROVIDED, HOWEVER, THAT LENDER MAY NOT PURSUE ANY SUCH RIGHT OR CLAIM UNLESS AN EVENT OF DEFAULT HAS OCCURRED AND REMAINS UNCURED. 77 -------------------------------------------------------------------------------- SECTION 7.8                                   LETTER OF CREDIT RIGHTS.  ANY LETTER OF CREDIT DELIVERED TO LENDER PURSUANT TO THIS AGREEMENT SHALL BE HELD BY LENDER AS ADDITIONAL SECURITY FOR THE LOAN.  LENDER SHALL HAVE THE RIGHT TO DRAW UPON ANY LETTER OF CREDIT IMMEDIATELY AND WITHOUT FURTHER NOTICE: (A)                                  UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT; (B)                                 IF BORROWER FAILS TO DELIVER TO LENDER, NO LESS THAN THIRTY (30) DAYS PRIOR TO THE EXPIRATION OF ANY LETTER OF CREDIT (INCLUDING ANY RENEWAL OR EXTENSION THEREOF), A RENEWAL OR EXTENSION OF SUCH LETTER OF CREDIT OR A REPLACEMENT LETTER OF CREDIT; OR (C)                                  IF THE INSTITUTION ISSUING THE LETTER OF CREDIT CEASES TO BE AN ELIGIBLE INSTITUTION AND BORROWER FAILS TO DELIVER TO LENDER A REPLACEMENT LETTER OF CREDIT FROM AN ELIGIBLE INSTITUTION WITHIN THIRTY (30) DAYS OF THE DATE THAT BORROWER IS NOTIFIED OR OTHERWISE BECOMES AWARE THAT SUCH INSTITUTION CEASED TO BE AN ELIGIBLE INSTITUTION. SECTION 7.9                                   APPLICATION OF LETTER OF CREDIT PROCEEDS.  IN THE EVENT OF A DRAW UPON A LETTER OF CREDIT DUE TO THE EXISTENCE OF AN EVENT OF DEFAULT, LENDER MAY APPLY SUCH AMOUNTS IN SUCH ORDER AND IN SUCH AMOUNTS AS LENDER SHALL ELECT, IN ITS SOLE AND ABSOLUTE DISCRETION, TO PAYMENT OF THE DEBT.  IN THE EVENT OF A DRAW UPON A LETTER OF CREDIT DUE TO THE OCCURRENCE OF AN EVENT DESCRIBED IN SECTION 7.8(B) OR (C) ABOVE, LENDER SHALL DEPOSIT THE PROCEEDS OF SUCH LETTER OF CREDIT INTO A RESERVE ACCOUNT DESIGNATED BY LENDER AND SUCH PROCEEDS SHALL BE HELD AND RELEASED IN THE SAME MANNER APPLICABLE TO THE RELEASE OF THE LETTER OF CREDIT.    VIII.                        DEFAULTS SECTION 8.1                                   EVENT OF DEFAULT.  (A)  EACH OF THE FOLLOWING EVENTS SHALL CONSTITUTE AN EVENT OF DEFAULT HEREUNDER (AN “EVENT OF DEFAULT”): (I)                              IF ANY PORTION OF THE DEBT IS NOT PAID PRIOR TO THE FIFTH (5TH) CALENDAR DAY AFTER THE SAME IS DUE OR IF THE ENTIRE DEBT IS NOT PAID ON THE MATURITY DATE, ALONG WITH APPLICABLE PREPAYMENT PREMIUMS, IF ANY; (II)                           IF ANY OF THE TAXES OR OTHER CHARGES ARE NOT PAID PRIOR TO THE DATE WHEN THE SAME BECOME DELINQUENT, EXCEPT TO THE EXTENT THAT BORROWER IS CONTESTING SAME IN ACCORDANCE WITH THE TERMS OF SECTION 5.1.2 HEREOF, OR THERE ARE SUFFICIENT FUNDS IN THE TAX AND INSURANCE ESCROW FUND TO PAY SUCH TAXES OR OTHER CHARGES AND LENDER FAILS TO OR REFUSES TO RELEASE THE SAME FROM THE TAX AND INSURANCE ESCROW FUND; (III)                        IF THE POLICIES ARE NOT KEPT IN FULL FORCE AND EFFECT, OR IF CERTIFIED COPIES OF THE POLICIES ARE NOT DELIVERED TO LENDER WITHIN TEN (10) DAYS OF REQUEST; (IV)                       IF BORROWER TRANSFERS OR ENCUMBERS ANY PORTION OF THE PROPERTY WITHOUT LENDER’S PRIOR WRITTEN CONSENT (TO THE EXTENT SUCH CONSENT IS REQUIRED) OR OTHERWISE VIOLATES THE PROVISIONS OF THIS AGREEMENT AND ARTICLE 6 OF THE MORTGAGE; (V)                          IF ANY MATERIAL REPRESENTATION OR WARRANTY MADE BY BORROWER HEREIN OR IN ANY OTHER LOAN DOCUMENT, OR IN ANY REPORT, CERTIFICATE, FINANCIAL STATEMENT OR 78 -------------------------------------------------------------------------------- OTHER INSTRUMENT, AGREEMENT OR DOCUMENT FURNISHED TO LENDER SHALL HAVE BEEN FALSE OR MISLEADING IN ANY MATERIAL RESPECT AS OF THE DATE THE REPRESENTATION OR WARRANTY WAS MADE; (VI)                       IF BORROWER, PRINCIPAL OR GUARANTOR SHALL MAKE AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS; (VII)                    IF A RECEIVER, LIQUIDATOR OR TRUSTEE SHALL BE APPOINTED FOR BORROWER, PRINCIPAL OR GUARANTOR OR IF BORROWER, PRINCIPAL OR GUARANTOR SHALL BE ADJUDICATED A BANKRUPT OR INSOLVENT, OR IF ANY PETITION FOR BANKRUPTCY, REORGANIZATION OR ARRANGEMENT PURSUANT TO FEDERAL BANKRUPTCY LAW, OR ANY SIMILAR FEDERAL OR STATE LAW, SHALL BE FILED BY OR AGAINST, CONSENTED TO, OR ACQUIESCED IN BY, BORROWER, PRINCIPAL OR GUARANTOR, OR IF ANY PROCEEDING FOR THE DISSOLUTION OR LIQUIDATION OF BORROWER, PRINCIPAL OR GUARANTOR SHALL BE INSTITUTED; PROVIDED, HOWEVER, IF SUCH APPOINTMENT, ADJUDICATION, PETITION OR PROCEEDING WAS INVOLUNTARY AND NOT CONSENTED TO BY BORROWER, PRINCIPAL OR GUARANTOR, UPON THE SAME NOT BEING DISCHARGED, STAYED OR DISMISSED WITHIN ONE HUNDRED EIGHTY (180) DAYS; (VIII)                 IF BORROWER ATTEMPTS TO ASSIGN ITS RIGHTS UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY INTEREST HEREIN OR THEREIN IN CONTRAVENTION OF THE LOAN DOCUMENTS; (IX)                         IF BORROWER BREACHES ANY OF ITS RESPECTIVE NEGATIVE COVENANTS CONTAINED IN SECTION 5.2 OR ANY COVENANT CONTAINED IN SECTION 4.1.30 HEREOF; (X)                            WITH RESPECT TO ANY TERM, COVENANT OR PROVISION SET FORTH HEREIN WHICH SPECIFICALLY CONTAINS A NOTICE REQUIREMENT OR GRACE PERIOD, IF BORROWER SHALL BE IN DEFAULT UNDER SUCH TERM, COVENANT OR CONDITION AFTER THE GIVING OF SUCH NOTICE OR THE EXPIRATION OF SUCH GRACE PERIOD; (XI)                         IF ANY OF THE ASSUMPTIONS CONTAINED IN THE INSOLVENCY OPINION DELIVERED TO LENDER IN CONNECTION WITH THE LOAN, OR IN ANY ADDITIONAL INSOLVENCY OPINION DELIVERED SUBSEQUENT TO THE CLOSING OF THE LOAN, IS OR SHALL BECOME UNTRUE IN ANY MATERIAL RESPECT; (XII)                      [INTENTIONALLY OMITTED]; (XIII)                   IF BORROWER SHALL CONTINUE TO BE IN DEFAULT UNDER ANY OF THE TERMS, COVENANTS OR CONDITIONS OF SECTION 9.1 HEREOF (UNLESS BORROWER IS UNABLE TO SATISFY SUCH TERM, COVENANTS OR CONDITIONS DUE TO CIRCUMSTANCES BEYOND ITS CONTROL, SUCH AS THE UNAVAILABILITY OF INFORMATION REQUESTED BY LENDER), OR WILLFULLY FAILS TO COOPERATE WITH LENDER IN CONNECTION WITH A SECURITIZATION PURSUANT TO THE PROVISIONS OF SECTION 9.1 HEREOF, FOR FIVE (5) BUSINESS DAYS AFTER NOTICE TO BORROWER FROM LENDER; (XIV)                  IF BORROWER SHALL CONTINUE TO BE IN DEFAULT UNDER ANY OF THE OTHER TERMS, COVENANTS OR CONDITIONS OF THIS AGREEMENT NOT SPECIFIED IN SUBSECTIONS (I) TO (XII) ABOVE, FOR TEN (10) DAYS AFTER NOTICE TO BORROWER FROM LENDER, IN THE CASE 79 -------------------------------------------------------------------------------- OF ANY DEFAULT WHICH CAN BE CURED BY THE PAYMENT OF A SUM OF MONEY, OR FOR THIRTY (30) DAYS AFTER NOTICE FROM LENDER IN THE CASE OF ANY OTHER DEFAULT; PROVIDED, HOWEVER, THAT IF SUCH NON-MONETARY DEFAULT IS SUSCEPTIBLE OF CURE BUT CANNOT REASONABLY BE CURED WITHIN SUCH THIRTY (30) DAY PERIOD AND PROVIDED FURTHER THAT BORROWER SHALL HAVE COMMENCED TO CURE SUCH DEFAULT WITHIN SUCH THIRTY (30) DAY PERIOD AND THEREAFTER DILIGENTLY AND EXPEDITIOUSLY PROCEEDS TO CURE THE SAME, SUCH THIRTY (30) DAY PERIOD SHALL BE EXTENDED FOR SUCH TIME AS IS REASONABLY NECESSARY FOR BORROWER IN THE EXERCISE OF DUE DILIGENCE TO CURE SUCH DEFAULT, SUCH ADDITIONAL PERIOD NOT TO EXCEED ONE HUNDRED EIGHTY (180) DAYS; OR (XV)                     IF THERE SHALL BE DEFAULT UNDER ANY OF THE OTHER LOAN DOCUMENTS BEYOND ANY APPLICABLE CURE PERIODS CONTAINED IN SUCH DOCUMENTS, WHETHER AS TO BORROWER OR THE PROPERTY, OR IF ANY OTHER SUCH EVENT SHALL OCCUR OR CONDITION SHALL EXIST, IF THE EFFECT OF SUCH EVENT OR CONDITION IS TO ACCELERATE THE MATURITY OF ANY PORTION OF THE DEBT OR TO PERMIT LENDER TO ACCELERATE THE MATURITY OF ALL OR ANY PORTION OF THE DEBT. (B)                                 UPON THE OCCURRENCE OF AN EVENT OF DEFAULT (OTHER THAN AN EVENT OF DEFAULT DESCRIBED IN CLAUSES (VI), (VII) OR (VIII) ABOVE) AND AT ANY TIME THEREAFTER LENDER MAY, IN ADDITION TO ANY OTHER RIGHTS OR REMEDIES AVAILABLE TO IT PURSUANT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS OR AT LAW OR IN EQUITY, LENDER MAY TAKE SUCH ACTION, WITHOUT NOTICE OR DEMAND, THAT LENDER DEEMS ADVISABLE TO PROTECT AND ENFORCE ITS RIGHTS AGAINST BORROWER AND THE PROPERTY, INCLUDING, WITHOUT LIMITATION, DECLARING THE DEBT TO BE IMMEDIATELY DUE AND PAYABLE, AND LENDER MAY ENFORCE OR AVAIL ITSELF OF ANY OR ALL RIGHTS OR REMEDIES PROVIDED IN THE LOAN DOCUMENTS AGAINST BORROWER AND ANY OR ALL OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, ALL RIGHTS OR REMEDIES AVAILABLE AT LAW OR IN EQUITY; AND UPON ANY EVENT OF DEFAULT DESCRIBED IN CLAUSES (VI), (VII) OR (VIII) ABOVE, THE DEBT AND OTHER OBLIGATIONS OF BORROWER HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS SHALL IMMEDIATELY AND AUTOMATICALLY BECOME DUE AND PAYABLE, WITHOUT NOTICE OR DEMAND, AND BORROWER HEREBY EXPRESSLY WAIVES ANY SUCH NOTICE OR DEMAND, ANYTHING CONTAINED HEREIN OR IN ANY OTHER LOAN DOCUMENT TO THE CONTRARY NOTWITHSTANDING. SECTION 8.2                                   REMEDIES.  (A)  UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, ALL OR ANY ONE OR MORE OF THE RIGHTS, POWERS, PRIVILEGES AND OTHER REMEDIES AVAILABLE TO LENDER AGAINST BORROWER UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS EXECUTED AND DELIVERED BY, OR APPLICABLE TO, BORROWER OR AT LAW OR IN EQUITY MAY BE EXERCISED BY LENDER AT ANY TIME AND FROM TIME TO TIME, WHETHER OR NOT ALL OR ANY OF THE DEBT SHALL BE DECLARED DUE AND PAYABLE, AND WHETHER OR NOT LENDER SHALL HAVE COMMENCED ANY FORECLOSURE PROCEEDING OR OTHER ACTION FOR THE ENFORCEMENT OF ITS RIGHTS AND REMEDIES UNDER ANY OF THE LOAN DOCUMENTS WITH RESPECT TO ALL OR ANY PART OF THE PROPERTY.  ANY SUCH ACTIONS TAKEN BY LENDER SHALL BE CUMULATIVE AND CONCURRENT AND MAY BE PURSUED INDEPENDENTLY, SINGLY, SUCCESSIVELY, TOGETHER OR OTHERWISE, AT SUCH TIME AND IN SUCH ORDER AS LENDER MAY DETERMINE IN ITS SOLE DISCRETION, TO THE FULLEST EXTENT PERMITTED BY LAW, WITHOUT IMPAIRING OR OTHERWISE AFFECTING THE OTHER RIGHTS AND REMEDIES OF LENDER PERMITTED BY LAW, EQUITY OR CONTRACT OR AS SET FORTH HEREIN OR IN THE OTHER LOAN DOCUMENTS.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BORROWER AGREES THAT IF AN EVENT OF DEFAULT IS CONTINUING (I) LENDER IS NOT SUBJECT TO ANY “ONE ACTION” OR “ELECTION OF REMEDIES” LAW OR RULE (TO THE EXTENT WAIVEABLE BY BORROWER), AND (II) ALL LIENS AND OTHER RIGHTS, REMEDIES OR PRIVILEGES PROVIDED TO LENDER SHALL REMAIN IN FULL FORCE AND EFFECT UNTIL LENDER HAS EXHAUSTED ALL OF ITS REMEDIES AGAINST 80 -------------------------------------------------------------------------------- THE PROPERTY AND THE MORTGAGE HAS BEEN FORECLOSED, SOLD AND/OR OTHERWISE REALIZED UPON IN SATISFACTION OF THE DEBT OR THE DEBT HAS BEEN PAID IN FULL. (B)                                 WITH RESPECT TO BORROWER AND THE PROPERTY, NOTHING CONTAINED HEREIN OR IN ANY OTHER LOAN DOCUMENT SHALL BE CONSTRUED AS REQUIRING LENDER TO RESORT TO THE PROPERTY FOR THE SATISFACTION OF ANY OF THE DEBT IN ANY PREFERENCE OR PRIORITY TO ANY OTHER PROPERTY, AND LENDER MAY SEEK SATISFACTION OUT OF THE PROPERTY, OR ANY PART THEREOF, IN ITS ABSOLUTE DISCRETION IN RESPECT OF THE DEBT.  IN ADDITION, TO THE EXTENT PERMITTED BY APPLICABLE LAW, LENDER SHALL HAVE THE RIGHT FROM TIME TO TIME TO PARTIALLY FORECLOSE THE MORTGAGE IN ANY MANNER AND FOR ANY AMOUNTS SECURED BY THE MORTGAGE THEN DUE AND PAYABLE AS DETERMINED BY LENDER IN ITS SOLE DISCRETION INCLUDING, WITHOUT LIMITATION, THE FOLLOWING CIRCUMSTANCES:  (I) IN THE EVENT BORROWER DEFAULTS BEYOND ANY APPLICABLE GRACE PERIOD IN THE PAYMENT OF ONE OR MORE SCHEDULED PAYMENTS OF PRINCIPAL AND INTEREST, LENDER MAY FORECLOSE THE MORTGAGE TO RECOVER SUCH DELINQUENT PAYMENTS OR (II) IN THE EVENT LENDER ELECTS TO ACCELERATE LESS THAN THE ENTIRE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN, LENDER MAY FORECLOSE THE MORTGAGE TO RECOVER SO MUCH OF THE PRINCIPAL BALANCE OF THE LOAN AS LENDER MAY ACCELERATE AND SUCH OTHER SUMS SECURED BY THE MORTGAGE AS LENDER MAY ELECT.  NOTWITHSTANDING ONE OR MORE PARTIAL FORECLOSURES, THE PROPERTY SHALL REMAIN SUBJECT TO THE MORTGAGE TO SECURE PAYMENT OF SUMS SECURED BY THE MORTGAGE AND NOT PREVIOUSLY RECOVERED. (C)                                  DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, LENDER SHALL HAVE THE RIGHT FROM TIME TO TIME TO SEVER THE NOTE AND THE OTHER LOAN DOCUMENTS INTO ONE OR MORE SEPARATE NOTES, MORTGAGES AND OTHER SECURITY DOCUMENTS (THE “SEVERED LOAN DOCUMENTS”) IN SUCH DENOMINATIONS AS LENDER SHALL DETERMINE IN ITS SOLE DISCRETION FOR PURPOSES OF EVIDENCING AND ENFORCING ITS RIGHTS AND REMEDIES PROVIDED HEREUNDER.  BORROWER SHALL EXECUTE AND DELIVER TO LENDER FROM TIME TO TIME, PROMPTLY AFTER THE REQUEST OF LENDER, A SEVERANCE AGREEMENT AND SUCH OTHER DOCUMENTS AS LENDER SHALL REQUEST IN ORDER TO EFFECT THE SEVERANCE DESCRIBED IN THE PRECEDING SENTENCE, ALL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO LENDER.  BORROWER HEREBY ABSOLUTELY AND IRREVOCABLY APPOINTS LENDER FOLLOWING THE OCCURRENCE OF AN EVENT OF DEFAULT AS ITS TRUE AND LAWFUL ATTORNEY, COUPLED WITH AN INTEREST, IN ITS NAME AND STEAD TO MAKE AND EXECUTE ALL DOCUMENTS NECESSARY OR DESIRABLE TO EFFECT THE AFORESAID SEVERANCE, BORROWER RATIFYING ALL THAT ITS SAID ATTORNEY SHALL DO BY VIRTUE THEREOF; PROVIDED, HOWEVER, LENDER SHALL NOT MAKE OR EXECUTE ANY SUCH DOCUMENTS UNDER SUCH POWER UNTIL THREE (3) DAYS AFTER NOTICE HAS BEEN GIVEN TO BORROWER BY LENDER OF LENDER’S INTENT TO EXERCISE ITS RIGHTS UNDER SUCH POWER.  BORROWER SHALL BE OBLIGATED TO PAY ANY COSTS OR EXPENSES INCURRED IN CONNECTION WITH THE PREPARATION, EXECUTION, RECORDING OR FILING OF THE SEVERED LOAN DOCUMENTS IN CONNECTION WITH AN EVENT OF DEFAULT AND THE SEVERED LOAN DOCUMENTS SHALL NOT CONTAIN ANY REPRESENTATIONS, WARRANTIES OR COVENANTS NOT CONTAINED IN THE LOAN DOCUMENTS AND ANY SUCH REPRESENTATIONS AND WARRANTIES CONTAINED IN THE SEVERED LOAN DOCUMENTS WILL BE GIVEN BY BORROWER ONLY AS OF THE CLOSING DATE. SECTION 8.3                                   REMEDIES CUMULATIVE; WAIVERS. THE RIGHTS, POWERS AND REMEDIES OF LENDER UNDER THIS AGREEMENT SHALL BE CUMULATIVE AND NOT EXCLUSIVE OF ANY OTHER RIGHT, POWER OR REMEDY WHICH LENDER MAY HAVE AGAINST BORROWER PURSUANT TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, OR EXISTING AT LAW OR IN EQUITY OR OTHERWISE.  LENDER’S RIGHTS, POWERS AND REMEDIES MAY BE PURSUED SINGLY, CONCURRENTLY OR OTHERWISE, AT SUCH TIME AND IN SUCH ORDER AS LENDER MAY DETERMINE IN LENDER’S SOLE DISCRETION.  NO DELAY OR OMISSION TO EXERCISE ANY REMEDY, RIGHT OR POWER ACCRUING UPON AN EVENT OF DEFAULT SHALL IMPAIR ANY SUCH REMEDY, RIGHT OR 81 -------------------------------------------------------------------------------- POWER OR SHALL BE CONSTRUED AS A WAIVER THEREOF, BUT ANY SUCH REMEDY, RIGHT OR POWER MAY BE EXERCISED FROM TIME TO TIME AND AS OFTEN AS MAY BE DEEMED EXPEDIENT.  A WAIVER OF ONE DEFAULT OR EVENT OF DEFAULT WITH RESPECT TO BORROWER SHALL NOT BE CONSTRUED TO BE A WAIVER OF ANY SUBSEQUENT DEFAULT OR EVENT OF DEFAULT BY BORROWER OR TO IMPAIR ANY REMEDY, RIGHT OR POWER CONSEQUENT THEREON. IX.                                SPECIAL PROVISIONS SECTION 9.1                                   SECURITIZATION. 9.1.1                     SALE OF NOTES AND SECURITIZATION.  BORROWER ACKNOWLEDGES AND AGREES THAT LENDER MAY SELL ALL OR ANY PORTION OF THE LOAN AND THE LOAN DOCUMENTS, OR ISSUE ONE OR MORE PARTICIPATIONS THEREIN, OR CONSUMMATE ONE OR MORE PRIVATE OR PUBLIC SECURITIZATIONS OF RATED SINGLE- OR MULTI-CLASS SECURITIES (THE “SECURITIES”) SECURED BY OR EVIDENCING OWNERSHIP INTERESTS IN ALL OR ANY PORTION OF THE LOAN AND THE LOAN DOCUMENTS OR A POOL OF ASSETS THAT INCLUDE THE LOAN AND THE LOAN DOCUMENTS (SUCH SALES, PARTICIPATIONS AND/OR SECURITIZATIONS, COLLECTIVELY, A “SECURITIZATION”).  AT THE REQUEST OF LENDER, AND TO THE EXTENT NOT ALREADY REQUIRED TO BE PROVIDED BY OR ON BEHALF OF BORROWER UNDER THIS AGREEMENT, BORROWER SHALL USE REASONABLE EFFORTS TO PROVIDE INFORMATION NOT IN THE POSSESSION OF LENDER OR WHICH MAY BE REASONABLY REQUIRED BY LENDER OR TAKE OTHER ACTIONS REASONABLY REQUIRED BY LENDER, IN EACH CASE IN ORDER TO SATISFY THE MARKET STANDARDS TO WHICH LENDER CUSTOMARILY ADHERES OR WHICH MAY BE REASONABLY REQUIRED BY PROSPECTIVE INVESTORS AND/OR THE RATING AGENCIES IN CONNECTION WITH ANY SUCH SECURITIZATION INCLUDING, WITHOUT LIMITATION, TO: (A)                                  PROVIDE ADDITIONAL AND/OR UPDATED PROVIDED INFORMATION, TOGETHER WITH APPROPRIATE VERIFICATION AND/OR CONSENTS RELATED TO THE PROVIDED INFORMATION THROUGH LETTERS OF AUDITORS OR OPINIONS OF COUNSEL OF INDEPENDENT ATTORNEYS REASONABLY ACCEPTABLE TO LENDER, PROSPECTIVE INVESTORS AND/OR THE RATING AGENCIES; (B)                                 ASSIST IN PREPARING DESCRIPTIVE MATERIALS FOR PRESENTATIONS TO ANY OR ALL OF THE RATING AGENCIES, AND WORK WITH, AND IF REQUESTED, SUPERVISE, THIRD-PARTY SERVICE PROVIDERS ENGAGED BY BORROWER AND APPROVED BY LENDER, PRINCIPAL AND THEIR RESPECTIVE AFFILIATES TO OBTAIN, COLLECT, AND DELIVER INFORMATION REQUESTED OR REQUIRED BY LENDER, PROSPECTIVE INVESTORS AND/OR THE RATING AGENCIES; (C)                                  DELIVER REVISED ORGANIZATIONAL DOCUMENTS FOR BORROWER, WHICH COUNSEL OPINIONS AND ORGANIZATIONAL DOCUMENTS SHALL BE REASONABLY SATISFACTORY TO LENDER, PROSPECTIVE INVESTORS AND/OR THE RATING AGENCIES; (D)                                 IF REQUIRED BY ANY PROSPECTIVE INVESTOR AND/OR ANY RATING AGENCY, USE COMMERCIALLY REASONABLE EFFORTS TO DELIVER SUCH ADDITIONAL TENANT ESTOPPEL LETTERS, SUBORDINATION AGREEMENTS OR OTHER AGREEMENTS FROM PARTIES TO AGREEMENTS THAT AFFECT THE PROPERTY, WHICH ESTOPPEL LETTERS, SUBORDINATION AGREEMENTS OR OTHER AGREEMENTS SHALL BE REASONABLY SATISFACTORY TO LENDER, PROSPECTIVE INVESTORS AND/OR THE RATING AGENCIES; (E)                                  MAKE SUCH REPRESENTATIONS AND WARRANTIES AS OF THE CLOSING DATE OF THE SECURITIZATION WITH RESPECT TO THE PROPERTY, BORROWER, PRINCIPAL, GUARANTOR AND THE LOAN DOCUMENTS AS MAY BE REASONABLY REQUESTED BY LENDER, PROSPECTIVE INVESTORS AND/OR THE RATING AGENCIES AND CONSISTENT WITH THE FACTS COVERED BY SUCH REPRESENTATIONS AND WARRANTIES AS THEY 82 -------------------------------------------------------------------------------- EXIST ON THE DATE THEREOF, INCLUDING THE REPRESENTATIONS AND WARRANTIES MADE IN THE LOAN DOCUMENTS; (F)                                    EXECUTE SUCH AMENDMENTS TO THE LOAN DOCUMENTS AND ORGANIZATIONAL DOCUMENTS AS MAY BE REASONABLY REQUESTED BY THE HOLDER OF THE NOTE OR THE RATING AGENCIES OR OTHERWISE TO EFFECT THE SECURITIZATION; PROVIDED, HOWEVER, THAT BORROWER SHALL NOT BE REQUIRED TO MODIFY OR AMEND ANY LOAN DOCUMENT IF SUCH MODIFICATION OR AMENDMENT WOULD (I) CHANGE THE INTEREST RATE, THE STATED MATURITY OR THE AMORTIZATION OF PRINCIPAL SET FORTH IN THE NOTE, OR (II) MODIFY OR AMEND ANY OTHER MATERIAL TERM OF THE LOAN; (G)                                 IF REQUESTED BY LENDER, REVIEW ANY INFORMATION REGARDING THE PROPERTY, BORROWER, PRINCIPAL, GUARANTOR, PROPERTY MANAGER AND THE LOAN WHICH IS CONTAINED IN A PRELIMINARY OR FINAL PRIVATE PLACEMENT MEMORANDUM, PROSPECTUS, PROSPECTUS SUPPLEMENT (INCLUDING ANY AMENDMENT OR SUPPLEMENT TO EITHER THEREOF), OR OTHER DISCLOSURE DOCUMENT TO BE USED BY LENDER OR ANY AFFILIATE THEREOF; AND (H)                                 SUPPLY TO LENDER SUCH DOCUMENTATION, FINANCIAL STATEMENTS AND REPORTS IN FORM AND SUBSTANCE REQUIRED IN ORDER TO COMPLY WITH ANY APPLICABLE SECURITIES LAWS. 9.1.2                     LOAN COMPONENTS.  BORROWER COVENANTS AND AGREES THAT IN CONNECTION WITH ANY SECURITIZATION OF THE LOAN, UPON LENDER’S REQUEST BORROWER SHALL DELIVER ONE OR MORE NEW COMPONENT NOTES TO REPLACE THE ORIGINAL NOTE OR MODIFY THE ORIGINAL NOTE TO REFLECT MULTIPLE COMPONENTS OF THE LOAN OR CREATE ONE OR MORE MEZZANINE LOANS (INCLUDING AMENDING BORROWER’S ORGANIZATIONAL STRUCTURE TO PROVIDE FOR ONE OR MORE MEZZANINE BORROWERS) (EACH A “RESIZING EVENT”).  LENDER AGREES THAT SUCH NEW NOTES OR MODIFIED NOTE OR MEZZANINE NOTES SHALL HAVE THE SAME WEIGHTED AVERAGE COUPON AS THE ORIGINAL NOTE PRIOR TO SUCH RESIZING EVENT AND SHALL OTHERWISE COMPLY WITH THE PROVISIONS OF SECTION 9.1.1(F). 9.1.3                     SECURITIZATION COSTS.  ALL REASONABLE THIRD PARTY COSTS AND EXPENSES INCURRED BY BORROWER IN CONNECTION WITH BORROWER’S COMPLYING WITH REQUESTS MADE UNDER THIS SECTION 9.1 (INCLUDING, WITHOUT LIMITATION, THE FEES AND EXPENSES OF THE RATING AGENCIES) SHALL BE PAID BY LENDER. SECTION 9.2                                   INTENTIONALLY OMITTED. SECTION 9.3                                   EXCULPATION.  SUBJECT TO THE QUALIFICATIONS BELOW, LENDER SHALL NOT ENFORCE THE LIABILITY AND OBLIGATION OF BORROWER TO PERFORM AND OBSERVE THE OBLIGATIONS CONTAINED IN THE NOTE, THIS AGREEMENT, THE MORTGAGE OR THE OTHER LOAN DOCUMENTS BY ANY ACTION OR PROCEEDING WHEREIN A MONEY JUDGMENT SHALL BE SOUGHT AGAINST BORROWER, EXCEPT THAT LENDER MAY BRING A FORECLOSURE ACTION, AN ACTION FOR SPECIFIC PERFORMANCE OR ANY OTHER APPROPRIATE ACTION OR PROCEEDING TO ENABLE LENDER TO ENFORCE AND REALIZE UPON ITS INTEREST UNDER THE NOTE, THIS AGREEMENT, THE MORTGAGE AND THE OTHER LOAN DOCUMENTS, OR IN THE PROPERTY, THE RENTS FOLLOWING AN EVENT OF DEFAULT, OR ANY OTHER COLLATERAL GIVEN TO LENDER PURSUANT TO THE LOAN DOCUMENTS; PROVIDED, HOWEVER, THAT, EXCEPT AS SPECIFICALLY PROVIDED HEREIN, ANY JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE ENFORCEABLE AGAINST BORROWER ONLY TO THE EXTENT OF BORROWER’S INTEREST IN THE PROPERTY, IN THE RENTS FOLLOWING AN EVENT OF DEFAULT AND IN ANY OTHER COLLATERAL GIVEN TO LENDER, AND LENDER, BY ACCEPTING THE NOTE, THIS AGREEMENT, THE MORTGAGE AND THE OTHER LOAN 83 -------------------------------------------------------------------------------- DOCUMENTS, AGREES THAT IT SHALL NOT SUE FOR, SEEK OR DEMAND ANY DEFICIENCY JUDGMENT AGAINST BORROWER IN ANY SUCH ACTION OR PROCEEDING UNDER OR BY REASON OF OR UNDER OR IN CONNECTION WITH THE NOTE, THIS AGREEMENT, THE MORTGAGE OR THE OTHER LOAN DOCUMENTS.  THE PROVISIONS OF THIS SECTION SHALL NOT, HOWEVER, (A) CONSTITUTE A WAIVER, RELEASE OR IMPAIRMENT OF ANY OBLIGATION EVIDENCED OR SECURED BY ANY OF THE LOAN DOCUMENTS; (B) IMPAIR THE RIGHT OF LENDER TO NAME BORROWER AS A PARTY DEFENDANT IN ANY ACTION OR SUIT FOR FORECLOSURE AND SALE UNDER THE MORTGAGE; (C) AFFECT THE VALIDITY OR ENFORCEABILITY OF OR ANY GUARANTY MADE IN CONNECTION WITH THE LOAN OR ANY OF THE RIGHTS AND REMEDIES OF LENDER THEREUNDER; (D) IMPAIR THE RIGHT OF LENDER TO OBTAIN THE APPOINTMENT OF A RECEIVER; (E) IMPAIR THE ENFORCEMENT OF THE ASSIGNMENT OF LEASES FOLLOWING AN EVENT OF DEFAULT; (F) CONSTITUTE A PROHIBITION AGAINST LENDER COMMENCING ANY OTHER APPROPRIATE ACTION OR PROCEEDING IN ORDER FOR LENDER TO EXERCISE ITS REMEDIES AGAINST THE PROPERTY.  IN ADDITION, THE FOREGOING SHALL NOT BE DEEMED A WAIVER OF THE RIGHT OF LENDER TO ENFORCE THE LIABILITY AND OBLIGATION OF BORROWER, BY MONEY JUDGMENT OR OTHERWISE, TO THE EXTENT OF ANY LOSS, DAMAGE, COST, EXPENSE, LIABILITY, CLAIM OR OTHER OBLIGATION INCURRED BY LENDER (INCLUDING ATTORNEYS’ FEES AND COSTS REASONABLY INCURRED) ARISING OUT OF OR IN CONNECTION WITH THE FOLLOWING: (I)                              THE MISAPPLICATION OR MISAPPROPRIATION OF RENTS; (II)                           THE MISAPPLICATION OR MISAPPROPRIATION OF INSURANCE PROCEEDS OR AWARDS; (III)                        BORROWER’S FAILURE TO RETURN OR TO REIMBURSE LENDER FOR ALL PERSONAL PROPERTY (OTHER THAN PERSONAL PROPERTY NOT MATERIAL TO THE OPERATION OR VALUE OF THE PROPERTY) TAKEN FROM THE PROPERTY BY OR ON BEHALF OF BORROWER AND NOT REPLACED WITH PERSONAL PROPERTY OF THE SAME UTILITY AND OF THE SAME OR GREATER VALUE; (IV)                       ANY ACT OF ACTUAL WASTE OR ARSON BY BORROWER, ANY PRINCIPAL, AFFILIATE, GENERAL PARTNER OR MEMBER THEREOF OR BY GUARANTOR; (V)                          ANY FEES OR COMMISSIONS PAID BY BORROWER TO ANY PRINCIPAL, AFFILIATE, GENERAL PARTNER OR MEMBER OF BORROWER OR ANY GUARANTOR IN VIOLATION OF THE TERMS OF THIS GUARANTY, THE OTHER LOAN DOCUMENTS; (VI)                       BORROWER’S FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 9.4 OF THE MORTGAGE; OR (VII)                    ANY FRAUD, WILLFUL MISCONDUCT OR INTENTIONAL MATERIAL MISREPRESENTATION BY BORROWER, PRINCIPAL, GUARANTOR OR ANY OF THEIR RESPECTIVE AFFILIATES IN CONNECTION WITH THE LOAN; OR (VIII)                 ANY BREACH OR DEFAULT OF ANY MATERIAL PROVISION OF SECTION 4.1.30 OF THIS AGREEMENT (OTHER THAN BREACHES OF THE REQUIREMENTS SET FORTH IN CLAUSES (XII) OR (XXIII) OF THE DEFINITION OF SPECIAL PURPOSE ENTITY). Notwithstanding anything to the contrary in this Agreement, the Note or any of the Loan Documents, (A) Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code 84 -------------------------------------------------------------------------------- to file a claim for the full amount of the Debt secured by the Mortgage or to require that all collateral shall continue to secure all of the Debt owing to Lender in accordance with the Loan Documents, and (B) the Debt shall be fully recourse to Borrower in the event or: (i) a voluntary breach or default under Section 5.2.10 of this Agreement, (ii) Borrower or Principal filing a voluntary petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (iii) Borrower or Principal filing an answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, or soliciting or causing to be solicited petitioning creditors for any involuntary petition from any Person; (iv) Borrower or Principal consenting to or acquiescing in or joining in an application for the appointment of a custodian, receiver, trustee, or examiner for Borrower, Principal or any portion of the Property; or (v) Borrower or Principal making an assignment for the benefit of creditors. SECTION 9.4                                   MATTERS CONCERNING PROPERTY MANAGER.  IF (A) AN EVENT OF DEFAULT HAS OCCURRED, (B) PROPERTY MANAGER SHALL BECOME BANKRUPT OR INSOLVENT OR (C) A DEFAULT OCCURS UNDER THE PROPERTY MANAGEMENT AGREEMENT AND CONTINUES BEYOND ALL APPLICABLE NOTICE AND CURE PERIODS, BORROWER SHALL, AT THE REQUEST OF LENDER, TERMINATE THE PROPERTY MANAGEMENT AGREEMENT AND REPLACE THE PROPERTY MANAGER WITH A QUALIFYING PROPERTY MANAGER PURSUANT TO A REPLACEMENT MANAGEMENT AGREEMENT, IT BEING UNDERSTOOD AND AGREED THAT THE MANAGEMENT FEE FOR SUCH QUALIFYING PROPERTY MANAGER SHALL NOT EXCEED THEN PREVAILING MARKET RATES. SECTION 9.5                                   SERVICER.  AT THE OPTION OF LENDER, THE LOAN MAY BE SERVICED BY A SERVICER/TRUSTEE (ANY SUCH SERVICER/TRUSTEE, TOGETHER WITH ITS AGENTS, NOMINEES OR DESIGNEES, ARE COLLECTIVELY REFERRED TO AS “SERVICER”) SELECTED BY LENDER AND LENDER MAY DELEGATE ALL OR ANY PORTION OF ITS RESPONSIBILITIES UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO THE SERVICER PURSUANT TO A SERVICING AGREEMENT (THE “SERVICING AGREEMENT”) BETWEEN LENDER AND SERVICER.  BORROWER SHALL BE RESPONSIBLE FOR ANY REASONABLE SET-UP FEES OR ANY OTHER INITIAL COSTS RELATING TO OR ARISING UNDER THE SERVICING AGREEMENT; PROVIDED, HOWEVER, THAT BORROWER SHALL NOT BE RESPONSIBLE FOR PAYMENT OF THE MONTHLY SERVICING FEE DUE TO SERVICER UNDER THE SERVICING AGREEMENT. X.                                    MISCELLANEOUS SECTION 10.1                            SURVIVAL.  THIS AGREEMENT AND ALL COVENANTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES MADE HEREIN AND IN THE CERTIFICATES DELIVERED PURSUANT HERETO SHALL SURVIVE THE MAKING BY LENDER OF THE LOAN AND THE EXECUTION AND DELIVERY TO LENDER OF THE NOTE, AND SHALL CONTINUE IN FULL FORCE AND EFFECT SO LONG AS ALL OR ANY OF THE DEBT IS OUTSTANDING AND UNPAID UNLESS A LONGER PERIOD IS EXPRESSLY SET FORTH HEREIN OR IN THE OTHER LOAN DOCUMENTS.  WHENEVER IN THIS AGREEMENT ANY OF THE PARTIES HERETO IS REFERRED TO, SUCH REFERENCE SHALL BE DEEMED TO INCLUDE THE LEGAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS OF SUCH PARTY.  ALL COVENANTS, PROMISES AND AGREEMENTS IN THIS AGREEMENT, BY OR ON BEHALF OF BORROWER, SHALL INURE TO THE BENEFIT OF THE LEGAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS OF LENDER. SECTION 10.2                            LENDER’S DISCRETION.  WHENEVER PURSUANT TO THIS AGREEMENT, LENDER EXERCISES ANY RIGHT GIVEN TO IT TO APPROVE OR DISAPPROVE, OR ANY ARRANGEMENT OR TERM IS TO BE SATISFACTORY TO LENDER, THE DECISION OF LENDER TO APPROVE OR DISAPPROVE OR TO DECIDE WHETHER 85 -------------------------------------------------------------------------------- ARRANGEMENTS OR TERMS ARE SATISFACTORY OR NOT SATISFACTORY SHALL (EXCEPT AS IS OTHERWISE SPECIFICALLY HEREIN PROVIDED) BE IN THE SOLE DISCRETION OF LENDER AND SHALL BE FINAL AND CONCLUSIVE. SECTION 10.3                            GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED (WITHOUT REGARD TO ANY CONFLICT OF LAWS OR PRINCIPLES) AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. SECTION 10.4                            MODIFICATION, WAIVER IN WRITING.  NO MODIFICATION, AMENDMENT, EXTENSION, DISCHARGE, TERMINATION OR WAIVER OF ANY PROVISION OF THIS AGREEMENT, OR OF THE NOTE, OR OF ANY OTHER LOAN DOCUMENT, NOR CONSENT TO ANY DEPARTURE BY BORROWER THEREFROM, SHALL IN ANY EVENT BE EFFECTIVE UNLESS THE SAME SHALL BE IN A WRITING SIGNED BY THE PARTY AGAINST WHOM ENFORCEMENT IS SOUGHT, AND THEN SUCH WAIVER OR CONSENT SHALL BE EFFECTIVE ONLY IN THE SPECIFIC INSTANCE, AND FOR THE PURPOSE, FOR WHICH GIVEN.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, NO NOTICE TO, OR DEMAND ON BORROWER, SHALL ENTITLE BORROWER TO ANY OTHER OR FUTURE NOTICE OR DEMAND IN THE SAME, SIMILAR OR OTHER CIRCUMSTANCES. SECTION 10.5                            DELAY NOT A WAIVER.  NEITHER ANY FAILURE NOR ANY DELAY ON THE PART OF LENDER IN INSISTING UPON STRICT PERFORMANCE OF ANY TERM, CONDITION, COVENANT OR AGREEMENT, OR EXERCISING ANY RIGHT, POWER, REMEDY OR PRIVILEGE HEREUNDER, OR UNDER THE NOTE OR UNDER ANY OTHER LOAN DOCUMENT, OR ANY OTHER INSTRUMENT GIVEN AS SECURITY THEREFOR, SHALL OPERATE AS OR CONSTITUTE A WAIVER THEREOF, NOR SHALL A SINGLE OR PARTIAL EXERCISE THEREOF PRECLUDE ANY OTHER FUTURE EXERCISE, OR THE EXERCISE OF ANY OTHER RIGHT, POWER, REMEDY OR PRIVILEGE.  IN PARTICULAR, AND NOT BY WAY OF LIMITATION, BY ACCEPTING PAYMENT AFTER THE DUE DATE OF ANY AMOUNT PAYABLE UNDER THIS AGREEMENT, THE NOTE OR ANY OTHER LOAN DOCUMENT, LENDER SHALL NOT BE DEEMED TO HAVE WAIVED ANY RIGHT EITHER TO REQUIRE PROMPT PAYMENT WHEN DUE OF ALL OTHER AMOUNTS DUE UNDER THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS, OR TO DECLARE A DEFAULT FOR FAILURE TO EFFECT PROMPT PAYMENT OF ANY SUCH OTHER AMOUNT. SECTION 10.6                            NOTICES.  ALL NOTICES, CONSENTS, APPROVALS AND REQUESTS REQUIRED OR PERMITTED HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT SHALL BE GIVEN IN WRITING AND SHALL BE EFFECTIVE FOR ALL PURPOSES IF HAND DELIVERED OR SENT BY (A) CERTIFIED OR REGISTERED UNITED STATES MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED OR (B) EXPEDITED PREPAID DELIVERY SERVICE, EITHER COMMERCIAL OR UNITED STATES POSTAL SERVICE, WITH PROOF OF ATTEMPTED DELIVERY, AND BY TELECOPIER (WITH ANSWER BACK ACKNOWLEDGED), ADDRESSED AS FOLLOWS (OR AT SUCH OTHER ADDRESS AND PERSON AS SHALL BE DESIGNATED FROM TIME TO TIME BY ANY PARTY HERETO, AS THE CASE MAY BE, IN A WRITTEN NOTICE TO THE OTHER PARTIES HERETO IN THE MANNER PROVIDED FOR IN THIS SECTION): If to Lender:                                                                               JPMorgan Chase Bank, N.A. c/o ARCap Servicing, Inc. 5221 North O’Connor Blvd., Suite 600 Irving, Texas 75039 Attention:  Wesley Wolf 86 -------------------------------------------------------------------------------- With a copy to:                                                             NorthMarq Capital Inc. 3500 American Boulevard West, Suite 500 Bloomington, Minnesota 55431 Attention: Karen Pribnow With a copy to:                                                             Kelley Drye & Warren LLP 101 Park Avenue New York, New York 10178 Attention:  Paul A. Keenan, Esq. If to Borrower:                                                                   c/o Behringer Harvard Funds 15601 Dallas Parkway, Suite 600 Addison, Texas 75001 Attention: Gerald J. Reihsen, III With a copy to:                                                             Luce, Forward, Hamilton & Scripps LLP 600 West Broadway Suite 2600 San Diego, CA 92101-3391 Attention: Darryl Steinhause, Esq. A notice shall be deemed to have been given:  in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; or in the case of expedited prepaid delivery and telecopy, upon the first attempted delivery on a Business Day. SECTION 10.7                            TRIAL BY JURY. BORROWER AND LENDER HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER AND LENDER. SECTION 10.8                            HEADINGS.  THE ARTICLE AND/OR SECTION HEADINGS AND THE TABLE OF CONTENTS IN THIS AGREEMENT ARE INCLUDED HEREIN FOR CONVENIENCE OF REFERENCE ONLY AND SHALL NOT CONSTITUTE A PART OF THIS AGREEMENT FOR ANY OTHER PURPOSE. SECTION 10.9                            SEVERABILITY.  WHEREVER POSSIBLE, EACH PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, 87 -------------------------------------------------------------------------------- SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS AGREEMENT. SECTION 10.10                     PREFERENCES.  LENDER SHALL HAVE THE CONTINUING AND EXCLUSIVE RIGHT TO APPLY OR REVERSE AND REAPPLY ANY AND ALL PAYMENTS BY BORROWER DURING THE EXISTENCE OF AN EVENT OF DEFAULT TO ANY PORTION OF THE OBLIGATIONS OF BORROWER HEREUNDER.  TO THE EXTENT BORROWER MAKES A PAYMENT OR PAYMENTS TO LENDER, WHICH PAYMENT OR PROCEEDS 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 UNDER ANY BANKRUPTCY LAW, STATE OR FEDERAL LAW, COMMON LAW OR EQUITABLE CAUSE, THEN, TO THE EXTENT OF SUCH PAYMENT OR PROCEEDS RECEIVED, THE OBLIGATIONS HEREUNDER OR PART THEREOF INTENDED TO BE SATISFIED SHALL BE REVIVED AND CONTINUE IN FULL FORCE AND EFFECT, AS IF SUCH PAYMENT OR PROCEEDS HAD NOT BEEN RECEIVED BY LENDER. SECTION 10.11                     WAIVER OF NOTICE.  BORROWER SHALL NOT BE ENTITLED TO ANY NOTICES OF ANY NATURE WHATSOEVER FROM LENDER EXCEPT WITH RESPECT TO MATTERS FOR WHICH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SPECIFICALLY AND EXPRESSLY PROVIDE FOR THE GIVING OF NOTICE BY LENDER TO BORROWER AND EXCEPT WITH RESPECT TO MATTERS FOR WHICH BORROWER IS NOT, PURSUANT TO APPLICABLE LEGAL REQUIREMENTS, PERMITTED TO WAIVE THE GIVING OF NOTICE.  BORROWER HEREBY EXPRESSLY WAIVES THE RIGHT TO RECEIVE ANY NOTICE FROM LENDER WITH RESPECT TO ANY MATTER FOR WHICH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS DO NOT SPECIFICALLY AND EXPRESSLY PROVIDE FOR THE GIVING OF NOTICE BY LENDER TO BORROWER. SECTION 10.12                     REMEDIES OF BORROWER.  IN THE EVENT THAT A CLAIM OR ADJUDICATION IS MADE THAT LENDER OR ITS AGENTS HAVE ACTED UNREASONABLY OR UNREASONABLY DELAYED ACTING IN ANY CASE WHERE BY LAW OR UNDER THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, LENDER OR SUCH AGENT, AS THE CASE MAY BE, HAS AN OBLIGATION TO ACT REASONABLY OR PROMPTLY, BORROWER AGREES THAT NEITHER LENDER NOR ITS AGENTS SHALL BE LIABLE FOR ANY MONETARY DAMAGES, AND BORROWER’S SOLE REMEDIES SHALL BE LIMITED TO COMMENCING AN ACTION SEEKING INJUNCTIVE RELIEF OR DECLARATORY JUDGMENT.  THE PARTIES HERETO AGREE THAT ANY ACTION OR PROCEEDING TO DETERMINE WHETHER LENDER HAS ACTED REASONABLY SHALL BE DETERMINED BY AN ACTION SEEKING DECLARATORY JUDGMENT. SECTION 10.13                     EXPENSES; INDEMNITY.  (A)  BORROWER COVENANTS AND AGREES TO PAY OR, IF BORROWER FAILS TO PAY, TO REIMBURSE, LENDER UPON RECEIPT OF WRITTEN NOTICE FROM LENDER FOR ALL REASONABLE COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES AND DISBURSEMENTS) INCURRED BY LENDER IN CONNECTION WITH (I) THE PREPARATION, NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY AND ALL THE COSTS OF FURNISHING ALL OPINIONS BY COUNSEL FOR BORROWER (INCLUDING WITHOUT LIMITATION ANY OPINIONS REQUESTED BY LENDER AS TO ANY LEGAL MATTERS ARISING UNDER THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS WITH RESPECT TO THE PROPERTY); (II) BORROWER’S ONGOING PERFORMANCE OF AND COMPLIANCE WITH BORROWER’S RESPECTIVE AGREEMENTS AND COVENANTS CONTAINED IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON ITS PART TO BE PERFORMED OR COMPLIED WITH AFTER THE CLOSING DATE, INCLUDING, WITHOUT LIMITATION, CONFIRMING COMPLIANCE WITH ENVIRONMENTAL AND INSURANCE REQUIREMENTS; (III) LENDER’S ONGOING PERFORMANCE AND COMPLIANCE WITH ALL AGREEMENTS AND CONDITIONS CONTAINED IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON ITS PART TO BE PERFORMED OR COMPLIED WITH AFTER THE CLOSING DATE; (IV) EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, THE NEGOTIATION, PREPARATION, EXECUTION, DELIVERY AND 88 -------------------------------------------------------------------------------- ADMINISTRATION OF ANY CONSENTS, AMENDMENTS, WAIVERS OR OTHER MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY OTHER DOCUMENTS OR MATTERS REASONABLY REQUESTED BY LENDER; (V) SECURING BORROWER’S COMPLIANCE WITH ANY REQUESTS MADE PURSUANT TO THE PROVISIONS OF THIS AGREEMENT; (VI) THE FILING AND RECORDING FEES AND EXPENSES, TITLE INSURANCE AND REASONABLE FEES AND EXPENSES OF COUNSEL FOR PROVIDING TO LENDER ALL REQUIRED LEGAL OPINIONS, AND OTHER SIMILAR EXPENSES INCURRED IN CREATING AND PERFECTING THE LIEN IN FAVOR OF LENDER PURSUANT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; (VII) ENFORCING OR PRESERVING ANY RIGHTS, IN RESPONSE TO THIRD PARTY CLAIMS OR THE PROSECUTING OR DEFENDING OF ANY ACTION OR PROCEEDING OR OTHER LITIGATION, IN EACH CASE AGAINST, UNDER OR AFFECTING BORROWER, THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE PROPERTY, OR ANY OTHER SECURITY GIVEN FOR THE LOAN; AND (VIII) ENFORCING ANY OBLIGATIONS OF OR COLLECTING ANY PAYMENTS DUE FROM BORROWER UNDER THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR WITH RESPECT TO THE PROPERTY (INCLUDING ANY FEES INCURRED BY SERVICER IN CONNECTION WITH THE TRANSFER OF THE LOAN TO A SPECIAL SERVICER PRIOR TO A DEFAULT OR EVENT OF DEFAULT) OR IN CONNECTION WITH ANY REFINANCING OR RESTRUCTURING OF THE CREDIT ARRANGEMENTS PROVIDED UNDER THIS AGREEMENT IN THE NATURE OF A “WORK-OUT” OR OF ANY INSOLVENCY OR BANKRUPTCY PROCEEDINGS; PROVIDED, HOWEVER, THAT BORROWER SHALL NOT BE LIABLE FOR THE PAYMENT OF ANY SUCH COSTS AND EXPENSES TO THE EXTENT THE SAME ARISE BY REASON OF THE GROSS NEGLIGENCE, ILLEGAL ACTS, FRAUD OR WILLFUL MISCONDUCT OF LENDER. (B)                                 BORROWER SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS LENDER FROM AND AGAINST ANY AND ALL OTHER LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL FOR LENDER IN CONNECTION WITH ANY INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL PROCEEDING COMMENCED OR THREATENED, WHETHER OR NOT LENDER SHALL BE DESIGNATED A PARTY THERETO), THAT MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST LENDER IN ANY MANNER RELATING TO OR ARISING OUT OF (I) ANY BREACH BY BORROWER OF ITS OBLIGATIONS UNDER, OR ANY MATERIAL MISREPRESENTATION BY BORROWER CONTAINED IN, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, OR (II) THE USE OR INTENDED USE OF THE PROCEEDS OF THE LOAN (COLLECTIVELY, THE “INDEMNIFIED LIABILITIES”); PROVIDED, HOWEVER, THAT BORROWER SHALL NOT HAVE ANY OBLIGATION TO LENDER HEREUNDER TO THE EXTENT THAT SUCH INDEMNIFIED LIABILITIES ARISE FROM THE GROSS NEGLIGENCE, ILLEGAL ACTS, FRAUD OR WILLFUL MISCONDUCT OF LENDER.  TO THE EXTENT THAT THE UNDERTAKING TO INDEMNIFY, DEFEND AND HOLD HARMLESS SET FORTH IN THE PRECEDING SENTENCE MAY BE UNENFORCEABLE BECAUSE IT VIOLATES ANY LAW OR PUBLIC POLICY, BORROWER SHALL PAY THE MAXIMUM PORTION THAT IT IS PERMITTED TO PAY AND SATISFY UNDER APPLICABLE LAW TO THE PAYMENT AND SATISFACTION OF ALL INDEMNIFIED LIABILITIES INCURRED BY LENDER. (C)                                  BORROWER COVENANTS AND AGREES TO PAY FOR OR, IF BORROWER FAILS TO PAY, TO REIMBURSE LENDER FOR, ANY FEES AND EXPENSES INCURRED BY ANY RATING AGENCY IN CONNECTION WITH ANY RATING AGENCY REVIEW OF THE LOAN, THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ANY CONSENT, APPROVAL, WAIVER OR CONFIRMATION OBTAINED FROM SUCH RATING AGENCY PURSUANT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND LENDER SHALL BE ENTITLED TO REQUIRE PAYMENT OF SUCH FEES AND EXPENSES AS A CONDITION PRECEDENT TO THE OBTAINING OF ANY SUCH CONSENT, APPROVAL, WAIVER OR CONFIRMATION. SECTION 10.14                     SCHEDULES INCORPORATED.  THE SCHEDULES ANNEXED HERETO ARE HEREBY INCORPORATED HEREIN AS A PART OF THIS AGREEMENT WITH THE SAME EFFECT AS IF SET FORTH IN THE BODY HEREOF. 89 -------------------------------------------------------------------------------- SECTION 10.15                     OFFSETS, COUNTERCLAIMS AND DEFENSES.  ANY ASSIGNEE OF LENDER’S INTEREST IN AND TO THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS SHALL TAKE THE SAME FREE AND CLEAR OF ALL OFFSETS, COUNTERCLAIMS OR DEFENSES WHICH ARE UNRELATED TO SUCH DOCUMENTS WHICH BORROWER MAY OTHERWISE HAVE AGAINST ANY ASSIGNOR OF SUCH DOCUMENTS, AND NO SUCH UNRELATED COUNTERCLAIM OR DEFENSE SHALL BE INTERPOSED OR ASSERTED BY BORROWER IN ANY ACTION OR PROCEEDING BROUGHT BY ANY SUCH ASSIGNEE UPON SUCH DOCUMENTS AND ANY SUCH RIGHT TO INTERPOSE OR ASSERT ANY SUCH UNRELATED OFFSET, COUNTERCLAIM OR DEFENSE IN ANY SUCH ACTION OR PROCEEDING IS HEREBY EXPRESSLY WAIVED BY BORROWER. SECTION 10.16                     NO JOINT VENTURE OR PARTNERSHIP; NO THIRD PARTY BENEFICIARIES.  (A)  BORROWER AND LENDER INTEND THAT THE RELATIONSHIPS CREATED HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS BE SOLELY THAT OF BORROWER AND LENDER.  NOTHING HEREIN OR THEREIN IS INTENDED TO CREATE A JOINT VENTURE, PARTNERSHIP, TENANCY-IN-COMMON, OR JOINT TENANCY RELATIONSHIP BETWEEN BORROWER AND LENDER NOR TO GRANT LENDER ANY INTEREST IN THE PROPERTY OTHER THAN THAT OF MORTGAGEE, BENEFICIARY OR LENDER. (B)                                 THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE SOLELY FOR THE BENEFIT OF LENDER AND BORROWER AND NOTHING CONTAINED IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE DEEMED TO CONFER UPON ANYONE OTHER THAN LENDER AND BORROWER ANY RIGHT TO INSIST UPON OR TO ENFORCE THE PERFORMANCE OR OBSERVANCE OF ANY OF THE OBLIGATIONS CONTAINED HEREIN OR THEREIN.  ALL CONDITIONS TO THE OBLIGATIONS OF LENDER TO MAKE THE LOAN HEREUNDER ARE IMPOSED SOLELY AND EXCLUSIVELY FOR THE BENEFIT OF LENDER AND NO OTHER PERSON SHALL HAVE STANDING TO REQUIRE SATISFACTION OF SUCH CONDITIONS IN ACCORDANCE WITH THEIR TERMS OR BE ENTITLED TO ASSUME THAT LENDER WILL REFUSE TO MAKE THE LOAN IN THE ABSENCE OF STRICT COMPLIANCE WITH ANY OR ALL THEREOF AND NO OTHER PERSON SHALL UNDER ANY CIRCUMSTANCES BE DEEMED TO BE A BENEFICIARY OF SUCH CONDITIONS, ANY OR ALL OF WHICH MAY BE FREELY WAIVED IN WHOLE OR IN PART BY LENDER IF, IN LENDER’S SOLE DISCRETION, LENDER DEEMS IT ADVISABLE OR DESIRABLE TO DO SO. SECTION 10.17                     PUBLICITY.  ALL NEWS RELEASES, PUBLICITY OR ADVERTISING BY BORROWER OR ITS AFFILIATES THROUGH ANY MEDIA INTENDED TO REACH THE GENERAL PUBLIC WHICH REFERS TO THE LOAN DOCUMENTS OR THE FINANCING EVIDENCED BY THE LOAN DOCUMENTS, TO LENDER, JPM, OR ANY OF THEIR AFFILIATES SHALL BE SUBJECT TO THE PRIOR WRITTEN APPROVAL OF LENDER. SECTION 10.18                     WAIVER OF MARSHALLING OF ASSETS.  TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER, FOR ITSELF AND ITS SUCCESSORS AND ASSIGNS, WAIVES ALL RIGHTS TO A MARSHALLING OF THE ASSETS OF BORROWER, BORROWER’S PARTNERS AND OTHERS WITH INTERESTS IN BORROWER, AND OF THE PROPERTY, OR TO A SALE IN INVERSE ORDER OF ALIENATION IN THE EVENT OF FORECLOSURE OF THE MORTGAGE, AND AGREES NOT TO ASSERT ANY RIGHT UNDER ANY LAWS PERTAINING TO THE MARSHALLING OF ASSETS, THE SALE IN INVERSE ORDER OF ALIENATION, HOMESTEAD EXEMPTION, THE ADMINISTRATION OF ESTATES OF DECEDENTS, OR ANY OTHER MATTERS WHATSOEVER TO DEFEAT, REDUCE OR AFFECT THE RIGHT OF LENDER UNDER THE LOAN DOCUMENTS TO A SALE OF THE PROPERTY FOR THE COLLECTION OF THE DEBT WITHOUT ANY PRIOR OR DIFFERENT RESORT FOR COLLECTION OR OF THE RIGHT OF LENDER TO THE PAYMENT OF THE DEBT OUT OF THE NET PROCEEDS OF THE PROPERTY IN PREFERENCE TO EVERY OTHER CLAIMANT WHATSOEVER. SECTION 10.19                     WAIVER OF COUNTERCLAIM.  BORROWER HEREBY WAIVES THE RIGHT TO ASSERT A COUNTERCLAIM, OTHER THAN A COMPULSORY COUNTERCLAIM, IN ANY ACTION OR PROCEEDING BROUGHT AGAINST IT BY LENDER OR ITS AGENTS. 90 -------------------------------------------------------------------------------- SECTION 10.20                     CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE.  IN THE EVENT OF ANY CONFLICT BETWEEN THE PROVISIONS OF THIS AGREEMENT AND ANY OF THE OTHER LOAN DOCUMENTS, THE PROVISIONS OF THIS AGREEMENT SHALL CONTROL.  THE PARTIES HERETO ACKNOWLEDGE THAT THEY WERE REPRESENTED BY COMPETENT COUNSEL IN CONNECTION WITH THE NEGOTIATION, DRAFTING AND EXECUTION OF THE LOAN DOCUMENTS AND THAT SUCH LOAN DOCUMENTS SHALL NOT BE SUBJECT TO THE PRINCIPLE OF CONSTRUING THEIR MEANING AGAINST THE PARTY WHICH DRAFTED SAME.  BORROWER ACKNOWLEDGES THAT, WITH RESPECT TO THE LOAN, BORROWER SHALL RELY SOLELY ON ITS OWN JUDGMENT AND ADVISORS IN ENTERING INTO THE LOAN WITHOUT RELYING IN ANY MANNER ON ANY STATEMENTS, REPRESENTATIONS OR RECOMMENDATIONS OF LENDER OR ANY PARENT, SUBSIDIARY OR AFFILIATE OF LENDER.  LENDER SHALL NOT BE SUBJECT TO ANY LIMITATION WHATSOEVER IN THE EXERCISE OF ANY RIGHTS OR REMEDIES AVAILABLE TO IT UNDER ANY OF THE LOAN DOCUMENTS OR ANY OTHER AGREEMENTS OR INSTRUMENTS WHICH GOVERN THE LOAN BY VIRTUE OF THE OWNERSHIP BY IT OR ANY PARENT, SUBSIDIARY OR AFFILIATE OF LENDER OF ANY EQUITY INTEREST ANY OF THEM MAY ACQUIRE IN BORROWER, AND BORROWER HEREBY IRREVOCABLY WAIVES THE RIGHT TO RAISE ANY DEFENSE OR TAKE ANY ACTION ON THE BASIS OF THE FOREGOING WITH RESPECT TO LENDER’S EXERCISE OF ANY SUCH RIGHTS OR REMEDIES.  BORROWER ACKNOWLEDGES THAT LENDER ENGAGES IN THE BUSINESS OF REAL ESTATE FINANCINGS AND OTHER REAL ESTATE TRANSACTIONS AND INVESTMENTS WHICH MAY BE VIEWED AS ADVERSE TO OR COMPETITIVE WITH THE BUSINESS OF BORROWER OR ITS AFFILIATES. SECTION 10.21                     BROKERS AND FINANCIAL ADVISORS.  BORROWER HEREBY REPRESENTS THAT IT HAS DEALT WITH NO FINANCIAL ADVISORS, BROKERS, UNDERWRITERS, PLACEMENT AGENTS, AGENTS OR FINDERS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OTHER THAN NORTHMARQ CAPITAL.  BORROWER HEREBY AGREES TO INDEMNIFY, DEFEND AND HOLD LENDER HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LIABILITIES, COSTS AND EXPENSES OF ANY KIND (INCLUDING LENDER’S REASONABLE ATTORNEYS’ FEES AND EXPENSES) IN ANY WAY RELATING TO OR ARISING FROM A CLAIM BY ANY PERSON THAT SUCH PERSON ACTED ON BEHALF OF BORROWER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREIN.  THE PROVISIONS OF THIS SECTION 10.21 SHALL SURVIVE THE EXPIRATION AND TERMINATION OF THIS AGREEMENT AND THE PAYMENT OF THE DEBT. SECTION 10.22                     PRIOR AGREEMENTS.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS CONTAIN THE ENTIRE AGREEMENT OF THE PARTIES HERETO AND THERETO IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, AND ALL PRIOR AGREEMENTS OR UNDERSTANDINGS AMONG OR BETWEEN SUCH PARTIES, WHETHER ORAL OR WRITTEN, ARE SUPERSEDED BY THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND UNLESS SPECIFICALLY SET FORTH IN A WRITING CONTEMPORANEOUS HEREWITH THE TERMS, CONDITIONS AND PROVISIONS OF SUCH PRIOR AGREEMENT DO NOT SURVIVE EXECUTION OF THIS AGREEMENT. SECTION 10.23                     TRANSFER OF LOAN.  IN THE EVENT THAT LENDER TRANSFERS THE LOAN, BORROWER SHALL CONTINUE TO MAKE PAYMENTS AT THE PLACE SET FORTH IN THE NOTE (AND ITS OBLIGATION TO MAKE SUCH PAYMENTS SHALL BE DEEMED SATISFIED UPON THE MAKING OF SUCH PAYMENTS) UNTIL SUCH TIME THAT BORROWER IS NOTIFIED IN WRITING BY LENDER THAT PAYMENTS ARE TO BE MADE AT ANOTHER PLACE. SECTION 10.24                     JOINT AND SEVERAL LIABILITY.  IF BORROWER CONSISTS OF MORE THAN ONE (1) PERSON THE OBLIGATIONS AND LIABILITIES OF EACH PERSON SHALL BE JOINT AND SEVERAL. (THE BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.) 91 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written.   BORROWER:       BEHRINGER HARVARD THREE PARKWAY, LLC, a Delaware limited liability company           By:       Name: Gerald J. Reihsen, III   Title: Secretary           LENDER:       JPMORGAN CHASE BANK, N.A., a banking association chartered under the laws of the United States of America           By:     Name:   Title:   -------------------------------------------------------------------------------- SCHEDULE I Form Guaranty of Payment I-1 -------------------------------------------------------------------------------- SCHEDULE II Rent Roll II-1 -------------------------------------------------------------------------------- SCHEDULE III (Required Repairs—Deadlines For Completion) Required Repair:   Time to complete:       “Water Damage” as defined in the Escrow Agreement   180 Days   III-1 -------------------------------------------------------------------------------- SCHEDULE IV (Organizational Chart of Borrower) IV-1 -------------------------------------------------------------------------------- SCHEDULE V (Exceptions to Representations) [None] V-1 -------------------------------------------------------------------------------- SCHEDULE VI (Lease Obligations) TENANT RELEASE DATES       12/1/06   1/1/07   2/1/07   3/1/07   AIG   $ 50,464   $ 50,464   $ 50,464   $ 50,464   DREXEL   $ 45,600   $ 45,600           EXCELLERX   $ 51,214   $ 51,214   $ 51,214   $ 51,214   TOTAL:   $ 147,278   $ 147,278   $ 101,678   $ 101,678     VI-1 --------------------------------------------------------------------------------

[NAME OF EMPLOYEE] Emp ID: [EMPLOYEE ID] FORM OF NONQUALIFIED STOCK OPTION AGREEMENT UNDER THE HEALTH NET, INC. [NAME OF PLAN] This agreement (the “Option Agreement”) is made as of [DATE] (the “Grant Date”), between Health Net, Inc., a Delaware corporation (the “Company”), and [EMPLOYEE NAME], an employee of the Company or a Subsidiary of the Company (the “Optionee”). Pursuant to the Health Net, Inc. [NAME OF PLAN] (the “Plan”), the Compensation Committee of the Board of Directors of the Company (the “Committee”) or an appropriate executive officer of the Company empowered by the Committee, has determined that the Optionee is to be granted, on the terms and conditions set forth herein, a nonqualified stock option (the “Option”) to purchase shares of Common Stock of the Company, par value $.001 per share (the “Common Stock”), and hereby grants such Option. Capitalized terms used but not defined herein shall have the meanings set forth in the Plan. 1. Number of Shares and Option Price. The Option is to purchase [NUMBER OF SHARES] shares of Common Stock (the “Option Shares”) at a price of [GRANT PRICE] per share (the “Option Price”), which is equal to the Fair Market Value (as defined in the Plan) of the Option Shares as of the date hereof. 2. Exercise of Option. Except as set forth in Sections 3 and 9, the Option shall become exercisable in cumulative installments on the dates (the “Vesting Dates”) [NUMBER OF YEARS] years after the Grant Date to the extent of [     %] of the Option Shares covered by the Option, and [on each subsequent anniversary of the Grant Date OR on the fourth anniversary of the Grant Date] to the extent of an additional [     %] of the Option Shares covered by the Option, until the Option has become exercisable as to all of the Option Shares. The Option may be exercised only to purchase whole shares, and in no case may a fraction of a share be purchased. 3. Term of Option and Termination of Employment. (a) General Term. The term of the Option and this Option Agreement shall commence on the date hereof. The right of the Optionee to exercise the Option with respect to any Option Shares, to purchase any such Option Shares and all other rights of the Optionee with respect to any such Option Shares shall terminate on the tenth anniversary of the Grant Date, unless the Option has been earlier terminated as provided either in paragraphs (b) through (h) below or under the Plan. (b) Death of Optionee. If the Optionee shall die prior to the exercise of the Option, then: 1 (i) if the Optionee dies while employed by an Employer (as defined in the Plan), then the Option (subject to subsection (h) below) may be exercised by the legatee(s) or personal representative of the Optionee at any time within one year after the Optionee’s death; (ii) if the Optionee’s employment with the Employer was terminated due to a Disability (as defined in the Plan) and the Optionee dies within one year after termination of employment, then the Option (subject to subsection (h) below) may be exercised by the legatee(s) or personal representative of the Optionee any time during the remainder of the period during which the Optionee would have been able to exercise the Option pursuant to subsection (c) below had the Optionee not died; (iii) if the Optionee’s employment is terminated due to Retirement (as defined below), and the Optionee dies during the period after Retirement when the Option was still exercisable by the Optionee, then the Option (subject to subsection (h) below) may be exercised by the legatee(s) or personal representative of the Optionee at any time during the remainder of the period during which the Optionee would have been able to exercise the Option pursuant to subsection (d) below had the Optionee not died; and (iv) if the Optionee dies within three months after termination of employment by the Employer without Cause, as determined pursuant to Subsection 3(f), and clauses (ii) and (iii) above are not applicable, then the Option (subject to subsection (h) below) may be exercised by the legatee(s) or personal representative of the Optionee at any time within one year after the Optionee’s death. (c) Disability. If the Optionee’s employment with the Employer shall terminate prior to the exercise of the Option as a result of a Disability, then the Option (subject to subsection (h) below) may be exercised by the Optionee (or his or her personal representative) at any time within one year after the Optionee’s termination of employment. (d) Retirement. If the Optionee’s employment with the Employer shall terminate prior to the exercise of the Option as a result of Retirement, then the Option (subject to subsection (h) below) may be exercised at any time within one year after the Optionee’s termination of employment. If the Recipient’s employment with the Company is terminated prior to any Vesting Date due to Retirement, then a portion of the Option shall vest immediately prior to such Retirement, if necessary, such that the total vested portion of the Option shall equal the total number of Options multiplied by a fraction, the numerator of which is the number of full years which have elapsed from the Date of Grant to the date of Retirement and the denominator of which is the number of full years in the total vesting period. For purposes hereof “Retirement” shall mean the Recipient’s voluntary termination of employment at or after the date upon which the Recipient has attained both age 55 and 10 years of continuous service with the Company. 2 (e) Termination by the Employer for Cause. If the Optionee’s employment with the Employer shall be terminated by the Employer prior to the exercise of the Option for Cause then the Option shall immediately terminate and shall immediately cease to be exercisable and shall be forfeited to the Company. For purposes of this Agreement, “Cause” shall have the meaning set forth in Section [INSERT SECTION NUMBER HERE] of the Plan. (f) Termination by the Employer Without Cause. If prior to the exercise of the Option, the Optionee’s employment with the Employer shall be terminated by the Employer without Cause, then the Option (subject to subsection (h) below) held by the Optionee may be exercised at any time within three months after the Optionee’s termination of employment, provided that, if such termination of the Optionee’s employment occurs during a Company trading blackout period established pursuant to the Company’s then existing Insider Trading Policy (the “Trading Blackout”), and the Optionee is subject to such Trading Blackout, such Option (subject to subsection (h) below) may be exercised at any time starting from the Optionee’s termination date through the last day of the third month following the expiration date of such Trading Blackout. For purposes of this Option Agreement, if a Subsidiary by which the Optionee is employed ceases to be a Subsidiary, whether through a sale by the Company of all or a portion of the stock or assets of such Subsidiary, a merger or otherwise (a “Subsidiary Transaction”), the Optionee’s employment with the Employer shall be deemed to have been terminated by the Employer without Cause as of the effective date of such Subsidiary Transaction. (g) Termination for Other Reason. If prior to the exercise of the Option, the Optionee’s employment with the Employer shall be terminated for any reason other than as set forth in paragraphs (b) through (f) above, then the Option (subject to subsection (h) below) held by the Optionee may be exercised at any time within one month after the Optionee’s termination of employment, provided that, if such termination of the Optionee’s employment occurs during a Trading Blackout and the Optionee is subject to such Trading Blackout, such Option (subject to subsection (h) below) may be exercised at any time starting from the Optionee’s termination date through the last day of the first month following the expiration date of such Trading Blackout. (h) Post-Termination exercisability. Notwithstanding any other provision of this Section 3 to the contrary, following termination of employment of the Optionee for any reason: (i) the Option shall be exercisable during any of the post-employment periods described in subparagraphs (b) through (g) of this Section 3 if and only to the extent the Option was exercisable (i.e., vested) at the time of such termination of employment and (2) no portion of the Option shall be exercisable following the tenth anniversary of the Grant Date. 4. Employment/Association with Company Competitor. The Optionee hereby agrees that, during (i) the six-month period following a termination of the Optionee’s employment with an Employer that entitles the Optionee to receive severance benefits under an agreement with or the policy of the Company or (ii) the twelve-month period following a termination of the Optionee’s employment with an Employer that does not entitle the Optionee to receive such severance benefits (the period referred to in either clause (i) or (ii), the “Noncompetition Period”), the Optionee shall not undertake any employment or activity (including, but not limited to, consulting services) with a Competitor (as defined below), where the loyal and complete fulfillment of the duties of the competitive employment or activity would call upon the Optionee to reveal, to make judgments on or otherwise use any confidential business information or trade secrets of the business of the Company or any Subsidiary to which the Optionee had access during his employment with the Employer. In addition, the Optionee agrees that, during the Non-competition Period applicable to the Optionee following termination of employment with the Employer, the Optionee shall not, directly or indirectly, solicit, interfere with, hire, offer to hire or induce any person, who is or was an employee of the Company or any of its Subsidiaries during the 12 month period prior to the date of such termination of employment, to discontinue his or her relationship with the Company or any of its Subsidiaries or to accept employment by, or enter into a business relationship with, the Optionee or any other entity or person. In the event that the Optionee breaches the covenants set forth in this first paragraph of Section 4:   (a)   the Option shall immediately terminate; and (b) the Optionee shall promptly pay to the Company an amount of cash equal to the Gain Realized (as defined below) on any Option Shares acquired during the Restricted Period (as defined below). For the purposes of this Section 4: “Restricted Period” shall refer to the period of time commencing ninety days prior to such termination of the Optionee’s employment and ending (x) in the case of an Optionee terminated under clause (i) of the first paragraph of this Section 4, six months after such termination or (y) in the case of an Optionee terminated under clause (ii) of the first paragraph of this Section 4, twelve months after such termination; “Gain Realized” shall equal the difference between (x) the Option Price applicable to the Option Shares and (y) the greater of the Fair Market Value (as defined in the Plan) of the Option Shares (I) on the date of acquisition of such Option Shares or (II) on the date such competitive activity with a Competitor was commenced by the Optionee; and “Competitor” shall refer to any health maintenance organization or insurance company that provides managed health care or related services similar to those provided by the Company or any Subsidiary. It is hereby further agreed that if any court of competent jurisdiction shall determine that the restrictions imposed in this Section 4 are unreasonable (including, but not limited to, the definition of Market Area or Competitor or the time period during which this provision is applicable), the parties hereto hereby agree to any restrictions that such court would find to be reasonable under the circumstances. The Optionee acknowledges that the services to be rendered by him/her to the Company are of a special and unique character, which gives this Agreement a peculiar value to the Company, the loss of which may not be reasonably or adequately compensated for by damages in an action at law, and that a material breach or threatened breach by him/her of any of the provisions contained in this Section 4 will cause the Company irreparable injury. Optionee therefore agrees that the Company may be entitled, in addition to the remedies set forth above in this Section 4 and any other right or remedy, to a temporary, preliminary and permanent injunction, without the necessity of proving the inadequacy of monetary damages or the posting of any bond or security, enjoining or restraining Optionee from any such violations or threatened violations. 5. Notices. Any notice or communication given hereunder shall be in writing and shall be given by fax or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three (3) days after mailing or twenty-four (24) hours after transmission of a fax to the following addresses:       To the Recipient at:   [Name]     [Address] To the Company at:   Health Net, Inc. 21650 Oxnard Street Woodland Hills, California 91367 Attention: General Counsel or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 6. Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Option Agreement or the Plan shall in no way be construed to be a waiver of such provision or of any other provision hereof. 7. Incorporation of Plan; Entire Agreement. The Plan is hereby incorporated by reference and made a part hereof, and the Option and this Option Agreement are subject to all terms and conditions of the Plan. This Option Agreement and the Plan, taken together, constitutes the entire agreement between the parties relating to or effecting the Option, and no promises, terms, conditions or obligations other than those contained in this Option Agreement or the Plan shall be valid or binding. Any prior agreements, statements or promises, either oral or written, made by any party or agent of any party relating to or effecting the Option that are not contained in the Option Agreement or the Plan are of no force or effect. 8. Rights of a Stockholder. The Optionee shall have no rights as a stockholder with respect to any Option Shares unless and until certificates for shares of Common Stock are issued to the Optionee. 9. Change of Control. Notwithstanding the provisions of Section 2 and 3 hereof, in the event that (i) there shall occur a Change in Control (as defined in the Plan) and (ii) the employment of the Optionee shall be terminated within the two year period following the Change in Control but prior to any Vesting Date either (A) by the Company without Cause or (B) under circumstances which entitle the Optionee to Change in Control severance benefits under an effective employment agreement between the Optionee and the Company or the Company’s Safety Net Security Program, each Option shall become fully vested and the date of such vesting shall be deemed to be the Vesting Date hereunder; such termination shall be treated as having occurred pursuant to Section 3(f) hereof for purposes of determining the post-termination exercise period. For purposes of this Section 10, “Cause” shall have the meaning set forth in the Plan. 10. Rights to Terminate Employment. Nothing in the Plan or in this Agreement shall confer upon the Optionee the right to continue in the employment of an Employer or affect any right which an Employer may have to terminate the employment of the Optionee. The Optionee specifically acknowledges that the Employer intends to review Optionee’s performance from time to time, and that the Company and/or the Employer has the right to terminate Optionee’s employment at any time, including a time in close proximity to a Vesting Date, for any reason, with or without Cause. The Optionee acknowledges that upon his or her termination of employment with an Employer for any reason, the Option shall be exercisable only to the extent it is exercisable on the effective date of the Optionee’s termination of employment and only within the period following such termination as is set forth in this Agreement. 11. Transferability. The Option may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Optionee 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; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. 12. Amendment. The Board may terminate or amend the Plan at any time; provided, however, that the termination or any modification or amendment of the Plan shall not, without the consent of the Optionee, affect the rights of the Optionee under this Agreement. 13. Compliance with Applicable Law. The Option is subject to the condition that if the listing, registration or qualification of the shares subject to the Option upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action, is necessary or desirable as a condition of, or in connection with, the purchase or delivery of shares hereunder, the Option may not be exercised, 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 the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval. 14. Decisions of Board or Committee. The Board of Directors or the Committee shall have the right to resolve all questions which may arise in connection with the Option or its exercise. Any interpretation, determination or other action made or taken by the Board of Directors or the Committee regarding the Plan or this Agreement shall be final, binding and conclusive. 15. Failure to Execute Agreement. This Agreement and the Option granted hereunder is subject to the Optionee returning a counter-signed copy of this Agreement to the designated representative of the Company on or before 60 days after the date of its distribution to the Optionee. In the event that the Optionee fails to so return a counter-signed copy of this Agreement within such 60 day period, then this Agreement and the Option granted hereunder shall automatically become null and void and shall have no further force or effect. Electronic acceptance of this Agreement shall constitute an execution of the Agreement by the Optionee and a return of the counter-signed copy to the Company. [Signature Page follows] 3 IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement as of the date and year set forth above. Health Net, Inc.       By:   Name: Title:   Jay M. Gellert President and Chief Executive Officer THE UNDERSIGNED OPTIONEE HEREBY EXPRESSLY ACKNOWLEDGES AND AGREES THAT (I) HE/SHE IS AN EMPLOYEE AT WILL AND MAY BE TERMINATED BY THE EMPLOYER AT ANY TIME, WITH OR WITHOUT CAUSE, (II) THE OPTION MAY NOT BE EXERCISED WITH RESPECT TO ANY OPTION SHARES THAT ARE NOT VESTED ON THE DATE OF ANY SUCH TERMINATION AND (III) THE OPTION MAY BE EXERCISED WITH RESPECT TO OPTION SHARES THAT ARE VESTED ON THE DATE OF ANY SUCH TERMINATION ONLY TO THE EXTENT EXPRESSLY PROVIDED IN THIS OPTION AGREEMENT. The undersigned hereby accepts and agrees to all the terms and provisions of the foregoing Option Agreement and to all the terms and provisions of the Health Net, Inc. [NAME OF PLAN] incorporated by reference herein.             [Optionee] Date 4

  Exhibit 10(bb)       $                       Date of Grant:                      DEFERRED PAYMENT CASH AWARD CLIFF VESTING DENBURY RESOURCES INC.      This grant of a deferred payment cash award (the “Award”) is hereby made by Denbury Resources Inc. (the “Company”) to ___(the “Employee”) on ___(“Date of Grant”). Defined terms used herein which are capitalized but not defined in this Award shall have the meaning assigned to them under the 2004 Omnibus Stock and Incentive Plan for Denbury Resources Inc. 1. Amount of Award. This Award is in the amount of $___. 2. Vesting of Award. This Award will “Vest” and become non-forfeitable on occurrence of the earliest of the dates (“Vesting Date”) set forth in (a) through (d) immediately below:   (a)   the date of the 4th Anniversary of the Date of Grant;     (b)   the date of Employee’s death or Disability;     (c)   the date of a Change in Control;     (d)   the date of Employee’s Separation if such Separation occurs after the Employee’s Retirement Vesting Date. 3. Payment of Award. The full amount of the Award, net of withholding, will be paid to the Employee in a single lump sum cash payment within a reasonable period of time after the Vesting Date. The Employee shall have no right to payment of any amount hereunder prior to the Vesting Date, and funds for payment of the Award have not been segregated, and will not be segregated, from the Company’s assets, and this Award is solely a general unsecured obligation of the Company to pay such Awards within a reasonable period of time following the Vesting Date. This Award will not accrue any interest nor will its dollar value appreciate. 4. Termination of Award. If the Employee Separates at any time prior to the Vesting Date, this Award expires, and the Employee’s right to receive all or any part of the Award is permanently forfeited, on such date of Separation. 5. Withholding. On the Vesting Date (or if not practical then on a date thereafter which is on or prior to payment of the Award), the minimum amount of Federal and state income and employment taxes required to withheld by the Company shall be deducted from the Award, and only the remainder of the Award paid to the Employee. The Employee, in his or her sole discretion, may direct the Company to withhold from the Award any amount in excess of the minimum withholding, by notifying the Human   --------------------------------------------------------------------------------   Resource Department prior to payment of the Award and completing the appropriate withholding forms. 6. No Transfers Permitted. The rights under this Award are not transferable by the Employee otherwise than by will or the laws of descent and distribution, and so long as Employee lives, only Employee or his or her guardian or legal representative shall have any rights under this Award. In the event of Employee’s Separation by reason of death, or Employee’s death after the Vesting Date but before actual payment has been made, the Award will be paid to the Employee’s Beneficiary within 30 days. 7. No Right To Continued Employment. This Award shall not confer upon the Employee any right with respect to continuation of employment by the Company, nor any right to provide services to the Company, nor shall it interfere in any way with Employee’s right to terminate employment, nor the Company’s right to terminate Employee’s employment, at any time. 8. Committee Authority. The Award shall be administered by the Committee, which shall adopt rules and regulations for carrying out the purposes of the Award and, without limitation, may delegate all of what, in its sole discretion, it determines to be ministerial duties to the Administrator; provided, further, that the determinations under, and the interpretations of, any provision of the Award by the Committee shall, in all cases, be in its sole discretion, and shall be final and conclusive. 9. Law Governing. WITHOUT LIMITATION, THIS AWARD SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF DELAWARE. 10. Binding Effect. This Award shall inure to the benefit of and be binding upon the heirs, executors, administrators, successors and assigns of the parties hereto. No amendment of the Award may be made except with the written agreement of both the Company and the Employee.      Dated as of this                      day of                    , 200                    .                   DENBURY RESOURCES INC.               Per:                       Gareth Roberts, President & CEO               Per:                       Phil Rykhoek, Sr. Vice President & CFO   --------------------------------------------------------------------------------   Acknowledgment      The undersigned hereby acknowledges (i) my receipt of this Award, (ii) my opportunity to review the Award, (iii) my opportunity to discuss this Award with a representative of the Company, and my personal advisors, to the extent I deem necessary or appropriate, (iv) my understanding of the terms and provisions of the Award, and (v) my understanding that, by my signature below, I am agreeing to be bound by all of the terms and provisions of this Award.      Without limitation, I agree to accept as binding, conclusive and final all decisions or interpretations (including, without limitation, all interpretations of the meaning of provisions of the Award) of the Administrator upon any questions arising under this Award.      Dated as of this                      day of                                         , 200                    .                                   Employee Name  

Exhibit 10.9   [usdc.jpg]   Haddon B. Libby Chief Financial Officer May 4, 2006 Re: US DRY CLEANING CORPORATION (“The Company”) Senior Secured Convertible Promissory Note Dear Noteholder: Enclosed please find your interest payment for the quarter ending May 2, 2006. A number of noteholders have inquired if it would be possible to receive stock for the interest payment. As a result, the Company is offering to pay this quarterly interest payment in common stock at the rate of $1.60 per share (that is, for example, a noteholder entitled to receive $2,500 in cash would receive 1,563 shares of stock). This is a 36% discount to the conversion price of the Company’s current $10Million convertible debt offering, which is taking place at $2.50 per share. The election to receive stock instead of cash is yours to make. If you desire to make this election, you must execute a copy of this letter acknowledging your desire to take stock and return the enclosed check in the self-addressed, stamped envelope enclosed herewith. It is the Company’s intention to file an SB-2 Registration Statement with the SEC by the end of the month in order to register all of the securities to be issued to noteholders. It is anticipated that the stock will being trading in approximately 60 days after the filing of the SB-2, assuming SEC approval. As you are aware, your Senior Secured Convertible Promissory Note (the “Note”) is convertible into common stock of the Company at a conversion price of $1.00 per share at any time prior to the Maturity Date of August 2, 2006. In order to encourage early conversion prior to May 31, 2006 and to facilitate the registration of the shares pursuant to the SB-2, the Company is offering to convert your Note at $.95 per share. Thus, a holder of a $100,000 Note would receive 105,263 shares of common stock of USDCC.     125 E TAHQUITZ CANYON/SUITE 203/PALM SPRINGS/CA 92262/PHONE 760-323-3338 X226/FAX 760-323-3390 1801 CENTURY PARK EAST/SUITE 1830/LOS ANGELES/CA 90067/PHONE 310-777-8889/FAX 310-226-8553 -------------------------------------------------------------------------------- Page 2 IF YOU DESIRE TO TAKE ADVANTAGE OF THIS EARLY CONVERSION OFFER, PLEASE EXECUTE AND RETURN THE ENCLOSED ELECTION TO CONVERT FORM ENCLOSED HEREWITH, TOGETHER WITH YOUR ORIGINAL NOTE, IN THE SELF-ADDRESSED, STAMPED ENVELOPE.   If you have any questions concerning the foregoing, feel free to contact me. Very truly yours,   /s/ Haddon B. Libby Haddon B. Libby Chief Financial Officer I/we elect to receive stock for my/our interest payment due May 2, 2006 pursuant to the terms set forth above. Print or type Name of Noteholder: ______________________________ Signature:__________________________________________________ Title (if corporation, partnership or trustee): _______________________   -------------------------------------------------------------------------------- Page 3   ELECTION TO CONVERT I/we, ___________________________________________, the holder of a Senior Secured Convertible Promissory Note (the “Note”) dated August 2, 2005, issued by U.S. Dry Cleaning Corporation (“USDCC”) in the principal sum of $_________________________ elect to convert the Note pursuant to Paragraph 8 thereof into common stock of USDCC at the early conversion price of $.95 per share. The original Note is being tendered herewith for cancellation upon the issuance of the stock of USDCC to the undersigned. Dated: _____________, 2006 Print or type Name of Noteholder: _____________________________________ Signature: ________________________________________________________ Title (if corporation, partnership or trustee): _______________________________

  Exhibit 10.2 CHEVRON CORPORATION BENEFIT PROTECTION PROGRAM (Amended and Restated Effective December 7, 2005) (Amended Effective December 6, 2006) Section 1. Establishment and Purpose.      This Chevron Corporation Benefit Protection Program was established effective March 29, 2000 by action of the Board of Chevron Corporation and amended and restated effective December 7, 2005. The Program was further amended effective December 6, 2006. The purpose of the Program is to protect certain benefits provided to employees of the Corporation and its Subsidiaries against elimination or reduction in the event of a Change in Control. In addition, the Program is designed to provide individuals who are eligible to receive awards under the Chevron Corporation Long-Term Incentive Plan compensation to offset any excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended. Section 2. Definitions.      (a) “Accountants” means the independent accountants retained by the Company most recently prior to the Change in Control.      (b) “Benefit Protection Period” means the period commencing six months prior to the public announcement of a proposed transaction which, when effected, is a Change in Control and ending on the date which is two years after the date of a Change in Control.      (c) “Board” means the board of directors of the Corporation.      (d) “Change in Control” shall have the meaning assigned to it in Article VI of the bylaws of the Corporation, as such bylaws may be amended from time to time.      (e) “Code” means the Internal Revenue Code of 1986, as amended.      (f) “Corporation” means Chevron Corporation, a Delaware corporation, or any successor corporation.      (g) “Equalization Amount” shall have the meaning set forth in Section 4 of the Program.      (h) “Excise Tax” shall have the meaning set forth in Section 4 of the Program.      (i) “Payment” shall have the meaning set forth in Section 4 of the Program.      (j) “Program” means this Chevron Corporation Benefit Protection Program.      (k) “Subsidiary” means any corporation or entity in which the Corporation directly or indirectly controls more than 50% of the total voting power of all classes of its stock having voting powers and which the Board has designated as a Subsidiary for purposes of the Program. 1 --------------------------------------------------------------------------------   Section 3. Benefit Protection.      (a) Severance Programs. Concurrent with the adoption of the Program, the Board has adopted the Chevron Corporation Change in Control Surplus Employee Severance Program for Salary Grades Below 27, the Chevron Corporation Change in Control Surplus Employee Severance Program for Salary Grades 27 to 30 and the Chevron Corporation Change in Control Surplus Employee Severance Program for Salary Grades 41 through 43 in order to provide protection to eligible employees of the Corporation or its Subsidiaries in the event of a Change in Control.      (b) Other Chevron Plans.      (i) Retiree Health Care and Life Insurance Coverage. During the Benefit Protection Period, neither the Corporation nor a Subsidiary may take any action which would render ineligible for post-retirement health care or life insurance coverage an individual who as of the date of a Change in Control had satisfied the eligibility requirements for such coverage (as determined under the terms of the applicable plan). This provision shall be applicable to any such individual, whether or not he or she was employed by the Corporation or a Subsidiary on the date of the Change in Control.      (ii) Employer Health Care and Life Insurance Coverage Contribution. During the Benefit Protection Period, neither the Corporation nor a Subsidiary may take any action which would reduce the amount or duration of employer contributions toward the cost of health care coverage or the proportion which employer contributions bears to the total cost of life insurance coverage for any individual who as of the date of a Change in Control was entitled to have the Corporation or a Subsidiary pay for all or a portion of the cost of such coverage (or who becomes so entitled during the Benefit Protection Period). This provision shall be applicable to any such individual, whether or not he or she was employed by the Corporation or a Subsidiary on the date of the Change in Control.      (iii) Retirement Plan Vesting. Upon a Change in Control, all Members in the Chevron Corporation Retirement Plan who were on the active payroll of the Corporation or a Subsidiary on the date of a Change in Control shall become fully vested in their benefits accrued under the Retirement Plan.      (c) Change in Control Effected Pursuant to Agreement. The Board shall take such action, if a Change in Control is effected pursuant to an agreement between the Corporation and another party or parties, as is necessary to require that such agreement contain provisions reasonably effective to ensure that (i) the benefits intended to be provided under the foregoing plans to eligible persons as of the date of the Change in Control will be effectively provided following the Change in Control and for at least two years thereafter; and (ii) following a Change in Control if any benefit plan or program previously maintained by the Corporation or any Subsidiary is eliminated or amended to reduce the benefits provided thereunder, the benefits thereafter provided under any comparable plan maintained by the Corporation or any Subsidiary or by the party or parties to the Change in Control shall be no less favorable to the individuals previously eligible to participate in the amended or eliminated plan or program than the benefits 2 --------------------------------------------------------------------------------   provided under comparable plans or programs to similarly situated employees or retirees, as applicable, of the party or parties to the Change in Control.      (d) General Provisions.      (i) No Mitigation of Damages. No employee shall be required to mitigate the amount of any payment or benefit provided for in any plan or program of the corporation or a Subsidiary by seeking other employment or otherwise and, except as otherwise provided in the Chevron Corporation Change in Control Surplus Employee Severance Program for Salary Grades 27 to 30 or the Chevron Corporation Change in Control Surplus Employee Severance Program for Salary Grades 41 through 43, as applicable, no such payment shall be offset or reduced by the amount of any compensation or benefits provided to any employee in any subsequent employment.      (ii) Severability. The provisions of this Program shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof      (iii) Successors and Assigns. The Program shall be binding upon and shall inure to the benefit of the Corporation, its successors and assigns and the Corporation shall require any successor or assign to expressly assume and agree to perform the Program in the same manner and to the same extent that the Corporation would be required to perform them if no such succession or assignment had taken place. The term “the Corporation” as used herein shall include such successors and assigns. The term “successors and assigns” as used herein shall mean a corporation or other entity acquiring all or substantially all the assets and business of the corporation (including the Program) whether by operation of law or otherwise.      (iv) No Right of Setoff. The Corporation’s obligation to make the payments and provide the benefits included in the Program and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any setoff, counterclaim, recoupment, defense or other rights which the Corporation may have against the affected employee or others.      (v) Waiver. No provision of the Program may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the affected employee and the Corporation. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of the Program to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the time or at any prior or subsequent time. 3 --------------------------------------------------------------------------------   Section 4. Payment of Tax Equalization Benefits.      (a) Eligibility. This Section 4 shall be applicable to any individual who is in PSG 43 or below and who is eligible to receive an award under the Chevron Corporation Long-Term Incentive Plan, as amended from time to time. Such individuals shall be referred to in this Section 4 as “Eligible Employees.”      (b) Tax Equalization Benefits. If any payments, distributions or other benefits payable by or from the Corporation to or for the benefit of an Eligible Employee in connection with or in any way related (or deemed related) to a Change in Control from any source whatsoever (collectively the “Payment”) would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Eligible Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to as the “Excise Tax”), then the Payment shall be limited to the largest amount which would not cause the Eligible Employee to be subject to the Excise Tax (the “Limited Payment”). The preceding sentence shall not apply, however, if the Payment (prior to such limitation) exceeds the Limited Payment by more than the lesser of ten percent of the Payment or $50,000. Where the Payment is not limited to the Limited Payment, the Eligible Employee shall be entitled to receive from the Corporation or the Subsidiary which employs the Eligible Employee an additional payment (the “Equalization Amount”) in an amount such that after payment by the Eligible Employee of all taxes (including, without limitation, any income and employment taxes and any interest and penalties imposed thereto) and the Excise Tax imposed on the Equalization Amount, the Eligible Employee retains an amount of the Equalization Payment equal to the Excise Tax imposed upon the Payment; provided, however, that the maximum Equalization Amount payable to an Eligible Employee shall not exceed 2.99 times the Eligible Employee’s “base amount” as defined in Section 280G of the Code. All calculations required pursuant to the Program shall be performed by the Accountants based on information supplied by the Corporation and the Eligible Employee. All fees and expenses of the Accountants shall be paid by the Corporation. In the event that an Eligible Employee’s Payment is limited to a Limited Payment, the components of the Payment shall be reduced in the following order, solely to the extent necessary to reduce the Payment to the Limited Payment:      (i) Payments pursuant to a severance program described in Section 3(a);      (ii) Payments pursuant to a performance unit granted under the Chevron Corporation Long-Term Incentive Plan which was accelerated by reason of the Change in Control;      (iii) The right to exercise a stock option granted under the Chevron Corporation Long-Term Incentive Plan the vesting of which was accelerated by reason of the Change in Control; and      (iv)Any other component of the Payment 4 --------------------------------------------------------------------------------   Section 5. Administration.      (a) The Committee. The Program shall be administered by the Management Compensation Committee of the Board, or any successor thereto. The Board may at any time replace the Management Compensation Committee with another Committee.      (b) Actions by the Committee. The Committee shall hold meetings at such times and places as it may determine. Acts approved by a majority of the members of the Committee present at a meeting at which a quorum is present, or acts reduced to or approved in writing by a majority of the members of the Committee, shall be the valid acts of the Committee.      (c) Powers of the Committee. The Committee shall have the authority to administer the Program in its sole discretion. To this end, the Committee is authorized to construe and interpret the Program, to promulgate, amend and rescind Rules relating to the implementation of the Program and to make all other determinations necessary or advisable for the administration of the Program. Subject to the requirements of applicable law, the Committee may designate persons other than members of the Committee to carry out its responsibilities and may prescribe such conditions and limitations as it may deem appropriate. Any determination, decision or action of the Committee in connection with the construction, interpretation, administration, or application of the Program shall be final, conclusive and binding upon all persons participating in the Program and any person validly claiming under or through persons participating in the Program.      (d) Liability of Committee Members. No member of the Board or the Committee will be liable for any action or determination made in good faith by the Board or the Committee with respect to the Program. Section 6. Amendment or Termination of the Program.      The Board may amend, suspend or terminate the Program at any time; provided, however, that no amendment, suspension or termination which was approved by the Board during the Benefit Protection Period shall be valid or effective if such amendment, suspension or termination would alter the provisions of this Section 6, adversely affect an Eligible Employee’s right to or amount of an Equalization Amount under the Program, whether or not the Eligible Employee’s employment had terminated at the time the amendment, suspension or termination was so approved, or otherwise eliminate or reduce any protection provided by the Program; provided, however, that any such amendment, suspension or termination may be effected, even if so approved after such a public announcement, if (a) the amendment, suspension or revision is approved after any plans have been abandoned to effect the transaction which, if effected, would have constituted a Change in Control and the event which would have constituted the Change in Control has not occurred, and (b) within a period of six months after such approval, no other event constituting a Change in Control shall have occurred, and no public announcement of a proposed event which would constitute a Change in Control shall have been made, unless thereafter any plans to effect the Change in Control have been abandoned and the event which would have constituted the Change in Control has not occurred. Any amendment, suspension or termination of the Program which is approved by the Board prior to a Change in Control at the 5 --------------------------------------------------------------------------------   request of a third party who effectuates a Change in Control shall be deemed to be an amendment, suspension or termination which is approved during the Benefit Protection Period. Section 7. General.      (a) No Right of Employment. Nothing contained in the Program nor any action of the Committee pursuant to the Program shall give any individual any right to remain in the employ of the Corporation or to impair the Corporation’s right to terminate the employment of any individual at any time, with or without cause, which right is hereby reserved.      (b) Costs of the Program. The costs and expenses of administering the Program shall be borne by the Corporation.      (c) No Assignment. The interest and property rights of any individual under the Program shall not be subject to option or be assignable either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor’s process, and any act in violation of this Section 7(c) shall be void.      (d) Applicable Law. The Program shall be administered, enforced, construed and governed in accordance with the laws of the State of California, without regard to the conflicts of laws principles thereof      (e) Participant’s Rights Unsecured. The Program is not intended and shall not be construed to require the Corporation to fund any of the benefits provided hereunder or to establish a trust for such purpose. The interest under the Program of any individual shall be an unsecured claim against the general assets of the Corporation. 6

Exhibit 10.2 PROJECT AGREEMENT No. 2 BETWEEN VIROPHARMA INCORPORATED AND OSG NORWICH PHARMACEUTICALS, INC. (Vancocin) -------------------------------------------------------------------------------- TABLE OF CONTENTS:   PROJECT AGREEMENT    3 1.    Identification of Terms.    3 2.    Development Activities.    4 3.    Equipment Purchase.    5 4.    Manufacture of Product.    6 5.    Manufacturing Price.    9 6.    Shelf Life and Storage Requirements.    10 7.    Term.    10 8.    Entire Agreement.    12 9.    Amendment.    12 PRICE EXHIBIT    14 DEVELOPMENT PLAN EXHIBIT    17 SCHEDULE OF EXCEPTIONS    19 MATERIALS EXHIBIT    20 -------------------------------------------------------------------------------- PROJECT AGREEMENT No. 2 VIROPHARMA INCORPORATED (“ViroPharma”) and OSG NORWICH PHARMACEUTICALS, INC. (“OSG Norwich”) are entering into this Project Agreement No. 2 (“Project Agreement”) effective as of the 15th day of May 2006 (the “Project Agreement Effective Date”). ViroPharma and OSG Norwich agree that this Project Agreement is entered into pursuant to the Master Agreement (the “Agreement”) and the Quality Agreement between ViroPharma and OSG Norwich dated as of December 1, 2005. The project described herein, for the purpose of increasing the batch size of the production of Vancocin 125mg and 250mg capsules, shall be governed by the terms, conditions and obligations set forth in the Agreement and this Project Agreement, and the terms of the Agreement are hereby incorporated into this Project Agreement by reference. Notwithstanding the incorporation by reference of the Agreement into this Project Agreement, in the event of conflict between the terms, conditions and obligations of this Project Agreement and the Agreement, the terms, conditions and obligations of this Project Agreement shall govern. Capitalized terms not otherwise defined herein shall have the meaning given them in the Agreement. In addition to the foregoing, the Parties hereby agree as follows:     1. Identification of Terms. For purposes of this Project Agreement, the following terms defined in the Agreement shall be further defined as follows:     (a) Active Pharmaceutical Ingredient. “Active Pharmaceutical Ingredient” or “API” shall mean bulk Vancomycin Hydrochloride.     (b) API Reimbursement Price. “API Reimbursement Price,” in U.S. dollars, is the average per batch of Product price paid by ViroPharma to a third party for API during the Calendar Quarter in which the price is being calculated.     (c) Commencement Date. “Commencement Date” shall mean the date that both parties agree in writing that the Development Plan has been successfully completed and has resulted in a validated process for Manufacturing the Product.     (d) Commercial Manufacturing Initiation. “Commercial Manufacturing Initiation” shall mean the completion of Development Plan and the start of manufacturing Product by OSG Norwich for commercial sale and shall commence following the Commencement Date on the date the first post-validation lot is milled upon the request and direction of ViroPharma.     (e) Development Plan. “Development Plan” shall mean the development plan attached hereto as the Development Plan Exhibit.   -------------------------------------------------------------------------------- [***] Indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.   -3- --------------------------------------------------------------------------------   (f) Initial Term. “Initial Term” shall mean the period of time required to complete Development Activities and the first five (5) years after Commercial Manufacturing Initiation.     (g) Lilly. “Lilly” shall mean Eli Lilly and Company.     (h) Manufacturing Price. “Manufacturing Price” shall mean the price set forth in the Price Exhibit provided that, notwithstanding anything to the contrary, the Manufacturing Price shall at all times be equal to or lower than any price for the Product offered by OSG Norwich to a third party.     (i) Minimum Yield. “Minimum Yield” shall be the yield initially determined in Section 4 below.     (j) PEG Specifications. “PEG Specifications” shall mean the specifications for testing the Polyethylene Glycol, or “PEG”, set forth in the Quality Agreement.     (k) Product. “Product” shall mean various presentations of the finished product containing Active Ingredient set forth in Specifications Exhibit attached in the Quality Agreement and incorporated herein by reference known under the registered trademark Vancocin.     (l) Project Agreement No.1. “Project Agreement No. 1” shall mean that certain Project Agreement No.1 dated as of December 1, 2005 between OSG Norwich and ViroPharma.     (m) Quality Agreement. The “Quality Agreement” shall mean that certain Quality Agreement dated as of December 1, 2005 between OSG Norwich and ViroPharma.     (n) Specifications. “Specifications” shall mean the specifications for Manufacturing and testing the Product set forth in Specifications Exhibit.     (o) Specifications Exhibit. “Specifications Exhibit” shall mean the exhibit to the Quality Agreement that sets for the specifications for Manufacturing and testing the Product.     (p) Territory. “Territory” shall mean the fifty (50) states and the District of Columbia and any territories and commonwealths constituting the United States of America, including Puerto Rico.     2. Development Activities. In order for OSG Norwich to start the Manufacture of the Product for ViroPharma, it will be necessary that the activities listed in the Development Plan be completed. The responsibilities of each of OSG Norwich and ViroPharma in relation to the Development Plan, and the timeframes for completion of the Development Plan, are also set forth in the Development Plan. [***] shall pay OSG Norwich the fees designated in the Price Exhibit under the heading Development Activity Costs (“Development Costs”). OSG   -------------------------------------------------------------------------------- [***] Indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.   -4- -------------------------------------------------------------------------------- Norwich acknowledges that the Development Costs represent OSG Norwich’s entire compensation for performance of activities related to completion of the Development Plan. The parties agree to make commercially reasonable efforts to continue to complete the Development Plan in accordance with its terms. OSG Norwich and ViroPharma acknowledge that certain development activities may be required in connection with API that is received from any source other than Alpharma, Inc. (“Third Party API”). OSG Norwich and ViroPharma shall meet to discuss in good faith the parameters of such development activities, including timelines and cost. OSG Norwich shall not commence any work using the Third Party API without ViroPharma’s prior written approval. Subject to the terms and conditions set forth herein, ViroPharma hereby grants to OSG a limited, non-exclusive, royalty free license under ViroPharma’s Patents and, ViroPharma’s Know-How relating to the manufacture of Product (the “Manufacturing Process Technology”), with no right to sublicense or assign such licensed rights, solely for the purpose of performing OSG’s obligations under this Project Agreement, which are limited solely to manufacturing Product for and selling Product to ViroPharma, and any incidental purposes related thereto solely for the benefit of ViroPharma. OSG and ViroPharma acknowledge and agree that (a) without limiting the generality of the foregoing, OSG shall not have any rights under the Manufacturing Process Technology to develop, manufacture or sell Product or any other product for any party other than ViroPharma; (b) the Manufacturing Process Technology is, in whole and in part, the Confidential Information of ViroPharma; and (c) prior to and since November 9, 2004, Lilly has been providing the Manufacturing Process Technology to OSG as a Representative of ViroPharma, and that it is the parties’ intention that, since such date, OSG has been operating solely in accordance with the license granted herein.     3. Equipment Purchase. In order for OSG Norwich to manufacture Product for ViroPharma, ViroPharma has purchased certain Equipment (as defined in the Price Exhibit), and anticipates purchasing additional Equipment during the term of this Project Agreement, that is required for use by OSG in the Manufacturing process. OSG Norwich agrees to purchase and install for ViroPharma all necessary Equipment. OSG Norwich shall maintain the Equipment in good working condition and in a manner consistent with industry practices and insured in the ordinary course of business. OSG Norwich shall inform ViroPharma in writing sixty (60) days prior to utilizing installed Equipment and capital for manufacturing of any material other than Product, which use shall be additionally subject to this Section 3 and Section 4 below. Manufacturing of penicillin, cephalosporin, cytotoxic, or highly potent material on the installed Equipment and capital is not permitted. Validated cleaning methods shall be established for all other materials.   -------------------------------------------------------------------------------- [***] Indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.   -5- -------------------------------------------------------------------------------- Except as specifically set forth in this Project Agreement, OSG Norwich shall use the Equipment [***] to manufacture the Product for ViroPharma, and shall not use the Equipment [***]. In the event that OSG Norwich wishes to use the equipment for the benefit of a third party during the [***] period following the successful completion of the validation work described in this Project Agreement, ViroPharma [***], subject to the limitations and restrictions set forth in this Project Agreement. If, in [***], ViroPharma decides not to permit such use of the Equipment by OSG, then in the event that this Project Agreement [***], or if this Project Agreement [***], OSG Norwich shall ship the Equipment to ViroPharma within [***] days. If, in [***], ViroPharma decides to permit the use of the Equipment by OSG for the benefit of a third party, then: a. In the event that [***], OSG Norwich shall a) return the Equipment to ViroPharma if OSG Norwich has no product under contract utilizing the Equipment or b) reimburse to ViroPharma [***] of the cost of an equivalent Equipment if OSG Norwich has product under contract utilizing the Equipment; and b. In the event that [***] OSG Norwich shall a) return the Equipment if OSG Norwich has no product under contract utilizing the Equipment or b) retain title to the Equipment if OSG Norwich does have product under contract utilizing the Equipment. Title to equipment and installed capital other than (a) the Equipment, and (b) any additional equipment used by OSG Norwich that is paid for by ViroPharma, will remain with OSG Norwich.     4. Manufacture of Product. Manufacture and Purchase Subject to the terms and conditions of this Project Agreement, the Agreement, the Quality Agreement, and the batch records approved by ViroPharma, and beginning on the Commencement Date, OSG Norwich shall manufacture from Active Pharmaceutical Ingredient and supply to ViroPharma, and ViroPharma shall purchase from OSG Norwich, Product for commercial sale in the Territory. Except as provided below, during the period that OSG Norwich’s “Product Manufacturing Capacity” (as defined below) equals or exceeds ViroPharma’s commercial requirements for finished cartons of the Product (as reflected in the first [***] Calendar Quarters of ViroPharma’s most recent forecast for the Product delivered to OSG Norwich pursuant to Section 4.1(b) of the Agreement, the “Commercial Requirements”), ViroPharma shall purchase at least [***] of its Commercial   -------------------------------------------------------------------------------- [***] Indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.   -6- -------------------------------------------------------------------------------- Requirements for Product in the Territory during each such [***] Calendar Quarter period exclusively from OSG Norwich, provided that,: (a) without regard to the Product Manufacturing Capacity: (i) if OSG Norwich is unable to meet the purchase orders of ViroPharma with respect to quantity ordered, quality of the Product and time for delivery (assuming that such purchase orders meet the terms of this Project Agreement and the Master Agreement), then ViroPharma may obtain [***] of Product from a third person; (ii) OSG Norwich acknowledges that, at any time, ViroPharma shall have the right to qualify [***] third party suppliers to manufacture the Product and that ViroPharma is permitted to purchase up to [***] of its Commercial Requirements for Product in the Territory from such other third party suppliers; and (iii) ViroPharma may purchase in excess of [***] of its Commercial Requirements for the Product from Lilly through [***]; and (b) during any period that OSG Norwich’s Product Manufacturing Capacity is less than ViroPharma’s Commercial Requirements for the Product, ViroPharma may submit purchase orders for Product to, or otherwise obtain Product from, a third person in an amount not to exceed [***]. Prior to the Commencement Date, prior to each anniversary of the Commencement Date, and at any time (not to exceed [***] each calendar year) that OSG Norwich, in good faith, reasonably determines that it has increased its Product Manufacturing Capacity by at least [***], ViroPharma and OSG Norwich shall meet and mutually agree in writing on the number of capsules of the Product that OSG Norwich can Manufacture for ViroPharma during the [***] Calendar Quarter period following the Commencement Date, each anniversary thereof, or such other time described in the beginning of this paragraph, as applicable (the “Number of Capsules”). If, within fifteen calendar days following the date that the parties meet to determine the Number of Capsules, the parties cannot agree on the Number of Capsules, the matter shall be submitted to arbitration. The parties shall mutually agree on the selection of the arbitrator. If the parties cannot so agree within 5 business days after the expiration of the foregoing fifteen calendar day, each party shall select one arbitrator and the two arbitrators shall be instructed to agree on a third arbitrator within five calendar days (the “Selected Arbitrator”). Within five business days after the appointment of the Selected Arbitrator, each of the parties shall submit in writing to the Selected Arbitrator its calculation of the Number of Capsules and its reasoning in support thereof (each, a “Written Proposal”), and the Selected Arbitrator shall be required to make a final determination by choosing one of the parties’ proposed Number of Capsules. The decision of the Selected Arbitrator in any such arbitration shall be final, binding and not appealable. Each Party shall pay its own expenses of arbitration and the expenses of the arbitrators shall be equally shared by the parties. This arbitration provision shall be deemed to be self-executing, and in the event either party fails to submit timely its Written Proposal, then the Selected Arbitrator shall select the Number of Capsules stated in the other party’s Written Proposal.   -------------------------------------------------------------------------------- [***] Indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.   -7- -------------------------------------------------------------------------------- OSG Norwich: (a) shall supply Product (including any other product containing the API) in the Territory exclusively to ViroPharma, except that OSG Norwich may continue to supply Product to Lilly to fulfill Lilly’s needs outside of the Territory in [***]; (b) shall not supply Product, or any product containing the API, anywhere in the world to any third person other than to (i) Lilly to fulfill Lilly’s needs in [***] or (ii) any assignee of Lilly’s rights and obligations in [***] under its Master Agreement with OSG Norwich dated March 13, 2003 (as amended as of August 31, 2004) and its Project Agreement with OSG Norwich dated August 31, 2004 to fulfill such assignees needs in [***]; (c) if ViroPharma decides to permit the use of the Equipment by OSG for the benefit of a third party as described in Section 3 above, then OSG Norwich shall, at all times, ensure that ViroPharma’s orders for Product are filled to the fullest extent of the capacity of the Equipment, and shall not reject or reschedule for later delivery (in whole or in part), any order for Product from ViroPharma, due to limitations or restrictions that might otherwise arise relating to OSG Norwich’s use of the Equipment for third parties; and (d) shall provide ViroPharma in writing, within 5 business days after the end of each month, data describing the amount of PEG in OSG’s possession at the end of the immediately preceding month. Minimum Yield The Minimum Yield for the first [***] lots (excluding validation lots) of 125mg and 250mg presentations of the Product shall be [***]% of Theoretical Carton Yield per batch (the “Initial Minimum Yield”). The “Theoretical Carton Yield” shall be determined by dividing (a) the Theoretical Capsule Yield by (b) [***]. The “Theoretical Capsule Yield” shall be determined by dividing (y) the [***] used to produce a single batch of Product by (z) the [***] of Product. If the Actual Yield for the first [***] lots (excluding validation lots) of 125mg and 250mg presentations of the Product is less than the Initial Minimum Yield, and if it determined that failure to meet Initial Minimum Yield is a direct result of OSG error, then OSG shall reimburse to ViroPharma an amount equal to (a) [***], times (b) the [***]. At ViroPharma’s option, reimbursement shall be made to ViroPharma as a set off against invoices that ViroPharma owes OSG, or against future invoices related to the Product. Following the manufacture of the first [***] lots (excluding validation lots) of 125mg and 250mg presentations of the Product under this Project Agreement, the “Minimum Yield” will be established and agreed between ViroPharma and OSG, and thereafter the Minimum Yield will be subject to the provisions of section of 5.4 of the Agreement.   -------------------------------------------------------------------------------- [***] Indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.   -8- -------------------------------------------------------------------------------- The Supplier Relationship Team may change the Minimum Yield from time to time, as circumstances require by doing so in writing. An authorized representative of each Party must sign any setting of the Minimum Yield.     5. Manufacturing Price. ViroPharma shall pay to OSG Norwich, and OSG Norwich shall accept from ViroPharma, the Manufacturing Price designated in Price Exhibit as OSG Norwich’s total compensation for Manufacture of Product, including all labor, materials, facilities, equipment, services, taxes, overhead, and profit. The Manufacturing Price designated in Price Exhibit consists of two (2) components: “Materials Costs” and “Non-Materials Costs.” The “Materials Costs” set forth on the Price Exhibit shall equal OSG Norwich’s actual out-of-pocket costs to acquire the materials described on the OSG Materials Exhibit attached hereto (“Materials”), and the Materials Costs described on the Price Exhibit shall include a handling fee equal to [***] of such out-of pocket costs. The Materials Costs shall initially be as set forth in the Price Exhibit, and shall remain firm for Product shipped prior to and during the [***] period of time after Commercial Manufacturing Initiation (such [***] period, and each subsequent [***] period, a “Commercial Manufacturing [***]”). Following the first Commercial Manufacturing [***] hereunder, OSG Norwich may, in accordance with the procedure set forth below, notify ViroPharma [***] in each Commercial Manufacturing [***] of any changes in the Manufacturing Price due to changes in Materials Costs, such increase in Materials Costs not to exceed in any year OSG’s actual out-of-pocket costs to acquire the Materials plus a handling fee equal to [***] of such out-of pocket costs. The “Non-Materials Costs” shall be all other components of the Manufacturing Price other than the Materials Costs. The Non-Materials Costs shall initially be as set forth in the Price Exhibit, and shall remain firm for Product shipped prior to and during [***] Commercial Manufacturing [***] hereunder. Following the [***] Commercial Manufacturing [***] hereunder, OSG Norwich may, in accordance with the procedure set forth below, notify ViroPharma [***] in each Commercial Manufacturing [***] of any changes in the Manufacturing Price due to changes in Non-Materials Costs, such increase in Non-Materials Costs not to exceed in any year the CPI-Adjusted Amount. The “CPI Adjusted Amount” shall be determined by multiplying the then-current Non-Materials Costs by a fraction, (i) the numerator of which shall be equal to the difference between the Index for the calendar month immediately preceding the last month of the then-current Commercial Manufacturing [***], less the Index for that same calendar month in the immediately preceding Commercial Manufacturing [***] (the “Previous Index”), and (ii) the denominator of which shall be equal to the Previous Index. For the purposes   -------------------------------------------------------------------------------- [***] Indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.   -9- -------------------------------------------------------------------------------- hereof, the term “Index” means the Consumer Price Index published by the Bureau of Labor Statistics of the U.S. Department of Labor for all Urban Consumers (CPI-U) — U.S. All Items (1982-1984 = 100). In the event that the compilation and/or publication of the Index shall be transferred to any other governmental department, bureau, or agency, or shall be discontinued, then the index most similar to the Index shall be used. No changes to the Manufacturing Price shall be effective unless OSG Norwich delivers proper notice of any changes to the Materials Costs and/or Non-Materials Costs, computed in accordance with the provisions set forth above and with accompanying documentation setting forth such computations in reasonable detail, to ViroPharma at least [***] days prior to the expiration of the then-current Commercial Manufacturing [***]. Changes in the Manufacturing Price will be effective for all Product shipped by OSG Norwich in the following Commercial Manufacturing [***]. Invoicing and payment shall be in United States dollars and shall follow the procedures set forth in the Agreement. The compensation for and development of ongoing stability testing is listed as Stability Costs in the Price Exhibit (“the “Stability Costs”). ViroPharma shall pay [***] Stability Costs. The Stability Costs shall remain firm for stability services invoiced during the [***] year period of time after Commercial Manufacturing Initiation. Upon ViroPharma’s request, OSG Norwich shall provide to ViroPharma a written estimate of any increase in cost in Manufacturing Product that may be caused by a change in the PEG Specifications. Any increase in cost experienced by OSG Norwich in Manufacturing Product for ViroPharma that is directly related to changes in the PEG Specifications required by ViroPharma shall be passed on to ViroPharma.     6. Shelf Life and Storage Requirements. Subject at all times to the limitations on OSG Norwich’s obligations described in Section 18 of the Agreement (Force Majeure), Product shipped to ViroPharma or to other locations of ViroPharma’s designation shall meet the following shelf life and storage requirements:   Shelf Life:    Minimum of [***] to [***] months remaining at time of shipment. Storage Requirements:    The handling and storage conditions for finished Product are Controlled Room Temperature, which is equivalent to 15 to 30 C (59 to 86 F) (Note: refer to Quality Agreement for storage conditions of Vancomycin HCl).     7. Term. This Project Agreement shall be effective as of the Project Agreement Effective Date and shall expire on the fifth (5th) anniversary of Commercial Manufacturing Initiation. At the   -------------------------------------------------------------------------------- [***] Indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.   -10- -------------------------------------------------------------------------------- end of the Project Agreement Initial Term, this Project Agreement shall continue automatically for successive [***] periods under the same terms and conditions hereunder until terminated. This Project Agreement may be terminated by ViroPharma at the expiration of the Project Agreement Initial Term or at the expiration of any renewal term upon not less than [***] months prior written notice to OSG Norwich. OSG Norwich may terminate this Project Agreement at the expiration of the Project Agreement Initial Term or at the expiration of any renewal term upon not less than [***] months prior written notice to ViroPharma. In addition to the foregoing, either Party may terminate this Project Agreement in the event of a material breach by the other Party of this Project Agreement, provided that the Party asserting such breach first serves written notice of the alleged breach on the offending Party and such breach is not cured within [***] days of said notice; provided further, however, that this Project Agreement shall not terminate in the event of a material breach pursuant to this Section 7 unless, at the termination of such [***] day period, the Party asserting such breach notifies the other Party in writing of such termination due to a failure to cure the material breach.     8. Project Agreement No. 1 Notwithstanding anything to the contrary in Project Agreement No. 1, from and after the Commencement Date: (a) all matters relating to ViroPharma’s obligations to purchase Product from OSG Norwich shall be governed by this Project Agreement, and (b) all of such obligations of ViroPharma under Project Agreement No. 1 shall automatically terminate, except with respect to purchase orders delivered to, and accepted by, OSG prior to the Commencement Date in respect of Product intended by the parties to be Manufactured by OSG Norwich and delivered to ViroPharma under Project Agreement No. 1. Notwithstanding the foregoing, if ViroPharma requests OSG Norwich to manufacture Product in the small tank under Project Agreement No. 1, or if Product must be manufactured under Project Agreement No. 1 because the large tank used for this Project Agreement is available as a result of [***] event as defined in paragraph [***] of the Agreement, then the prices for such Product will be as listed in the Price Exhibit in Project Agreement No. 1 . Any termination of this Project Agreement shall automatically terminate Project Agreement No. 1, unless the parties otherwise agree in writing to continue the effectiveness of Project Agreement No. 1.     9. Entire Agreement. This Project Agreement, the Agreement, and the Quality Agreement, including the exhibits and other attachments hereto and thereto, contain the entire agreement between the parties relating to the subject hereof and supersedes all prior drafts or understanding, whether written or oral, relating to the subject matter hereof.     10. Amendment. Except as otherwise provided herein, this Project Agreement, including the exhibits and other attachments hereto, may be modified or amended only by written agreement of the Parties hereto signed by authorized representatives of the Parties.   -------------------------------------------------------------------------------- [***] Indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.   -11- -------------------------------------------------------------------------------- [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]     -------------------------------------------------------------------------------- [***] Indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.   -12- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Parties have caused this Project Agreement to be executed and delivered on the date first set forth above. VIROPHARMA INCORPORATED   By:   /s/ Michel de Rosen Printed Name:   Michel de Rosen Title:   Chief Executive Officer OSG NORWICH PHARMACEUTICALS, INC.   By:   /s/ Christopher R. Calhoun Printed Name:   Christopher R. Calhoun Title:   President   -------------------------------------------------------------------------------- [***] Indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.   -13- -------------------------------------------------------------------------------- PRICE EXHIBIT PRODUCT: Vancocin capsules MATERIALS:     ¨ ViroPharma Supplied: Vancomycin Hydrochloride API, and Polyethylene Glycol (PEG).     ¨ OSG Norwich Supplied: All other materials required for manufacturing and packaging.   TERMS:    Net [***] days FOB:    [***] PALLETS:    [***] each for OSG Norwich supplied pallets used to ship Product. MANUFACTURING PRICE: Vancocin Capsules 125 mg and 250 mg:     1. 125 mg:   Non-Materials Costs per finished carton of Product   Materials Costs per finished carton of Product   Manufacturing Price per finished carton of Product [***]   [***]   [***]     2. 250 mg:   Non-Materials Costs per finished carton of Product   Materials Costs per finished carton of Product   Manufacturing Price per finished carton of Product [***]   [***]   [***] For clarity, each finished carton of Product shall contains [***] blister packs of [***] capsules of Product, and the total cost per finished carton of Product includes the costs for [***]. The Manufacturing Price per finished carton of Product shall at all times be [***].   -------------------------------------------------------------------------------- [***] Indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.   -14- -------------------------------------------------------------------------------- DEVELOPMENT ACTIVITY COSTS Development Lots, Validation Lots and Stability As more fully described in the Development Plan, OSG Norwich shall Manufacture [***] development lot of each of the 125 mg and 250 mg presentations of the Product, and [***] validation lots of each of the 125 mg and 250 mg presentations of the Product. Completion of stability tests for the initial time points for all development and validation lots are included in Process Qualification and IOQ charges. Additional stability costs for Development Activities will be charged on a [***] pull price. Stability charges for this Product shall be invoiced at the completion of stability testing and documentation. The following stability table outlines the project stability requirements and estimated charges. Development Lots: Estimated charge for Manufacturing both development lots equals [***]. Validation Lots: Stability:     •   [***]: The [***] lots of each strength will utilize [***] Estimated charge for stability pulls associated with the validation lots equals [***]. Manufacturing: Estimated charge for Manufacturing all validation lots equals [***] Product made in the [***] demonstration and [***] validation lots and that remains after testing associated with the validation plan will be reimbursed at the per carton Manufacturing Price when made available for commercial sale. Cleaning Validation/Verification Estimated charge equals [***] [***] Estimated charge equals [***] EQUIPMENT: ViroPharma shall purchase or reimburse OSG Norwich for the following equipment/services required to manufacture the Product. The equipment described below is the “Equipment” referred to in this Project Agreement.   -------------------------------------------------------------------------------- [***] Indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.   -15- -------------------------------------------------------------------------------- Type         Cost [***]    [***]    [***] [***]    [***]    [***] [***]    [***]    [***] [***]    [***]    [***]         TOTAL       [***]         -------------------------------------------------------------------------------- * purchased by ViroPharma for use by OSG Norwich prior to the date of this Project Agreement REFERENCE STANDARD MANAGEMENT OSG Norwich shall manage the reference standards for Third Party API at no additional cost to ViroPharma. STABILITY COSTS FOLLOWING “COMMERCIAL MANUFACTURING INITIATION”: Cost per Pull: [***]. “Pull” is defined as testing and documenting results of required analytical methods as required in the Product Specification for one sample for one time point for each condition. Stability Table: The following are the estimated requirements for the stability program for this Product. Stability charges for this Product shall be invoiced at the time of the completion of stability testing and documentation. Annual Routine Pulls: A minimum of [***] lot of each strength per year for a total of [***] lots per year [***] Total estimated cost per year = [***] Non-routine Stability Request: In the event of a deviation, or an event requiring further investigation, either party may request an additional stability study. OSG Norwich and ViroPharma shall discuss in good faith the event leading to the request. In the event that the deviation is clearly the result of fault of OSG Norwich, OSG Norwich shall be responsible for costs associated for related stability pulls. In the event that the cause of the deviation is not clearly due to the fault of OSG Norwich, then the parties shall discuss in good faith the responsibility of costs associated for related stability pulls.   -------------------------------------------------------------------------------- [***] Indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.   -16- -------------------------------------------------------------------------------- DEVELOPMENT PLAN EXHIBIT Except as set forth on the attached Schedule of Exceptions, Lilly has previously supplied OSG Norwich with the following information:     1. Process flow chart     2. Process flow document     3. Development history reports     4. Existing stability protocols for drug product     5. In-process control methods     6. Master Formulas of Indianapolis registration stability lots with Alpharma vancomycin hydrochloride     7. Raw material specifications     8. Raw material suppliers     9. Drug product specifications     10. Health and safety information     11. Analytical Methods     12. Analytical Transfer Protocols     13. Cleaning Method Protocol OSG Norwich has completed the following activities prior to start of validation: [***]   -------------------------------------------------------------------------------- [***] Indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.   -17- -------------------------------------------------------------------------------- DEVELOPMENT PLAN EXHIBIT (continued) OSG Norwich has transferred the following methods prior to validation:   Method    Used For [***]    [***] OSG Norwich will manufacture the following type and number of lots for the described purpose: [***] OSG Norwich will complete the following activities in order to consider the scale-up validation effort to be complete: [***]   -------------------------------------------------------------------------------- [***] Indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.   -18- -------------------------------------------------------------------------------- SCHEDULE OF EXCEPTIONS None.   -------------------------------------------------------------------------------- [***] Indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.   -19- -------------------------------------------------------------------------------- MATERIALS EXHIBIT Provided by OSG Norwich: [***]   -------------------------------------------------------------------------------- [***] Indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

  Exhibit 10 (m) MARKETING SERVICES AGREEMENT THIS MARKETING SERVICES AGREEMENT is made as of March 14, 2006 between DNB FIRST, NATIONAL ASSOCIATION, a national banking association with an address at 4 Brandywine Avenue, Downingtown, PA 19335 (“DNB”) and TSG, INC., a Pennsylvania business corporation with an address at P.O. Box 156, 1212 Scott Road, Unionville, PA 19375 (“Service Provider”). Background: A. DNB does not presently have sufficient staff to provide all of the “Marketing Services” referred to below for itself.   B. Eli Silberman, the principal of Service Provider, is uniquely situated to assist DNB with the Marketing Services because of his marketing industry knowledge and experience, and his knowledge of DNB.   In consideration of the premises and mutual obligations contained herein, and intending to be legally bound, the parties hereto agree as follows:   1. Marketing Services. Service Provider shall consult with and assist DNB in the execution of its branding strategy for the purpose of successfully differentiating DNB’s products and services. To achieve that goal, Service Provider shall provide the following services:   (a) Consult with and assist DNB’s management in establishing strategies for branding based on the 2005 Branding study.   (b) Assist DNB with marketing, public relations and customer relations strategies to provide a clear and consistent brand positioning message to its customers and prospects.   (c) Assist DNB Management with creative supervision and copywriting as needed for all advertising and communications including, but not limited to, the Annual Report.   The foregoing services shall produce the deliverables, and be consistent with, the documented discussions DNB and Service Provider have had to date, and shall be subject to such performance measures for each stage of performance as the parties shall identify prior to commencement of each stage of services. The foregoing are sometimes referred to in this Agreement as the “Marketing Services.” The Marketing Services shall be provided within such deadlines as the parties may mutually agree from time to time, but shall in all events be consistent with DNB’s marketing requirements.   2. Compensation. In consideration for Service Provider rendering the Marketing Services, DNB shall (i) reimburse Service Provider its reasonable out-of-pocket expenses in providing the Marketing Services. All such expenses are subject to prior approval by DNB’s Retail Banking Division’s Executive Vice President; and (ii) pay Service Provider a monthly retainer of $5,000.00 per month for each calendar month in 2006.     -1- --------------------------------------------------------------------------------   3. Regulatory Compliance. This Agreement shall in all events be subject to all applicable banking laws and regulations. The performance of Marketing Services by the Service Provider is subject to examination oversight by DNB’s applicable banking regulators. Without limiting the foregoing, the provision of Marketing Services and the payment of compensation therefor shall be on terms and at compensation rates that are substantially the same, or at least as favorable to DNB, as those available to DNB for comparable services from other nonaffiliated service providers. The parties agree to modify this Agreement and the compensation payable hereunder from time to time to conform to any applicable regulatory requirements. Service Provider shall each be subject to examination by DNB’s regulators to the extent deemed appropriate or necessary by such regulators in connection with this Agreement.   4. Intellectual Property. Any work product and intellectual property, such as DNB’s name, logo, trademark, and copyrighted material, shall be the sole property of DNB.   5. Confidentiality; Preservation and Disposition of Confidential Information. All information relating to DNB, including without limitation relating to its products, services, methods, branding and other business strategies, product designs, and customers and consumers, and all information relating to any DNB customers or consumers, shall be confidential (collectively “Confidential Information”) and shall not be disclosed by Service Provider to any third party without DNB’s prior written consent. Service Provider shall, consistent with DNB’s policies and procedures and laws and regulations applicable to DNB: (a) establish policies, safeguards, methods and procedures to ensure the confidentiality of Confidential Information; (b) establish policies, safeguards, methods and procedures for disposing of Confidential Information; (c) establish policies, safeguards, methods, and procedures consistent with DNB policies and procedures and the laws and regulations applicable to DNB to assure, to DNB’ s reasonable satisfaction, that no third party will gain unauthorized access to any Confidential Information; and (d) upon completion of the engagement for Marketing Services, take such steps as DNB may request to turn over to DNB or destroy all Confidential Information.   6. Business Resumption and Contingency Plans. Service Provider shall be responsible for backing up and otherwise protecting all program and data files of Service Provider relating to DNB and the Marketing Services, for protecting any equipment used in providing the Marketing Services, and for maintaining disaster recovery and contingency plans reasonably acceptable to DNB, including plans and procedures for testing of those plans and providing results to DNB when requested.   7. Termination. This Agreement will expire on December 31, 2006; however, either party may terminate this Agreement prior to such date by written notice of termination upon sixty (60) days written notice. Upon such termination, the parties’ relative rights and obligations shall be governed by this Agreement and applicable law, but notwithstanding any termination, the provisions of Sections 3,4 and 5 of this Agreement shall survive and continue to bind both parties.   8. Authorization. Service Provider and DNB each respectively represents and warrants, one to the other, that this Agreement has been duly authorized by their respective boards of directors and that a copy of this Agreement, fully executed, shall be continuously maintained hereafter as a part of its corporate records.     -2- --------------------------------------------------------------------------------     9. Assignment. 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 permitted assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by any of the parties hereto without the prior written consent of the other parties.   10. Entire Agreement. This agreement embodies the entire agreement and understanding of the parties with respect to the transactions contemplated hereby and supersedes all prior written or oral commitments, arrangements or understandings with respect thereto. There are no restrictions, agreements, promises, warranties, covenants or undertakings with respect to the transactions contemplated hereby other than those expressly set forth herein or therein.   11. Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and each of which shall be deemed an original.   12. Governing Law. This Agreement shall be governed by the internal laws of the Commonwealth of Pennsylvania (regardless of the laws that might be applicable under principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect and performance, except to the extent such laws are pre-empted by applicable federal laws or regulations.   13. Severability. If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected thereby. To the extent permitted by applicable law, each party waives any provision of law, which renders any provision of this Agreement invalid, illegal or unenforceable in any respect.   14. Amendments. This Agreement may not be changed, modified or amended except by written agreement signed by all parties hereto.   IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.   DNB FIRST, NATIONAL ASSOCIATION     By:___________________________ William J. Hieb, President TSG, INC.     By:___________________________ President   -3- --------------------------------------------------------------------------------

CONSULTANT AGREEMENT This CONSULTANT AGREEMENT (the “Agreement”) is entered into by and between the Asia Global Holdings Corp., a Nevada corporation (the “Company”) and Li, Yuen Yee, a natural person (“Consultant”), this 19th day of October, 2006, the date the Services (as defined herein) were first provided to the Company by Consultant. WHEREAS, the Company wishes to retain Consultant to provide the Services in exchange for which the Company agrees to issue to Consultant, during the term of this Agreement, Three Million Two Hundred Thousand (3,200,000) S-8 shares of its common stock; and WHEREAS, the Company acknowledges that Consultant’s services are of a special, unique, unusual and extraordinary character and which are of particular benefit and importance to the Company; and WHEREAS, this Agreement is made to set out the compensation, conditions and guidelines that will govern the relationship between the parties. NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the receipt and sufficiency of which is expressly acknowledged by the parties hereto, the parties agree as follows: 1.   The Services.  For the term of this Agreement Consultant will use his best efforts to provide expansion opportunities, research and geographical oversight, within China,with respect to the activities of the Company’s subsidiary, SINO Trade Intelligent Development Corporation, Ltd., and provide other services as legally and reasonably directed by the Company’s Board of Directors. Such efforts by Consultant shall hereinafter be referred to as the “Services”. It is mutually understood and agreed that any fees for the Services provided by Consultant which result in some benefit for the Company in connection with a capital raising transaction shall be negotiated separately from this Agreement. 2.   Term of Agreement.  Unless otherwise terminated as provided hereunder, the mutual term of this Agreement shall be one (1) year beginning the date the Services were first performed, which was on or about October 19, 2006 through October 18, 2007. 3.   Costs and Expenses.  The Company understands that, in the course of Consultant’s efforts, it may be necessary for Consultant to incur certain costs or expenses. The Company will reimburse Consultant for the costs or expenses by Consultant in providing the Services to the Company, provided such expenses are approved by the Company in writing in advance.   --------------------------------------------------------------------------------   4.   Payment for Services.  In consideration for the Services, the Company agrees to pay Consultant a fee for Services, by way of the issuance to Consultant, during the term of this Agreement, of Three Million Two Hundred Thousand (3,200,000) shares of the Company’s common stock (the “Fee Shares”), herein the Fee Shares referred to herein as the “Consultant Fee”. 5.   Termination. Following the first anniversary of the Effective Date hereof, either party may terminate this agreement upon thirty (30) days notice by registered or certified mail, return receipt requested, addressed to the other party. The thirty (30) day notice shall be measured from the date the notice is mailed. If neither party elects to terminate the agreement pursuant to such written notice then the agreement shall automatically renew pursuant to the same terms and conditions for an additional twelve month time period. 6.   Assignment.  Notwithstanding anything contained herein to the contrary, the rights to the Consultanty Fee and the obligation to provide the Services set forth in this Agreement, may be assigned or transferred by Consultant to an Affiliate; otherwise, this Agreement and the rights and obligations hereunder shall not be assigned. For the purpose of this Agreement the term “affiliate” shall be defined as a person or enterprise that directly, or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control by Consultant. 7.   Counterparts; Facsimile.  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 instrument. A facsimile, telecopy or other reproduction of the original or any counterpart hereof and such executed the original or any counterpart hereof may be delivered by facsimile or similar instantaneous electronic transmission device pursuant to which the signature of or on behalf of such party can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes. At the request of any party hereto, all parties agree to execute an original of this instrument as well as any facsimile, telecopy or other reproduction hereof. 2 --------------------------------------------------------------------------------   8.   Further Documentation. Each party hereto agrees to execute such additional instruments and take such action as may be reasonably requested by the other party to effect the transaction, or otherwise to carry out the intent and purposes of this Agreement. 9.   Notices.  All notices and other communications hereunder shall be in writing and shall be sent by prepaid first class mail to the parties at the following addresses, as amended by the parties with written notice to the other: To Consultant:                                     Li, Yuen Yee    Rm 2010 Wang Yiu House Wang Tau Hom Estate Wong Tai Sin, Hong Kong Telephone: (852) 287-0881   To the Company:                                  Asia Global Holdings Corp. 1601-1604 CRE Centre 889 Cheung Sha Wan Road Kowloon, Hong Kong Telephone: (852) 2180-8666 Facsimile:  (852) 2180-8622 With Copy to:                                       Michael Mak 1601-3 CRE Centre 889 Cheung Sha Wna Road Kowloon Hong Kong Telephone: (852) 2180-8666 Telephone: (852) 2180-8622         10.   Governing Law.  This Agreement was negotiated and shall be governed by the laws of the United States, State of California, County of Los Angeles, notwithstanding any conflict-of-law provision to the contrary.   3 --------------------------------------------------------------------------------   11.   Entire Agreement.  This Agreement sets forth the entire understanding between the parties hereto and no other prior written or oral statement or agreement shall be recognized or enforced. 12.   Severability.  If a court of competent jurisdiction determined that any clause or provision of this Agreement is invalid, illegal or unenforceable, the other clauses and provisions of the Agreement shall remain in full force and effect and the clauses and provision which are determined to be void, illegal or unenforceable shall be limited so that they shall remain in effect to the extent permissible by law. 13.   Amendment or Waiver.  Every right and remedy provided herein shall be cumulative with every other right and remedy, whether conferred herein, at law, or in equity, and may be enforced concurrently herewith, and no waiver by any party of the performance of any obligation by the other shall be construed as a waiver of the same or any other default then, theretofore, or thereafter occurring or existing. At any time prior to a closing of the Initial Acquisition, this Agreement may be amended by a writing signed by all parties hereto. 14.   Headings.  The section and subsection headings in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement the effective date first written above. The “Company” Asia Global Holdings Corp.   By: /s/ Michael Mak   Michael Mak Title: CEO “Consultant” By: /s/ Li, Yuen Yee  Li, Yuen Yee        A natural person      4 --------------------------------------------------------------------------------   

-------------------------------------------------------------------------------- Exhibit 10.1 COMMON STOCK PURCHASE AGREEMENT COMMON STOCK PURCHASE AGREEMENT (the “Agreement”), dated as of January 17, 2006 by and between DOR BIOPHARMA, INC., a Delaware corporation (the “Company”), and FUSION CAPITAL FUND II, LLC, an Illinois limited liability company (the “Buyer”). Capitalized terms used herein and not otherwise defined herein are defined in Section 10 hereof. WHEREAS: Subject to the terms and conditions set forth in this Agreement, the Company wishes to sell to the Buyer, and the Buyer wishes to buy from the Company, up to Six Million Dollars ($6,000,000) of the Company's common stock, par value $0.001 per share (the “Common Stock”). The shares of Common Stock to be purchased hereunder are referred to herein as the "Purchase Shares." NOW THEREFORE, the Company and the Buyer hereby agree as follows: 1.  PURCHASE OF COMMON STOCK. Subject to the terms and conditions set forth in Sections 6, 7 and 9 below, the Company hereby agrees to sell to the Buyer, and the Buyer hereby agrees to purchase from the Company, Purchase Shares as follows: (a) Commencement of Purchases of Common Stock. The purchase and sale of Purchase Shares hereunder shall commence (the "Commencement") within five (5) Trading Days following the date of satisfaction of the conditions to the Commencement set forth in Sections 6 and 7 below (the date of such Commencement, the "Commencement Date"). (b) Buyer's Purchase Rights and Obligations. Subject to the Company’s right to suspend purchases under Section 1(d)(ii) hereof, the Buyer shall buy Purchase Shares (“Daily Purchases”) on each Trading Day during each Monthly Period equal to the Daily Purchase Amount (as defined in Section 1(c)(i)) at the Purchase Price. From time to time, the Company shall also have the right but not the obligation, by its delivery to the Buyer of a Block Purchase Notice (as defined in Section 1(c)(iv)), to require the Buyer to buy Purchase Shares (a “Block Purchase”) equal to the Block Purchase Amount (as defined in Section 1(c)(iv)) at the Block Purchase Price (as defined in Section 1(c)(iv)). The Buyer shall pay to the Company an amount equal to the Purchase Amount with respect to such Purchase Shares as full payment for the purchase of the Purchase Shares so received. The Company shall not issue any fraction of a share of Common Stock upon any purchase. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up or down to the nearest whole share. All payments made under this Agreement shall be made in lawful money of the United States of America by check or wire transfer of immediately available funds to such account as the Company may from time to time designate by written notice in accordance with the provisions of this Agreement. Whenever any amount expressed to be due by the terms of this Agreement is due on any day that is not a Trading Day, the same shall instead be due on the next succeeding day which is a Trading Day. (c) The Daily Purchase Amount; Company's Right to Decrease or Increase the Daily Purchase Amount; the Block Purchase Amount. (i) The Daily Purchase Amount. As used herein the term “Original Daily Purchase Amount” shall mean Twenty Thousand Dollars ($20,000) per Trading Day. As used herein, the term “Daily Purchase Amount” shall mean initially Twenty Thousand Dollars ($20,000) per Trading Day, which amount may be increased or decreased from time to time pursuant to this Section 1(c). (ii) Company’s Right to Decrease the Daily Purchase Amount. The Company shall always have the right at any time to decrease the amount of the Daily Purchase Amount by delivering written notice (a “Daily Purchase Amount Decrease Notice”) to the Buyer which notice shall specify the new Daily Purchase Amount. The decrease in the Daily Purchase Amount shall become effective one Trading Day after receipt by the Buyer of the Daily Purchase Amount Decrease Notice. Any purchases by the Buyer which have a Purchase Date on or prior to the first (1st) Trading Day after receipt by the Buyer of a Daily Purchase Amount Decrease Notice must be honored by the Company as otherwise provided herein. The decrease in the Daily Purchase Amount shall remain in effect until the Company delivers to the Buyer a Daily Purchase Amount Increase Notice (as defined below). (iii) Company’s Right to Increase the Daily Purchase Amount. The Company shall have the right (but not the obligation) to increase the amount of the Daily Purchase Amount in accordance with the terms and conditions set forth in this Section 1(c)(iii) by delivering written notice to the Buyer stating the new amount of the Daily Purchase Amount (a “Daily Purchase Amount Increase Notice”). A Daily Purchase Amount Increase Notice shall be effective five (5) Trading Days after receipt by the Buyer. The Company shall always have the right at any time to increase the amount of the Daily Purchase Amount up to the Original Daily Purchase Amount. With respect to increases in the Daily Purchase Amount above the Original Daily Purchase Amount, as the market price for the Common Stock increases the Company shall have the right from time to time to increase the Daily Purchase Amount as follows. For every $0.10 increase in Threshold Price above $0.30 (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction), the Company shall have the right to increase the Daily Purchase Amount by up to an additional $5,000 in excess of the Original Daily Purchase Amount. “Threshold Price” for purposes hereof means the lowest Sale Price of the Common Stock during the five (5) consecutive Trading Days immediately prior to the submission to the Buyer of a Daily Purchase Amount Increase Notice (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction). For example, if the Threshold Price is $0.50, the Company shall have the right to increase the Daily Purchase Amount to up to $30,000 in the aggregate. If the Threshold Price is $0.70, the Company shall have the right to increase the Daily Purchase Amount to up to $40,000 in the aggregate. Any increase in the amount of the Daily Purchase Amount shall continue in effect until the delivery to the Buyer of a Daily Purchase Amount Decrease Notice. However, if at any time during any Trading Day the Sale Price of the Common Stock is below the applicable Threshold Price, such increase in the Daily Purchase Amount shall be void and the Buyer’s obligations to buy Purchase Shares hereunder in excess of the applicable maximum Daily Purchase Amount shall be terminated. Thereafter, the Company shall again have the right to increase the amount of the Daily Purchase Amount as set forth herein by delivery of a new Daily Purchase Amount Increase Notice only if the Sale Price of the Common Stock is above the applicable Threshold Price on each of five (5) consecutive Trading Days immediately prior to such new Daily Purchase Amount Increase Notice. (iv) The Block Purchase Amount. As used herein the term “Block Purchase Amount” shall mean such Purchase Amount as specified by the Company in a Block Purchase Notice. As used herein the term “Block Purchase Notice” shall mean an irrevocable written notice from the Company to the Buyer directing the Buyer to buy the Purchase Amount in Purchase Shares as specified by the Company therein at the Block Purchase Price. For a Block Purchase Notice to be valid the following conditions must be met: (1) the Block Purchase Amount shall not exceed Two Hundred Thousand Dollars ($200,000) per Block Purchase Notice, (2) the Company must deliver the Purchase Shares on the same day as the Block Purchase Notice is delivered and (3) the Sale Price of the Common Stock must have been above $0.60 (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) on the date of the delivery of the Block Purchase Notice and during the ten (10) Trading Days prior to the delivery of the Block Purchase Notice. The Block Purchase Amount may be increased to up to $400,000 if the Sale Price of the Common Stock is above $0.90 (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) during the ten (10) Trading Days prior to the delivery of the Block Purchase Notice. The Block Purchase Amount may be increased to up to $600,000 if the Sale Price of the Common Stock is above $1.20 (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) during the ten (10) Trading Days prior to the delivery of the Block Purchase Notice. The Company may deliver multiple Block Purchase Notices as it shall determine; provided however, at least ten (10) Trading Days must have passed since the most recent Block Purchase was completed. As used herein, the term “Block Purchase Price” shall mean the lesser of (i) the lowest Sale Price of the Common Stock on the Trading Day that a valid Block Purchase Notice was received by the Buyer or (ii) the lowest Purchase Price during the previous fifteen (15) Trading Days prior to the date that the valid Block Purchase Notice was received by the Buyer. The daily purchases shall be automatically suspended for ten (10) trading days each time any such block purchase notice is delivered.  (d) Limitations on Purchases. (i) Limitation on Beneficial Ownership. The Buyer shall not have the right or the obligation to purchase shares of Common Stock under this Agreement to the extent that after giving effect to such purchase the Buyer together with its affiliates would beneficially own in excess of 9.9% of the outstanding shares of the Common Stock following such purchase. For purposes hereof, the number of shares of Common Stock beneficially owned by the Buyer and its affiliates or acquired by the Buyer and its affiliates, as the case may be, shall include the number of shares of Common Stock issuable in connection with a purchase under this Agreement with respect to which the determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (1) a purchase of the remaining Available Amount which has not been submitted for purchase, and (2) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company (including, without limitation, any notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Buyer and its affiliates.  For purposes of this Section, in determining the number of outstanding shares of Common Stock the Buyer may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company's most recent Form 10-QSB or Form 10-KSB, as the case may be, (2) a more recent public announcement by the Company or (3) any other written communication by the Company or its Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the reasonable written or oral request of the Buyer, the Company shall promptly confirm orally and in writing to the Buyer the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to any purchases under this Agreement by the Buyer since the date as of which such number of outstanding shares of Common Stock was reported. Except as otherwise set forth herein, for purposes of this Section 1(d)(i), beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. (ii) Company's Right to Suspend Purchases. The Company may, at any time, give written notice (a " Daily Purchase Suspension Notice") to the Buyer suspending Daily Purchases of Purchase Shares by the Buyer under this Agreement. The Daily Purchase Suspension Notice shall be effective only for Daily Purchases that have a Purchase Date later than one (1) Trading Day after receipt of the Daily Purchase Suspension Notice by the Buyer. Any Daily Purchase by the Buyer that has a Purchase Date on or prior to the first (1st) Trading Day after receipt by the Buyer of a Daily Purchase Suspension Notice from the Company must be honored by the Company as otherwise provided herein. Such Daily Purchase suspension shall continue in effect until a revocation in writing by the Company, at its sole discretion. (iii) Purchase Price Floor. The Company shall not affect any sales under this Agreement and the Buyer shall not have the right nor the obligation to purchase any Purchase Shares under this Agreement on any Trading Day where the Purchase Price for any purchases of Purchase Shares would be less than the Floor Price. “Floor Price” means $0.12, which shall be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction. (e) Records of Purchases. The Buyer and the Company shall each maintain records showing the remaining Available Amount at any give time and the dates and Purchase Amounts for each purchase or shall use such other method, reasonably satisfactory to the Buyer and the Company. (f) Taxes. The Company shall pay any and all transfer, stamp or similar taxes that may be payable with respect to the issuance and delivery of any shares of Common Stock to the Buyer made under this Agreement. (g) Compliance with Principal Market Rules. The Company shall not effect any sale under this Agreement and the Buyer shall not have the right or the obligation to purchase shares of Common Stock under this Agreement to the extent that after giving effect to such purchase the "Exchange Cap" shall be deemed to be reached. The "Exchange Cap" shall be deemed to have been reached if, at any time prior to the shareholders of the Company approving the transaction contemplated by this Agreement, upon a purchase under this Agreement, the Purchase Shares issuable pursuant to such purchase would, together with all Purchase Shares previously issued under this Agreement, exceed 10,071,888 shares of Common Stock (19.99% of the 50,612,504 outstanding shares of Common Stock as of the date of this Agreement). The Company may, but shall be under no obligation to, request its shareholders to approve the transaction contemplated by this Agreement. The Company shall not be required to issue any shares of Common Stock under this Agreement if such issuance would breach the Company's obligations under the rules or regulations of the Principal Market.  2. BUYER'S REPRESENTATIONS AND WARRANTIES. The Buyer represents and warrants to the Company that as of the date hereof and as of the Commencement Date: (a) Investment Purpose. The Buyer is entering into this Agreement and acquiring the Commitment Shares, (as defined in Section 4(f) hereof) (this Agreement and the Commitment Shares  are collectively referred to herein as the "Securities"), for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof; provided however, by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term.   (b) Accredited Investor Status. The Buyer is an "accredited investor" as that term is defined in Rule 501(a)(3) of Regulation D. (c) Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Buyer's compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities. (d) Information. The Buyer has been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities that have been reasonably requested by the Buyer, including, without limitation, the SEC Documents (as defined in Section 3(f) hereof). The Buyer understands that its investment in the Securities involves a high degree of risk. The Buyer (i) is able to bear the economic risk of an investment in the Securities including a total loss, (ii) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the proposed investment in the Securities and (iii) has had an opportunity to ask questions of and receive answers from the officers of the Company concerning the financial condition and business of the Company and others matters related to an investment in the Securities. Neither such inquiries nor any other due diligence investigations conducted by the Buyer or its representatives shall modify, amend or affect the Buyer's right to rely on the Company's representations and warranties contained in Section 3 below. The Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities. (e) No Governmental Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities. (f) Transfer or Sale. The Buyer understands that except as provided in the Registration Rights Agreement (as defined in Section 4(a) hereof): (i) the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder or (B) an exemption exists permitting such Securities to be sold, assigned or transferred without such registration; (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register the Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. (g) Validity; Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Buyer and is a valid and binding agreement of the Buyer enforceable against the Buyer in accordance with its terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies. (h) Residency. The Buyer is a resident of the State of Illinois. (i) No Prior Short Selling. The Buyer represents and warrants to the Company that at no time prior to the date of this Agreement has any of the Buyer, its agents, representatives or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly, any (i) "short sale" (as such term is defined in Rule 200 of Regulation SHO of the Securities Exchange Act of 1934, as amended (the "1934 Act")) of the Common Stock or (ii) hedging transaction, which establishes a net short position with respect to the Common Stock. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Buyer that as of the date hereof and as of the Commencement Date: (a) Organization and Qualification. The Company and its "Subsidiaries" (which for purposes of this Agreement means any entity in which the Company, directly or indirectly, owns 50% or more of the voting stock or capital stock or other similar equity interests) are corporations duly organized and validly existing in good standing under the laws of the jurisdiction in which they are incorporated, and have the requisite corporate power and authority to own their properties and to carry on their business as now being conducted. Each of the Company and its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing could not reasonably be expected to have a Material Adverse Effect. As used in this Agreement, "Material Adverse Effect" means any material adverse effect on any of: (i) the business, properties, assets, operations, results of operations or financial condition of the Company and its Subsidiaries, if any, taken as a whole, or (ii) the authority or ability of the Company to perform its obligations under the Transaction Documents (as defined in Section 3(b) hereof). The Company has no Subsidiaries except as set forth on Schedule 3(a). (b) Authorization; Enforcement; Validity. (i) The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement, the Registration Rights Agreement and each of the other agreements entered into by the parties on the Commencement Date and attached hereto as exhibits to this Agreement (collectively, the "Transaction Documents"), and to issue the Securities in accordance with the terms hereof and thereof, (ii) the execution and delivery of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby, including without limitation, the issuance of the Commitment Shares and the reservation for issuance and the issuance of the Purchase Shares issuable under this Agreement, have been duly authorized by the Company's Board of Directors and no further consent or authorization is required by the Company, its Board of Directors or its shareholders, (iii) this Agreement has been, and each other Transaction Document shall be on the Commencement Date, duly executed and delivered by the Company and (iv) this Agreement constitutes, and each other Transaction Document upon its execution on behalf of the Company, shall constitute, the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and remedies. The Board of Directors of the Company has approved the resolutions (the “Signing Resolutions”) substantially in the form as set forth as Exhibit C attached hereto to authorize this Agreement and the transactions contemplated hereby including the registration statement referred to in Section 4 hereof. The Signing Resolutions are valid, in full force and effect and have not been modified or supplemented in any respect. The Company has delivered to the Buyer a true and correct copy of a unanimous written consent adopting the Signing Resolutions executed by all of the members of the Board of Directors of the Company. No other approvals or consents of the Company’s Board of Directors and/or shareholders is necessary under applicable laws and the Company’s Certificate of Incorporation and/or Bylaws to authorize the execution and delivery of this Agreement or any of the transactions contemplated hereby, including, but not limited to, the issuance of the Commitment Shares and the issuance of the Purchase Shares. (c) Capitalization. As of the date hereof, the authorized capital stock of the Company consists of (i) 150,000,000 shares of Common Stock, of which as of the date hereof, 50,612,504 shares are issued and outstanding, 0 are held as treasury shares, 10,264,339 shares are reserved for issuance pursuant to the Company's stock option plans of which only approximately 0 shares remain available for future grants and 22,167,118 shares are issuable and reserved for issuance pursuant to securities (other than stock options issued pursuant to the Company's stock option plans) exercisable or exchangeable for, or convertible into, shares of Common Stock and (ii) 4,600,000 shares of Preferred Stock, par value $.001 per share, 200,000 shares of Series B Convertible Preferred Stock, par value $.05 per share, and 200,000 shares of Series C Convertible Preferred Stock, par value $.05 per share, of which as of the date hereof none of such shares are issued and outstanding. Except as disclosed in Schedule 3(c), (i) no shares of the Company's capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company, (ii) there are no outstanding debt securities, (iii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, (iv) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except the Registration Rights Agreement), (v) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries, (vi) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities as described in this Agreement and (vii) the Company does not have any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement. The Company has furnished to the Buyer true and correct copies of the Company's Certificate of Incorporation, as amended and as in effect on the date hereof (the "Certificate of Incorporation"), and the Company's By-laws, as amended and as in effect on the date hereof (the "By-laws"), and summaries of the terms of all securities convertible into or exercisable for Common Stock, if any, and copies of any documents containing the material rights of the holders thereof in respect thereto. (d) Issuance of Securities. The Commitment Shares have been duly authorized and, upon issuance in accordance with the terms hereof, the Commitment Shares shall be (i) validly issued, fully paid and non-assessable and (ii) free from all taxes, liens and charges with respect to the issue thereof. At least 9,000,000 shares of Common Stock have been duly authorized and reserved for issuance upon purchase under this Agreement. 450,000 shares of Common Stock (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) have been duly authorized and reserved for issuance as Additional Commitment Shares in accordance with Section 4(f) this Agreement. Upon issuance and payment therefor in accordance with the terms and conditions of this Agreement, the Purchase Shares shall be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. (e) No Conflicts. Except as disclosed in Schedule 3(e), the execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the reservation for issuance and issuance of the Purchase Shares) will not (i) result in a violation of the Certificate of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the By-laws or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the Principal Market applicable to the Company or any of its Subsidiaries) or by which any property or asset of the Company or any of its Subsidiaries is bound or affected, except in the case of conflicts, defaults and violations under clause (ii), which could not reasonably be expected to result in a Material Adverse Effect. Except as disclosed in Schedule 3(e), neither the Company nor its Subsidiaries is in violation of any term of or in default under its Certificate of Incorporation, any Certificate of Designation, Preferences and Rights of any outstanding series of preferred stock of the Company or By-laws or their organizational charter or by-laws, respectively. Except as disclosed in Schedule 3(e), neither the Company nor any of its Subsidiaries is in violation of any term of or is in default under any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its Subsidiaries, except for possible conflicts, defaults, terminations or amendments which could not reasonably be expected to have a Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted, and shall not be conducted, in violation of any law, ordinance, regulation of any governmental entity, except for possible violations, the sanctions for which either individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. Except as specifically contemplated by this Agreement and as required under the 1933 Act or applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency or any regulatory or self-regulatory agency in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents in accordance with the terms hereof or thereof. Except as disclosed in Schedule 3(e), all consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence shall be obtained or effected on or prior to the Commencement Date. Except as listed in Schedule 3(e), since January 1, 2005 the Company has not received nor delivered any notices or correspondence from or to the Principal Market. The Principal Market has not commenced any delisting proceedings against the Company. (f) SEC Documents; Financial Statements. Except as disclosed in Schedule 3(f), since January 1, 2005, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the "SEC Documents"). As of their respective dates (except as they have been correctly amended), the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC (except as they may have been properly amended), 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. As of their respective dates (except as they have been properly amended), the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as listed in Schedule 3(f), the Company has received no notices or correspondence from the SEC since January 1, 2005. The SEC has not commenced any enforcement proceedings against the Company or any of its subsidiaries. (g) Absence of Certain Changes. Except as disclosed in Schedule 3(g), since September 30, 2005, there has been no material adverse change in the business, properties, operations, financial condition or results of operations of the Company or its Subsidiaries. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any Bankruptcy Law nor does the Company or any of its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy or insolvency proceedings. The Company is financially solvent and is generally able to pay its debts as they become due.  (h) Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company, the Common Stock or any of the Company's Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or directors in their capacities as such, which could reasonably be expected to have a Material Adverse Effect. A description of each action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body which, as of the date of this Agreement, is pending or threatened in writing against or affecting the Company, the Common Stock or any of the Company's Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or directors in their capacities as such, is set forth in Schedule 3(h). (i) Acknowledgment Regarding Buyer's Status. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm's length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby and any advice given by the Buyer or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Buyer's purchase of the Securities. The Company further represents to the Buyer that the Company's decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives and advisors. (j) No General Solicitation. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the 1933 Act) in connection with the offer or sale of the Securities. (k) Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. Except as set forth on Schedule 3(k), none of the Company's material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights have expired or terminated, or, by the terms and conditions thereof, could expire or terminate within two years from the date of this Agreement. The officers and directors of the Company and its Subsidiaries do not have any actual knowledge of any infringement by the Company or its Subsidiaries of any material trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others and, except as set forth on Schedule 3(k), there is no claim, action or proceeding being made or brought against, or to the actual knowledge of the officers and directors of the Company, being threatened against, the Company or its Subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement, which could reasonably be expected to have a Material Adverse Effect. (l) Environmental Laws. The Company and its Subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where, in each of the three foregoing clauses, the failure to so comply could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (m) Title. The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(m) or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and any of its Subsidiaries. Any real property and facilities held under lease by the Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries. (n) Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any insurance coverage sought or applied for and neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company and its Subsidiaries, taken as a whole. (o) Regulatory Permits. The Company and its Subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. (p) Tax Status. The Company and each of its Subsidiaries has made or filed all federal and state income and all other material tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. (q) Transactions With Affiliates. Except as set forth on Schedule 3(q) and other than the grant or exercise of stock options disclosed on Schedule 3(c), none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), 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 corporation, partnership, trust or other entity in which any officer, director, or any such employee has an interest or is an officer, director, trustee or partner. (r) Application of Takeover Protections. The Company and its board of directors have taken or will take prior to the Commencement Date all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Certificate of Incorporation or the laws of the state of its incorporation which is or could become applicable to the Buyer as a result of the transactions contemplated by this Agreement, including, without limitation, the Company's issuance of the Securities and the Buyer's ownership of the Securities. (s) Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. 4. COVENANTS. (a) Filing of Form 8-K and Registration Statement. The Company agrees that it shall, within the time required under the 1934 Act file a Report on Form 8-K disclosing this Agreement and the transaction contemplated hereby. The Company shall also file within ten (10) Trading Days from the date hereof a new registration statement covering only the sale of the Commitment Shares and at least 9,000,000 Purchase Shares in accordance with the terms of the Registration Rights Agreement between the Company and the Buyer, dated as of the date hereof (“Registration Rights Agreement”). After such registration statement is declared effective by the SEC, the Company agrees and acknowledges that any sales by the Company to the Buyer pursuant to this Agreement are sales of the Company's equity securities in a transaction that is registered under the 1933 Act. (b) Blue Sky. The Company shall take such action, if any, as is reasonably necessary in order to obtain an exemption for or to qualify (i) the initial sale of the Commitment Shares and any Purchase Shares to the Buyer under this Agreement and (ii) any subsequent resale of the Commitment Shares and any Purchase Shares by the Buyer, in each case, under applicable securities or "Blue Sky" laws of the states of the United States in such states as is reasonably requested by the Buyer from time to time, and shall provide evidence of any such action so taken to the Buyer. (c) No Variable Priced Financing. Other than pursuant to this Agreement, the Company agrees that beginning on the date of this Agreement and ending on the date of termination of this Agreement (as provided in Section 11(k) hereof), neither the Company nor any of its Subsidiaries shall, without the prior written consent of the Buyer, contract for any equity financing (including any debt financing with an equity component) or issue any equity securities of the Company or any Subsidiary or securities convertible or exchangeable into or for equity securities of the Company or any Subsidiary (including debt securities with an equity component) which, in any case (i) are convertible into or exchangeable for an indeterminate number of shares of common stock, (ii) are convertible into or exchangeable for Common Stock at a price which varies with the market price of the Common Stock, (iii) directly or indirectly provide for any "re-set" or adjustment of the purchase price, conversion rate or exercise price after the issuance of the security, or (iv) contain any "make-whole" provision based upon, directly or indirectly, the market price of the Common Stock after the issuance of the security, in each case, other than reasonable and customary anti-dilution adjustments for issuance of shares of Common Stock at a price which is below the market price of the Common Stock. (d) Listing. The Company shall promptly secure the listing of all of the Purchase Shares and Commitment Shares upon each national securities exchange and automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all such securities from time to time issuable under the terms of the Transaction Documents. The Company shall maintain the Common Stock's authorization for quotation on the Principal Market. Neither the Company nor any of its Subsidiaries shall take any action that would be reasonably expected to result in the delisting or suspension of the Common Stock on the Principal Market. The Company shall promptly, and in no event later than the following Trading Day, provide to the Buyer copies of any notices it receives from the Principal Market regarding the continued eligibility of the Common Stock for listing on such automated quotation system or securities exchange. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section. (e) Limitation on Short Sales and Hedging Transactions. The Buyer agrees that beginning on the date of this Agreement and ending on the date of termination of this Agreement as provided in Section 11(k), the Buyer and its agents, representatives and affiliates shall not in any manner whatsoever enter into or effect, directly or indirectly, any (i) "short sale" (as such term is defined in Rule 200 of Regulation SHO of the 1934 Act) of the Common Stock or (ii) hedging transaction, which establishes a net short position with respect to the Common Stock. (f) Issuance of Commitment Shares; Limitation on Sales of Commitment Shares. Immediately upon the execution of this Agreement, the Company shall issue to the Buyer 450,000 shares of Common Stock (the "Initial Commitment Shares"). In connection with each purchase of Purchase Shares hereunder, the Company agrees to issue to the Buyer a number of shares of Common Stock (the “Additional Commitment Shares” and together with the Initial Commitment Shares, the “Commitment Shares”) equal to the product of (x) 450,000 and (y) the Purchase Amount Fraction. The “Purchase Amount Fraction” shall mean a fraction, the numerator of which is the Purchase Amount purchased by the Buyer with respect to such purchase of Purchase Shares and the denominator of which is Six Million Dollars ($6,000,000). The Additional Commitment Shares shall be equitably adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction. The Initial Commitment Shares shall be issued in certificated form and (subject to Section 5 hereof) shall bear the following restrictive legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF HOLDER’S COUNSEL, IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. The Buyer agrees that the Buyer shall not transfer or sell the Commitment Shares until the earlier of 300 Trading Days (15 Monthly Periods) from the date hereof or the date on which this Agreement has been terminated, provided, however, that such restrictions shall not apply: (i) in connection with any transfers to or among affiliates (as defined in the 1934 Act), (ii) in connection with any pledge in connection with a bona fide loan or margin account, (iii) in the event that the Commencement does not occur on or before March 15, 2006, due to the failure of the Company to satisfy the conditions set forth in Section 7 or (iv) if an Event of Default has occurred, or any event which, after notice and/or lapse of time, would become an Event of Default, including any failure by the Company to timely issue Purchase Shares under this Agreement. Notwithstanding the forgoing, the Buyer may transfer Commitment Shares to a third party in order to settle a sale made by the Buyer where the Buyer reasonably expects the Company to deliver Purchase Shares to the Buyer under this Agreement so long as the Buyer maintains ownership of the same overall number of shares of Common Stock by "replacing" the Commitment Shares so transferred with Purchase Shares when the Purchase Shares are actually issued by the Company to the Buyer. (g) Due Diligence. The Buyer shall have the right, from time to time as the Buyer may reasonably deem appropriate, to perform reasonable due diligence on the Company during normal business hours. The Company and its officers and employees shall provide information and reasonably cooperate with the Buyer in connection with any reasonable request by the Buyer related to the Buyer's due diligence of the Company, including, but not limited to, any such request made by the Buyer in connection with (i) the filing of the registration statement described in Section 4(a) hereof and (ii) the Commencement. Each party hereto agrees not to disclose any Confidential Information of the other party to any third party and shall not use the Confidential Information for any purpose other than in connection with, or in furtherance of, the transactions contemplated hereby. Each party hereto acknowledges that the Confidential Information shall remain the property of the disclosing party and agrees that it shall take all reasonable measures to protect the secrecy of any Confidential Information disclosed by the other party. 5. TRANSFER AGENT INSTRUCTIONS. Immediately upon the execution of this Agreement, the Company shall deliver to the Transfer Agent a letter in the form as set forth as Exhibit E attached hereto with respect to the issuance of the Initial Commitment Shares. On the Commencement Date, the Company shall cause any restrictive legend on the Initial Commitment Shares and the 62,500 shares of Common Stock issued to the Buyer upon signing that certain Term Sheet between the Buyer and the Company and dated as of November 30, 2005 (the “Signing Shares”) to be removed and all of the Purchase Shares and Additional Commitment Shares, to be issued under this Agreement shall be issued without any restrictive legend unless the Buyer expressly consents otherwise. The Company shall issue irrevocable instructions to the Transfer Agent, and any subsequent transfer agent, to issue Purchase Shares in the name of the Buyer for the Purchase Shares (the "Irrevocable Transfer Agent Instructions"). The Company warrants to the Buyer that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5, will be given by the Company to the Transfer Agent with respect to the Purchase Shares and that the Commitment Shares Signing Shares and the Purchase Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Registration Rights Agreement subject to the provisions of Section 4(f) in the case of the Commitment Shares.   6. CONDITIONS TO THE COMPANY'S OBLIGATION TO COMMENCE SALES OF SHARES OF COMMON STOCK. The obligation of the Company hereunder to commence sales of the Purchase Shares is subject to the satisfaction of each of the following conditions on or before the Commencement Date (the date that sales begin) and once such conditions have been initially satisfied, there shall not be any ongoing obligation to satisfy such conditions after the Commencement has occurred; provided that these conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion by providing the Buyer with prior written notice thereof: (a) The Buyer shall have executed each of the Transaction Documents and delivered the same to the Company. (b) Subject to the Company's compliance with Section 4(a), a registration statement covering the sale of all of the Commitment Shares, Signing Shares and at least 9,000,000 Purchase Shares shall have been declared effective under the 1933 Act by the SEC and no stop order with respect to the Registration Statement shall be pending or threatened by the SEC. (c) The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Commencement Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Commencement Date.   7. CONDITIONS TO THE BUYER'S OBLIGATION TO COMMENCE PURCHASES OF SHARES OF COMMON STOCK. The obligation of the Buyer to commence purchases of Purchase Shares under this Agreement is subject to the satisfaction of each of the following conditions on or before the Commencement Date (the date that sales begin) and once such conditions have been initially satisfied, there shall not be any ongoing obligation to satisfy such conditions after the Commencement has occurred: (a) The Company shall have executed each of the Transaction Documents and delivered the same to the Buyer. (b) The Company shall have issued to the Buyer the Initial Commitment Shares and shall have removed the restrictive transfer legend from the certificate representing the Initial Commitment Shares and Signing Shares. (c) The Common Stock shall be authorized for quotation on the Principal Market, trading in the Common Stock shall not have been within the last 365 days suspended by the SEC or the Principal Market and the Purchase Shares and the Commitment Shares shall be approved for listing upon the Principal Market. (d) The Buyer shall have received the opinions of the Company's legal counsel dated as of the Commencement Date substantially in the form of Exhibit A attached hereto. (e) The representations and warranties of the Company shall be true and correct in all material respects (except to the extent that any of such representations and warranties is already qualified as to materiality in Section 3 above, in which case, such representations and warranties shall be true and correct without further qualification) as of the date when made and as of the Commencement Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Commencement Date. The Buyer shall have received a certificate, executed by the CEO, President or CFO of the Company, dated as of the Commencement Date, to the foregoing effect in the form attached hereto as Exhibit B. (f) The Board of Directors of the Company shall have adopted resolutions in the form attached hereto as Exhibit C which shall be in full force and effect without any amendment or supplement thereto as of the Commencement Date. (g) As of the Commencement Date, the Company shall have reserved out of its authorized and unissued Common Stock, (A) solely for the purpose of effecting purchases of Purchase Shares hereunder, at least 9,000,000 shares of Common Stock and (B) as Additional Commitment Shares in accordance with Section 4(f) hereof, 450,000 shares of Common Stock. (h) The Irrevocable Transfer Agent Instructions, in form acceptable to the Buyer shall have been delivered to and acknowledged in writing by the Company and the Company's Transfer Agent. (i) The Company shall have delivered to the Buyer a certificate evidencing the incorporation and good standing of the Company in the State of Delaware issued by the Secretary of State of the State of Delaware as of a date within ten (10) Trading Days of the Commencement Date. (j) The Company shall have delivered to the Buyer a certified copy of the Certificate of Incorporation as certified by the Secretary of State of the State of Delaware within ten (10) Trading Days of the Commencement Date. (k) The Company shall have delivered to the Buyer a secretary's certificate executed by the Secretary of the Company, dated as of the Commencement Date, in the form attached hereto as Exhibit D. (l) A registration statement covering the sale of all of the Commitment Shares, Signing Shares and at least 9,000,000 Purchase Shares shall have been declared effective under the 1933 Act by the SEC and no stop order with respect to the registration statement shall be pending or threatened by the SEC. The Company shall have prepared and delivered to the Buyer a final form of prospectus to be used by the Buyer in connection with any sales of any Commitment Shares, Signing Shares or any Purchase Shares. The Company shall have made all filings under all applicable federal and state securities laws necessary to consummate the issuance of the Commitment Shares, Signing Shares and the Purchase Shares pursuant to this Agreement in compliance with such laws. (m) No Event of Default has occurred, or any event which, after notice and/or lapse of time, would become an Event of Default has occurred. (n) On or prior to the Commencement Date, the Company shall take all necessary action, if any, and such actions as reasonably requested by the Buyer, in order to render inapplicable any control share acquisition, business combination, shareholder rights plan or poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Certificate of Incorporation or the laws of the state of its incorporation which is or could become applicable to the Buyer as a result of the transactions contemplated by this Agreement, including, without limitation, the Company's issuance of the Securities and the Buyer's ownership of the Securities. (o) The Company shall have provided the Buyer with the information requested by the Buyer in connection with its due diligence requests made prior to, or in connection with, the Commencement, in accordance with the terms of Section 4(g) hereof.   8. INDEMNIFICATION. In consideration of the Buyer's execution and delivery of the Transaction Documents and acquiring the Securities hereunder and in addition to all of the Company's other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless the Buyer and all of its affiliates, shareholders, officers, directors, employees and direct or indirect investors and any of the foregoing person's agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "Indemnitees") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, or (c) any cause of action, suit or claim brought or made against such Indemnitee and arising out of or resulting from the execution, delivery, performance or enforcement of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, other than with respect to Indemnified Liabilities which directly and primarily result from the gross negligence or willful misconduct of the Indemnitee. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. 9. EVENTS OF DEFAULT. An "Event of Default" shall be deemed to have occurred at any time as any of the following events occurs: (a) while any registration statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of such registration statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to the Buyer for sale of all of the Registrable Securities (as defined in the Registration Rights Agreement) in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of ten (10) consecutive Trading Days or for more than an aggregate of thirty (30) Trading Days in any 365-day period; (b) the suspension from trading or failure of the Common Stock to be listed on the Principal Market for a period of three (3) consecutive Trading Days; (c) the delisting of the Company’s Common Stock from the Principal Market, provided, however, that the Common Stock is not immediately thereafter trading on the New York Stock Exchange, the NASDAQ National Market, the NASDAQ Capital Market, or the OTC Bulletin Board; (d) the failure for any reason by the Transfer Agent to issue Purchase Shares to the Buyer within five (5) Trading Days after the applicable Purchase Date which the Buyer is entitled to receive; (e) the Company breaches any representation, warranty, covenant or other term or condition under any Transaction Document if such breach could have a Material Adverse Effect and except, in the case of a breach of a covenant which is reasonably curable, only if such breach continues for a period of at least five (5) Trading Days; (f) if any Person commences a proceeding against the Company pursuant to or within the meaning of any Bankruptcy Law; (g) if the Company pursuant to or within the meaning of any Bankruptcy Law; (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, (D) makes a general assignment for the benefit of its creditors, (E) becomes insolvent, or (F) is generally unable to pay its debts as the same become due; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company in an involuntary case, (B) appoints a Custodian of the Company or for all or substantially all of its property, or (C) orders the liquidation of the Company or any Subsidiary; (i) a material adverse change in the business, properties, operations, financial condition or results of operations of the Company or its Subsidiaries; (j) if at any time after the Commencement Date, the "Exchange Cap" is reached. [(the "Exchange Cap" shall be deemed to be reached at such time if, upon submission of a Purchase Notice under this Agreement, the issuance of such shares of Common Stock would exceed that number of shares of Common Stock which the Company may issue under this Agreement without breaching the Company's obligations under the rules or regulations of the Principal Market). In addition to any other rights and remedies under applicable law and this Agreement, including the Buyer termination rights under Section 11(k) hereof, so long as an Event of Default has occurred and is continuing, or if any event which, after notice and/or lapse of time, would become an Event of Default, has occurred and is continuing, or so long as the Purchase Price is below the Purchase Price Floor, the Buyer shall not be obligated to purchase any shares of Common Stock under this Agreement. If pursuant to or within the meaning of any Bankruptcy Law, the Company commences a voluntary case or any Person commences a proceeding against the Company, a Custodian is appointed for the Company or for all or substantially all of its property, or the Company makes a general assignment for the benefit of its creditors, (any of which would be an Event of Default as described in Sections 9(f), 9(g) and 9(h) hereof) this Agreement shall automatically terminate without any liability or payment to the Company without further action or notice by any Person. No such termination of this Agreement under Section 11(k)(i) shall affect the Company's or the Buyer's obligations under this Agreement with respect to pending purchases and the Company and the Buyer shall complete their respective obligations with respect to any pending purchases under this Agreement. 10. CERTAIN DEFINED TERMS. For purposes of this Agreement, the following terms shall have the following meanings: (a) “1933 Act” means the Securities Act of 1933, as amended. (b) “Available Amount” means initially Six Million Dollars ($6,000,000) in the aggregate which amount shall be reduced by the Purchase Amount each time the Buyer purchases shares of Common Stock pursuant to Section 1 hereof. (c) “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors. (d) “Closing Sale Price” means, for any security as of any date, the last closing trade price for such security on the Principal Market as reported by the Principal Market, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing trade price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by the Principal Market. (e) “Confidential Information” means any information disclosed by either party to the other party, either directly or indirectly, in writing, orally or by inspection of tangible objects (including, without limitation, documents, prototypes, samples, plant and equipment), which is designated as "Confidential," "Proprietary" or some similar designation. Information communicated orally shall be considered Confidential Information if such information is confirmed in writing as being Confidential Information within ten (10) business days after the initial disclosure. Confidential Information may also include information disclosed to a disclosing party by third parties. Confidential Information shall not, however, include any information which (i) was publicly known and made generally available in the public domain prior to the time of disclosure by the disclosing party; (ii) becomes publicly known and made generally available after disclosure by the disclosing party to the receiving party through no action or inaction of the receiving party; (iii) is already in the possession of the receiving party at the time of disclosure by the disclosing party as shown by the receiving party’s files and records immediately prior to the time of disclosure; (iv) is obtained by the receiving party from a third party without a breach of such third party’s obligations of confidentiality; (v) is independently developed by the receiving party without use of or reference to the disclosing party’s Confidential Information, as shown by documents and other competent evidence in the receiving party’s possession; or (vi) is required by law to be disclosed by the receiving party, provided that the receiving party gives the disclosing party prompt written notice of such requirement prior to such disclosure and assistance in obtaining an order protecting the information from public disclosure. (f) “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. (g) “Maturity Date” means the date that is 300 Trading Days (15 Monthly Periods) from the Commencement Date. (h) “Monthly Period” means each successive 20 Trading Day period commencing with the Commencement Date.   (i) “Person” means an individual or entity including any limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. (j) “Principal Market” means the American Stock Exchange; provided however, that in the event the Company’s Common Stock is ever listed or traded on the NASDAQ National Market, the NASDAQ Small Cap Market, the NASDAQ OTC Bulletin Board or the New York Stock Exchange, than the “Principal Market” shall mean such other market or exchange on which the Company’s Common Stock is then listed or traded. (k) “Purchase Amount” means the portion of the Available Amount to be purchased by the Buyer pursuant to Section 1 hereof. (l) “Purchase Date” means the actual date that the Buyer is to buy Purchase Shares pursuant to Section 1 hereof. (m) “Purchase Price” means, as of any Trading Day the lower of the (A) the lowest Sale Price of the Common Stock on such Trading Day and (B) the arithmetic average of the three (3) lowest Closing Sale Prices for the Common Stock during the twelve (12) consecutive Trading Days ending on the Trading Day immediately preceding such date of determination (to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction). (n) “Sale Price” means, for any security as of any date, any trade price for such security on the Principal Market as reported by the Principal Market, or, if the Principal Market is not the principal securities exchange or trading market for such security, the trade price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by the Principal Market. (o) “SEC” means the United States Securities and Exchange Commission. (q) “Transfer Agent” means the transfer agent of the Company as set forth in Section 11(f) hereof or such other person who is then serving as the transfer agent for the Company in respect of the Common Stock. (r) “Trading Day” means any day on which the Principal Market is open for trading including any day on which the Principal Market is open for trading for a period of time less than the customary time. 11. MISCELLANEOUS. (a) Governing Law; Jurisdiction; Jury Trial. The corporate laws of the State of Delaware shall govern all issues concerning the relative rights of the Company and its shareholders. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement and the other Transaction Documents shall be governed by the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of Chicago, for the adjudication of any dispute hereunder or under the other Transaction Documents or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. (b) Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature. (c) Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. (d) Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. (e) Entire Agreement. With the exception of the Mutual Nondisclosure Agreement between the parties dated as of December 1, 2005, this Agreement supersedes all other prior oral or written agreements between the Buyer, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement, the other Transaction Documents and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. The Company acknowledges and agrees that is has not relied on, in any manner whatsoever, any representations or statements, written or oral, other than as expressly set forth in this Agreement. (f) Notices. Any notices, consents or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one Trading Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: If to the Company:   DOR BioPharma, Inc.   1691 Michigan Avenue, Suite 435 Miami, Fl 33139 Telephone: 305-534-3383 Facsimile: 305-534-3553 Attention:   With a copy to: Edwards Angell Palmer & Dodge LLP 350 East Las Olas Boulevard, Suite 1150 Fort Lauderdale, FL 33301 Telephone: 954-667-6129 Facsimile: 954-727-2701 Attention: Leslie J. Croland If to the Buyer: Fusion Capital Fund II, LLC 222 Merchandise Mart Plaza, Suite 9-112 Chicago, IL 60654 Telephone: 312-644-6644 Facsimile: 312-644-6244 Attention: Steven G. Martin If to the Transfer Agent: American Stock Transfer & Trust Co. 59 Maiden Lane New York, NY 10038 Telephone:  718-921-8247 Facsimile: 718-921-8323 Attention:  Angelia Brown or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) Trading Days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, and recipient facsimile number or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. (g) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Buyer, including by merger or consolidation. The Buyer may not assign its rights or obligations under this Agreement. (h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. (i) Publicity. The Buyer shall have the right to approve before issuance any press release, SEC filing or any other public disclosure made by or on behalf of the Company whatsoever with respect to, in any manner, the Buyer, its purchases hereunder or any aspect of this Agreement or the transactions contemplated hereby, provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any press release or other public disclosure, including, but not limited to, any SEC filings, with respect to such transactions as is required by applicable law and regulations; provided however, the Company must consult with the Buyer in connection with any press release or other public disclosure relating in any manner to the Buyer, its purchases hereunder or any aspect of this Agreement or the transactions contemplated hereby at least two (2) Trading Days prior to its release. The Buyer must be provided with a copy thereof at least two (2) Trading Days prior to any release or use by the Company thereof. The Company agrees and acknowledges that its failure to fully comply with this provision constitutes a material adverse effect on its ability to perform its obligations under this Agreement. (j) Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. (k) Termination. This Agreement may be terminated only as follows: (i) By the Buyer any time an Event of Default exists without any liability or payment to the Company. However, if pursuant to or within the meaning of any Bankruptcy Law, the Company commences a voluntary case or any Person commences a proceeding against the Company, a Custodian is appointed for the Company or for all or substantially all of its property, or the Company makes a general assignment for the benefit of its creditors, (any of which would be an Event of Default as described in Sections 9(f), 9(g) and 9(h) hereof) this Agreement shall automatically terminate without any liability or payment to the Company without further action or notice by any Person. No such termination of this Agreement under this Section 11(k)(i) shall affect the Company's or the Buyer's obligations under this Agreement with respect to pending purchases and the Company and the Buyer shall complete their respective obligations with respect to any pending purchases under this Agreement. (ii) In the event that the Commencement shall not have occurred, the Company shall have the option to terminate this Agreement for any reason or for no reason without liability of any party to any other party. (iii) In the event that the Commencement shall not have occurred on or before March 15, 2006, due to the failure to satisfy the conditions set forth in Sections 6 and 7 above with respect to the Commencement (and the nonbreaching party's failure to waive such unsatisfied condition(s)), the nonbreaching party shall have the option to terminate this Agreement at the close of business on such date or thereafter without liability of any party to any other party. (iv) If by the Maturity Date (including any extension thereof by the Company pursuant to Section 10(g) hereof), for any reason or for no reason the full Available Amount under this Agreement has not been purchased as provided for in Section 1 of this Agreement, by the Buyer without any liability or payment to the Company. (v)  At any time after the Commencement Date, the Company shall have the option to terminate this Agreement for any reason or for no reason by delivering notice (a “Company Termination Notice”) to the Buyer electing to terminate this Agreement without any liability or payment to the Buyer. The Company Termination Notice shall not be effective until one (1) Trading Day after it has been received by the Buyer. (vi) This Agreement shall automatically terminate on the date that the Company sells and the Buyer purchases the full Available Amount as provided herein, without any action or notice on the part of any party. Except as set forth in Sections 11(k)(i) (in respect of an Event of Default under Sections 9(f), 9(g) and 9(h)) and 11(k)(vi), any termination of this Agreement pursuant to this Section 11(k) shall be effected by written notice from the Company to the Buyer, or the Buyer to the Company, as the case may be, setting forth the basis for the termination hereof. The representations and warranties of the Company and the Buyer contained in Sections 2 and 3 hereof, the indemnification provisions set forth in Section 8 hereof and the agreements and covenants set forth in Section 11, shall survive the Commencement and any termination of this Agreement. No termination of this Agreement shall affect the Company's or the Buyer's rights or obligations (i) under the Registration Rights Agreement which shall survive any such termination or (ii) under this Agreement with respect to pending purchases and the Company and the Buyer shall complete their respective obligations with respect to any pending purchases under this Agreement. (l) No Financial Advisor, Placement Agent, Broker or Finder. The Company acknowledges that it has retained MidSouth Capital as financial advisor in connection with the transactions contemplated hereby. The Company represents and warrants to the Buyer that it has not engaged any other financial advisor, placement agent, broker or finder in connection with the transactions contemplated hereby. The Buyer represents and warrants to the Company that it has not engaged any financial advisor, placement agent, broker or finder in connection with the transactions contemplated hereby. The Company shall be responsible for the payment of any fees or commissions, if any, of any financial advisor, placement agent, broker or finder relating to or arising out of the transactions contemplated hereby. The Company shall pay, and hold the Buyer harmless against, any liability, loss or expense (including, without limitation, attorneys' fees and out of pocket expenses) arising in connection with any such claim. (m) No Strict Construction. 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. (n) Remedies, Other Obligations, Breaches and Injunctive Relief. The Buyer’s remedies provided in this Agreement shall be cumulative and in addition to all other remedies available to the Buyer under this Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief), no remedy of the Buyer contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Buyer's right to pursue actual damages for any failure by the Company to comply with the terms of this Agreement. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer 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 Buyer 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. (0) Enforcement Costs. If: (i) this Agreement is placed by the Buyer in the hands of an attorney for enforcement or is enforced by the Buyer through any legal proceeding; or (ii) an attorney is retained to represent the Buyer in any bankruptcy, reorganization, receivership or other proceedings affecting creditors' rights and involving a claim under this Agreement; or (iii) an attorney is retained to represent the Buyer in any other proceedings whatsoever in connection with this Agreement, then the Company shall pay to the Buyer, as incurred by the Buyer, all reasonable costs and expenses including attorneys' fees incurred in connection therewith, in addition to all other amounts due hereunder. (p) Failure or Indulgence Not Waiver. No failure or delay in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. * * * * * -- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Buyer and the Company have caused this Common Stock Purchase Agreement to be duly executed as of the date first written above. THE COMPANY: DOR BIOPHARMA, INC. By: /s/Michael T. Sember        Name: Michael T. Sember    Title: President and Chief Executive Officer BUYER: FUSION CAPITAL FUND II, LLC BY: FUSION CAPITAL PARTNERS, LLC BY: ROCKLEDGE CAPITAL CORPORATION By: /s/Josh Scheinfeld________________ Name: Josh Scheinfeld Title: President -------------------------------------------------------------------------------- SCHEDULES Schedule 3(a) Subsidiaries Schedule 3(c) Capitalization Schedule 3(e) Conflicts Schedule 3(f) 1934 Act Filings Schedule 3(g) Material Changes Schedule 3(h) Litigation Schedule 3(k) Intellectual Property Schedule 3(m) Liens Schedule 3(q) Certain Transactions EXHIBITS Exhibit A Form of Company Counsel Opinion Exhibit B Form of Officer’s Certificate Exhibit C Form of Resolutions of Board of Directors of the Company Exhibit D Form of Secretary’s Certificate Exhibit E Form of Letter to Transfer Agent -------------------------------------------------------------------------------- DISCLOSURE SCHEDULES Schedule 3(a) - Subsidiaries Schedule 3(c) - Capitalization Schedule 3(e) - No Conflicts Schedule 3(f) - 1934 Act Filings Schedule 3(g) - Absence of Certain Changes Schedule 3(h) - Litigation Schedule 3(k) - Intellectual Property Rights Schedule 3(m) - Title Schedule 3(q) - Transactions with Affiliates -------------------------------------------------------------------------------- EXHIBIT A   FORM OF COMPANY COUNSEL OPINION   Capitalized terms used herein but not defined herein, have the meaning set forth in the Common Stock Purchase Agreement. Based on the foregoing, and subject to the assumptions and qualifications set forth herein, we are of the opinion that: 1. The Company is a corporation existing and in good standing under the laws of the State of Delaware. The Company is qualified to do business as a foreign corporation and is in good standing in the States of Florida.   2. The Company has the corporate power to execute and deliver, and perform its obligations under, each Transaction Document to which it is a party. The Company has the corporate power to conduct its business as, to the best of our knowledge, it is now conducted, and to own and use the properties owned and used by it.   3. The execution, delivery and performance by the Company of the Transaction Documents to which it is a party have been duly authorized by all necessary corporate action on the part of the Company. The execution and delivery of the Transaction Documents by the Company, the performance of the obligations of the Company thereunder and the consummation by it of the transactions contemplated therein have been duly authorized and approved by the Company's Board of Directors and no further consent, approval or authorization of the Company, its Board of Directors or its stockholders is required. The Transaction Documents to which the Company is a party have been duly executed and delivered by the Company and are the valid and binding obligations of the Company, enforceable against the Company in accordance with their terms except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, liquidation or similar laws relating to, or affecting creditor’s rights and remedies.   4. The execution, delivery and performance by the Company of the Transaction Documents, the consummation by the Company of the transactions contemplated thereby including the offering, sale and issuance of the Commitment Shares, and the Purchase Shares in accordance with the terms and conditions of the Common Stock Purchase Agreement, and fulfillment and compliance with terms of the Transaction Documents, does not and shall not: (i) conflict with, constitute a breach of or default (or an event which, with the giving of notice or lapse of time or both, constitutes or could constitute a breach or a default), under (a) the Certificate of Incorporation or the Bylaws of the Company, (b) any material agreement, note, lease, mortgage, deed or other material instrument to which to our knowledge the Company is a party or by which the Company or any of its assets are bound, (ii) result in any violation of any statute, law, rule or regulation applicable to the Company, or (iii) to our knowledge, violate any order, writ, injunction or decree applicable to the Company or any of its subsidiaries.   5. The issuance of the Purchase Shares, Signing Shares and Commitment Shares pursuant to the terms and conditions of the Transaction Documents has been duly authorized and the Signing Shares and Commitment Shares are validly issued, fully paid and non-assessable, to our knowledge, free of all taxes, liens, charges, restrictions, rights of first refusal and preemptive rights. At least 9,000,000 shares of Common Stock have been properly reserved for issuance under the Common Stock Purchase Agreement. When issued and paid for in accordance with the Common Stock Purchase Agreement, the Purchase Shares shall be validly issued, fully paid and non-assessable, to our knowledge, free of all taxes, liens, charges, restrictions, rights of first refusal and preemptive rights. 450,000 shares of Common Stock have been properly reserved for issuance as Additional Commitment Shares under the Common Stock Purchase Agreement. When issued in accordance with the Common Stock Purchase Agreement, the Additional Commitment Shares shall be validly issued, fully paid and non-assessable, to our knowledge, free of all taxes, liens, charges, restrictions, rights of first refusal and preemptive rights. To our knowledge, the execution and delivery of the Registration Rights Agreement do not, and the performance by the Company of its obligations thereunder shall not, give rise to any rights of any other person for the registration under the 1933 Act of any shares of Common Stock or other securities of the Company which have not been waived.   6. As of the date hereof, the authorized capital stock of the Company consists of 150,000,000 shares of common stock, par value $0.001 per share, of which to our knowledge __________ shares are issued and outstanding.   7. Assuming the accuracy of the representations and your compliance with the covenants made by you in the Transaction Documents, the offering, sale and issuance of the Commitment Shares to you pursuant to the Transaction Documents is exempt from registration under the 1933 Act and the securities laws and regulations of the State of Florida, Illinois, Delaware.   8. Other than that which has been obtained and completed prior to the date hereof, no authorization, approval, consent, filing or other order of any federal or state governmental body, regulatory agency, or stock exchange or market, or any court, or, to our knowledge, any third party is required to be obtained by the Company to enter into and perform its obligations under the Transaction Documents or for the Company to issue and sell the Purchase Shares as contemplated by the Transaction Documents.   9. The Common Stock is registered pursuant to Section 12(g) of the 1934 Act. To our knowledge, since January 1, 2005, the Company has been in compliance with the reporting requirements of the 1934 Act applicable to it. To our knowledge, since January 1, 2005, the Company has not received any written notice from the Principal Market stating that the Company has not been in compliance with any of the rules and regulations (including the requirements for continued listing) of the Principal Market.   We further advise you that to our knowledge, except as disclosed on Schedule 3(h) in the Common Stock Purchase Agreement, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body, any governmental agency, any stock exchange or market, or self-regulatory organization, which has been threatened in writing or which is currently pending against the Company, any of its subsidiaries, any officers or directors of the Company or any of its subsidiaries or any of the properties of the Company or any of its subsidiaries. In addition, we have participated in the preparation of the Registration Statement (SEC File #________) covering the sale of the Purchase Shares, the Commitment Shares including the prospectus dated ____________, contained therein and in conferences with officers and other representatives of the Company (including the Company’s independent auditors) during which the contents of the Registration Statement and related matters were discussed and reviewed and, although we are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement, on the basis of the information that was developed in the course of the performance of the services referred to above, considered in the light of our understanding of the applicable law, nothing came to our attention that caused us to believe that the Registration Statement (other than the financial statements and schedules and the other financial and statistical data included therein, as to which we express no belief), as of their dates, contained 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 the circumstances under which they were made, not misleading.     -------------------------------------------------------------------------------- EXHIBIT B   FORM OF OFFICER’S CERTIFICATE   This Officer’s Certificate (“Certificate”) is being delivered pursuant to Section 7(e) of that certain Common Stock Purchase Agreement dated as of _________, (“Common Stock Purchase Agreement”), by and between DOR BIOPHARMA, INC., a Delaware corporation (the “Company”), and FUSION CAPITAL FUND II, LLC (the “Buyer”). Terms used herein and not otherwise defined shall have the meanings ascribed to them in the Common Stock Purchase Agreement. The undersigned, ___________, ______________ of the Company, hereby certifies as follows: 1. I am the _____________ of the Company and make the statements contained in this Certificate; 2. The representations and warranties of the Company are true and correct in all material respects (except to the extent that any of such representations and warranties is already qualified as to materiality in Section 3 of the Common Stock Purchase Agreement, in which case, such representations and warranties are true and correct without further qualification) as of the date when made and as of the Commencement Date as though made at that time (except for representations and warranties that speak as of a specific date); 3. The Company has performed, satisfied and complied in all material respects with covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Commencement Date. 4.  The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any Bankruptcy Law nor does the Company or any of its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy or insolvency proceedings. The Company is financially solvent and is generally able to pay its debts as they become due. IN WITNESS WHEREOF, I have hereunder signed my name on this ___ day of ___________. ______________________ Name: Title: The undersigned as Secretary of ________, a ________ corporation, hereby certifies that ___________ is the duly elected, appointed, qualified and acting ________ of _________ and that the signature appearing above is his genuine signature. ___________________________________ Secretary -------------------------------------------------------------------------------- EXHIBIT C FORM OF COMPANY RESOLUTIONS FOR SIGNING PURCHASE AGREEMENT AND REGISTRATION RIGHTS AGREEMENT UNANIMOUS WRITTEN CONSENT OF DOR BIOPHARMA, INC. Pursuant to Section 141(f) of the Delaware General Corporation Law, the undersigned, being all of the directors of DOR BIOPHARMA, INC., a Delaware corporation (the “Corporation”) do hereby consent to and adopt the following resolutions as the action of the Board of Directors for and on behalf of the Corporation and hereby direct that this Consent be filed with the minutes of the proceedings of the Board of Directors: WHEREAS, there has been presented to the Board of Directors of the Corporation a draft of the Common Stock Purchase Agreement (the “Purchase Agreement”) by and between the Corporation and Fusion Capital Fund II, LLC (“Fusion”), providing for the purchase by Fusion of up to Six Million Dollars ($6,000,000) of the Corporation’s common stock, par value $0.001 (the “Common Stock”); WHEREAS, after careful consideration of the Purchase Agreement, the documents incident thereto and other factors deemed relevant by the Board of Directors, the Board of Directors has determined that it is advisable and in the best interests of the Corporation to engage in the transactions contemplated by the Purchase Agreement, including, but not limited to, the issuance of 450,000 shares of Common Stock to Fusion as a an initial commitment fee (the “Initial Commitment Shares”) and the sale of shares of Common Stock to Fusion up to the available amount under the Purchase Agreement (the "Purchase Shares");     WHEREAS, in connection with the transactions contemplated pursuant to the Purchase Agreement, the Company has agreed to file a registration statement with the Securities and Exchange Commission (the “Commission”) registering the Commitment Shares (as defined in the Purchase Agreement) and the Purchase Shares (as herein defined in the Purchase Agreement) and to list the Commitment Shares and Purchase Shares on the American Stock Exchange;   WHEREAS, the management of the Corporation has prepared an initial draft of a Registration Statement on Form S-1 (the “Registration Statement”) in order to register the sale of the Purchase Shares, Signing Shares and the Commitment Shares (collectively, the “Shares”); and WHEREAS, the Board of Directors has determined to approve the Registration Statement and to authorize the appropriate officers of the Corporation to take all such actions as they may deem appropriate to effect the offering.     Transaction Documents   NOW, THEREFORE, BE IT RESOLVED, that the transactions described in the Purchase Agreement are hereby approved and the executive officers (the “Authorized Officers”) of the Corporation be, and each of them hereby is authorized to execute and deliver the Purchase Agreement, and any other agreements or documents contemplated thereby including, without limitation, a registration rights agreement (the “Registration Rights Agreement”) providing for the registration of the shares of Common Stock issuable in respect of the Purchase Agreement on behalf of the Corporation, with such amendments, changes, additions and deletions as the Authorized Officers may deem to be appropriate and approve on behalf of, the Corporation, such approval to be conclusively evidenced by the signature of an Authorized Officer thereon; and   FURTHER RESOLVED, that the terms and provisions of the Registration Rights Agreement by and between the Corporation and Fusion are hereby approved and the Authorized Officers are authorized to execute and deliver the Registration Rights Agreement (pursuant to the terms of the Purchase Agreement), with such amendments, changes, additions and deletions as the Authorized Officer may deem appropriate and approve on behalf of, the Corporation, such approval to be conclusively evidenced by the signature of an Authorized Officer thereon; and   FURTHER RESOLVED, that the terms and provisions of the Form of Transfer Agent Instructions (the “Instructions”) are hereby approved and the Authorized Officers are authorized to execute and deliver the Instructions (pursuant to the terms of the Purchase Agreement), with such amendments, changes, additions and deletions as the Authorized Officers may deem appropriate and approve on behalf of, the Corporation, such approval to be conclusively evidenced by the signature of an Authorized Officer thereon; and   Execution of Purchase Agreement   FURTHER RESOLVED, that the Corporation be and it hereby is authorized to execute the Purchase Agreement providing for the purchase of common stock of the Corporation having an aggregate value of up to $6,000,000; and   Issuance of Common Stock   FURTHER RESOLVED, that the Corporation was authorized to issue 62,500 shares of Common Stock to Fusion pursuant to the Confidential Term Sheet between the Company and Fusion dated as of November 30, 2005 (“Signing Shares”) and that upon issuance of the Signing Shares, the Signing Shares have been duly authorized, validly issued, fully paid and nonassessable with no personal liability attaching to the ownership thereof; and   FURTHER RESOLVED, that the Corporation is hereby authorized to issue 450,000 shares of Common Stock to Fusion Capital Fund II, LLC as Initial Commitment Shares and that upon issuance of the Initial Commitment Shares pursuant to the Purchase Agreement, the Initial Commitment Shares shall be duly authorized, validly issued, fully paid and nonassessable with no personal liability attaching to the ownership thereof; and   FURTHER RESOLVED, that the Corporation is hereby authorized to issue shares of Common Stock upon the purchase of Purchase Shares up to the available amount under the Purchase Agreement in accordance with the terms of the Purchase Agreement and that, upon issuance of the Purchase Shares pursuant to the Purchase Agreement, the Purchase Shares will be duly authorized, validly issued, fully paid and nonassessable with no personal liability attaching to the ownership thereof; and   FURTHER RESOLVED, that the Corporation shall initially reserve at least 9,000,000 shares of Common Stock for issuance as Purchase Shares under the Purchase Agreement. FURTHER RESOLVED, that the Corporation is hereby authorized to issue 450,000 shares of Common Stock (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) in connection with the purchase of Purchase Shares (the “Additional Commitment Shares”) in accordance with the terms of the Purchase Agreement and that, upon issuance of the Additional Commitment Shares pursuant to the Purchase Agreement, the Additional Commitment Shares will be duly authorized, validly issued, fully paid and nonassessable with no personal liability attaching to the ownership thereof; and FURTHER RESOLVED, that the Corporation shall initially reserve 450,000 shares of Common Stock (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) for issuance as Additional Commitment Shares under the Purchase Agreement. Registration Statement FURTHER RESOLVED, that the Authorized Officers and directors of the Corporation be, and each of them hereby is, authorized and directed, with the assistance of counsel and accountants for the Corporation, to prepare, execute and file with the Commission the Registration Statement, which Registration Statement shall be filed substantially in the form presented to the Board of Directors, with such changes therein as the Chief Executive Officer of the Corporation or any Vice President of the Corporation shall deem desirable and in the best interest of the Corporation and its shareholders (such officer’s execution thereof including such changes shall be deemed to evidence conclusively such determination); and   FURTHER RESOLVED, that the officers of the Corporation be, and each of them hereby is, authorized and directed, with the assistance of counsel and accountants for the Corporation, to prepare, execute and file with the Commission all amendments, including post-effective amendments, and supplements to the Registration Statement, and all certificates, exhibits, schedules, documents and other instruments relating to the Registration Statement, as such officers shall deem necessary or appropriate (such officer’s execution and filing thereof shall be deemed to evidence conclusively such determination); and   FURTHER RESOLVED, that the execution of the Registration Statement and of any amendments and supplements thereto by the officers and directors of the Corporation be, and the same hereby is, specifically authorized either personally or by the Authorized Officers as such officer’s or director’s true and lawful attorneys-in-fact and agents; and   FURTHER RESOLVED, that the Authorized Officers are hereby designated as “Agent for Service” of the Corporation in connection with the Registration Statement and the filing thereof with the Commission, and the Authorized Officers hereby are authorized to receive communications and notices from the Commission with respect to the Registration Statement; and   FURTHER RESOLVED, that the officers of the Corporation be, and each of them hereby is, authorized and directed to pay all fees, costs and expenses that may be incurred by the Corporation in connection with the Registration Statement; and   FURTHER RESOLVED, that it is desirable and in the best interest of the Corporation that the Shares be qualified or registered for sale in various states; that the officers of the Corporation be, and each of them hereby is, authorized to determine the states in which appropriate action shall be taken to qualify or register for sale all or such part of the Shares as they may deem advisable; that said officers be, and each of them hereby is, authorized to perform on behalf of the Corporation any and all such acts as they may deem necessary or advisable in order to comply with the applicable laws of any such states, and in connection therewith to execute and file all requisite papers and documents, including, but not limited to, applications, reports, surety bonds, irrevocable consents, appointments of attorneys for service of process and resolutions; and the execution by such officers of any such paper or document or the doing by them of any act in connection with the foregoing matters shall conclusively establish their authority therefor from the Corporation and the approval and ratification by the Corporation of the papers and documents so executed and the actions so taken; and   FURTHER RESOLVED, that if, in any state where the securities to be registered or qualified for sale to the public, or where the Corporation is to be registered in connection with the public offering of the Shares, a prescribed form of resolution or resolutions is required to be adopted by the Board of Directors, each such resolution shall be deemed to have been and hereby is adopted, and the Secretary is hereby authorized to certify the adoption of all such resolutions as though such resolutions were now presented to and adopted by the Board of Directors; and     FURTHER RESOLVED, that the officers of the Corporation with the assistance of counsel be, and each of them hereby is, authorized and directed to take all necessary steps and do all other things necessary and appropriate to effect the listing of the Shares on the American Stock Exchange.     Approval of Actions   FURTHER RESOLVED, that, without limiting the foregoing, the Authorized Officers are, and each of them hereby is, authorized and directed to proceed on behalf of the Corporation and to take all such steps as deemed necessary or appropriate, with the advice and assistance of counsel, to cause the Corporation to consummate the agreements referred to herein and to perform its obligations under such agreements; and   FURTHER RESOLVED, that the Authorized Officers be, and each of them hereby is, authorized, empowered and directed on behalf of and in the name of the Corporation, to take or cause to be taken all such further actions and to execute and deliver or cause to be executed and delivered all such further agreements, amendments, documents, certificates, reports, schedules, applications, notices, letters and undertakings and to incur and pay all such fees and expenses as in their judgment shall be necessary, proper or desirable to carry into effect the purpose and intent of any and all of the foregoing resolutions, and that all actions heretofore taken by any officer or director of the Corporation in connection with the transactions contemplated by the agreements described herein are hereby approved, ratified and confirmed in all respects. IN WITNESS WHEREOF, the Board of Directors has executed and delivered this Consent effective as of __________, 2005. ______________________ ______________________ ______________________ being all of the directors of ____________ -------------------------------------------------------------------------------- EXHIBIT D FORM OF SECRETARY’S CERTIFICATE This Secretary’s Certificate (“Certificate”) is being delivered pursuant to Section 7(k) of that certain Common Stock Purchase Agreement dated as of __________, (“Common Stock Purchase Agreement”), by and between DOR BIOPHARMA, INC., a Delaware corporation (the “Company”) and FUSION CAPITAL FUND II, LLC (the “Buyer”), pursuant to which the Company may sell to the Buyer up to Six Million Dollars ($6,000,000) of the Company's Common Stock, par value $_____ per share (the "Common Stock"). Terms used herein and not otherwise defined shall have the meanings ascribed to them in the Common Stock Purchase Agreement. The undersigned, ____________, Secretary of the Company, hereby certifies as follows: 1. I am the Secretary of the Company and make the statements contained in this Secretary’s Certificate. 2. Attached hereto as Exhibit A and Exhibit B are true, correct and complete copies of the Company’s bylaws (“Bylaws”) and Certificate of Incorporation (“Articles”), in each case, as amended through the date hereof, and no action has been taken by the Company, its directors, officers or shareholders, in contemplation of the filing of any further amendment relating to or affecting the Bylaws or Articles. 3. Attached hereto as Exhibit C are true, correct and complete copies of the resolutions duly adopted by the Board of Directors of the Company on _____________, at which a quorum was present and acting throughout. Such resolutions have not been amended, modified or rescinded and remain in full force and effect and such resolutions are the only resolutions adopted by the Company’s Board of Directors, or any committee thereof, or the shareholders of the Company relating to or affecting (i) the entering into and performance of the Common Stock Purchase Agreement, or the issuance, offering and sale of the Purchase Shares and the Commitment Shares and (ii) and the performance of the Company of its obligation under the Transaction Documents as contemplated therein. 4. As of the date hereof, the authorized, issued and reserved capital stock of the Company is as set forth on Exhibit D hereto. IN WITNESS WHEREOF, I have hereunder signed my name on this ___ day of ____________. _________________________ Secretary The undersigned as ___________ of __________, a ________ corporation, hereby certifies that ____________ is the duly elected, appointed, qualified and acting Secretary of _________, and that the signature appearing above is his genuine signature. ___________________________________ -------------------------------------------------------------------------------- EXHIBIT E FORM OF LETTER TO THE TRANSFER AGENT FOR THE ISSUANCE OF THE COMMITMENTS SHARES AT SIGNING OF THE PURCHASE AGREEMENT [COMPANY LETTERHEAD] [DATE] [TRANSFER AGENT] __________________ __________________ __________________ Re: Issuance of Common Shares to Fusion Capital Fund II, LLC Dear ________, On behalf of DOR BIOPHARMA, INC., (the “Company”), you are hereby instructed to issue as soon as possible 512,500 shares of our common stock in the name of Fusion Capital Fund II, LLC. The share certificate should be dated [DATE OF THE COMMON STOCK PURCHASE AGREEMENT]. I have included a true and correct copy of a unanimous written consent executed by all of the members of the Board of Directors of the Company adopting resolutions approving the issuance of these shares. The shares should be issued subject to the following restrictive legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF HOLDER’S COUNSEL, IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.   The share certificate should be sent as soon as possible via overnight mail to the following address: Fusion Capital Fund II, LLC 222 Merchandise Mart Plaza, Suite 9-112 Chicago, IL 60654 Attention: Steven Martin Thank you very much for your help. Please call me at ______________ if you have any questions or need anything further.   DOR BIOPHARMA, INC. BY:_____________________________ [name] [title]       -------------------------------------------------------------------------------- Schedule 3(a) Subsidiaries The following represents a list of the Company’s subsidiaries: Enteron Pharmaceuticals, Inc. 89.13% Corporate Technology Development, Inc. 100.00% Oral Solutions, Inc. 85.00% Formulation Technologies, Inc. 100.00% Intero Corp. 100.00% Magyer Pharmaceuticals 100.00% Rx Eyes, Inc. 80.00% Orasomal Technologies Inc. 75.30% Wisconsin Genetics, Inc. 100.00% Innovaccines Corp. 100.00% Endorex Newco, LTD 80.10% Institute for Drug Research, Inc. 100.00% BioDefense Corp. 100.00% -------------------------------------------------------------------------------- Schedule 3(a) Capitalization The following represents the Company’s capitalization: Common Stock Common Shares Authorized 150,000,000 Common Shares Outstanding 50,612,504 Stock Options Outstanding 10,264,339 Warrants Outstanding 22,167,118 Common Shares Available for Issuance 66,956,039     Preferred Stock   Preferred Shares Authorized 4,600,000 Series B Authorized 200,000 Series C Authorized 200,000 Preferred Shares Available for Issuance 5,000,000         -------------------------------------------------------------------------------- Schedule 3(c)(iii) Capitalization STOCK OPTIONS AND WARRANTS: As of the date of this Agreement, the Company has: (a) granted stock options with exercise prices ranging from $0.200 to $5.625 to purchase 10,264,339 shares of common stock, and (b) issued warrants with exercise prices ranging from $0.350 to $8.110 to purchase 22,167,118 shares of common stock. -------------------------------------------------------------------------------- Schedule 3(e) No Conflicts The following are notices and filings made with respect to the American Stock Exchange Listing.  On January 19, 2005, AMEX notified the Company that the staff of AMEX has accepted the Company’s compliance plan which was submitted on December 30, 2004. AMEX has granted the Company an extension until July 12, 2005 to regain compliance with the continued listing standard of Section 1003(a)(iii) of the AMEX Company Guide. This standard requires that member companies that have incurred losses in three of the last four years must maintain shareholders’ equity of at least $6 million. The Company must continue to provide the staff of AMEX with updates in conjunction with the initiatives under the plan as appropriate or requested. The Company will be subject to periodic review by the staff of AMEX during the extension period. If the Company fails to make progress consistent with the compliance plan or to regain compliance with the continued listing standards by the end of the extension period, the Company’s common stock could be delisted from AMEX. On July 13, 2005, AMEX notified the Company that after review of the Company’s Compliance plan submitted on December 30, 2004, and after review of the submission dated July 6, 2005, it has determined that, in accordance with Section 1009 of the Company Guide, the period to regain compliance has been extended to October 15, 2005. This extension is granted in order to regain compliance with the continued listing standard of Section 1003 (a)(iii) of the Company Guide with shareholder’s equity of less than $6,000,000 and losses from continuing operations and/or net losses in its five most recent fiscal years. The Company must continue to provide the staff of AMEX with updates in conjunction with the initiatives under the plan as appropriate or requested. The Company will be subject to periodic review by the Exchange Staff during the extension period. Failure to make progress consistent with the plan or to regain compliance with the continued listing standards by the end of the extension period could result in the Company being delisted from the American Stock Exchange. On October 26, 2005, the Company received notice from AMEX staff indicating that the Company no longer complies with AMEX’s continued listing standards because the Company had shareholders' equity of less than $6.0 million and losses from continuing operations and/or net losses in its five most recent fiscal years, as set forth in Section 1003(a)(iii) of the Company Guide, and that AMEX intends to proceed with removal of the Company's common stock from listing and registration on AMEX. The Company has appealed this determination and requested a hearing before a committee of AMEX. There can be no assurance that the Company's request for continued listing will be granted. As previously reported, on October 26, 2005, the Company received notice from the AMEX staff indicating that the Company no longer complies with AMEX's continued listing standards because the Company had shareholders' equity of less than $6.0 million and losses from continuing operations and/or net losses in its five most recent fiscal years, as set forth in Section 1003(a)(iii) of the Company Guide, and that AMEX intends to proceed with removal of the Company's common stock from listing and registration on AMEX. The Company appealed this determination and a hearing before a committee of the Amex has been scheduled for December 2, 2005. On November 22, 2005, the Company received a second notice from the Amex staff indicating that the Company no longer complies with AMEX's continued listing standards because the Company had shareholders' equity of less than $4.0 million and losses from continuing operations and/or net losses in three of its four most recent fiscal years, as set forth in Section 1003(a)(ii) of the Company Guide, and that AMEX intends to consider this deficiency at the Company's hearing on December 2, 2005. The Company will not have the opportunity to comply with the lower equity standard due to not meeting the losses from continuing operations and/or net losses in three of its four most recent fiscal years. There can be no assurance that the Company's request for continued listing will be granted. On December 8, 2005 the Company received notice from AMEX that after a hearing on December 2 with a Listing Qualifications Panel of the Amex Committee on Securities (“the Panel”), it has been granted an extension within which to regain compliance with the continued listing standards of the AMEX. Based on the presentation of the Company’s management at that meeting, the Panel unanimously agreed to grant the Company until March 31, 2006 to regain compliance with the continued listing standard of Section 1003 (a)(iii) of the AMEX Company Guide. This standard requires that member companies that have incurred losses in their five most recent fiscal years must maintain a shareholder equity balance of at least $6,000,000. If the Company has not achieved the minimum shareholder equity requirement by March 31, 2006, the Panel unanimously agreed that the AMEX should immediately move to delist the Company’s common stock at that time with no further opportunity for the Company to appeal.       --------------------------------------------------------------------------------   Schedule 3(f) 1934 Act Filings The Company has timely filed all reports, schedules, forms, statements, and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act.   -------------------------------------------------------------------------------- Schedule 3(g) Absence of Certain Changes There have been no material adverse changes in the business, properties, operations, financial condition or results of operations of the Company or its Subsidiaries.   -------------------------------------------------------------------------------- Schedule 3(h) Litigation None.   -------------------------------------------------------------------------------- Schedule 3(k) Intellectual Property Rights None.   -------------------------------------------------------------------------------- Schedule 3(m) Title None.   -------------------------------------------------------------------------------- Schedule 3(q) Transactions with Affiliates None.

EXHIBIT 10.12 SECOND AMENDMENT TO REAL ESTATE PURCHASE CONTRACT THIS SECOND AMENDMENT TO REAL ESTATE PURCHASE CONTRACT (the “Second Amendment”) is attached to and made a part of that certain Real Estate Purchase Contract effectively dated February 9, 2006, by and between CNLR DC ACQUISITIONS I, LLC, a Delaware limited liability company (hereinafter referred to as “Seller”), and BROOKFIELD FINANCIAL PROPERTIES, L.P., a Delaware limited partnership (hereinafter referred to as “Purchaser”), as amended by the Amendment to Real Estate Purchase Contract dated February 14, 2006 (as amended, the “Agreement”). WITNESSETH: WHEREAS, Seller and Purchaser have heretofore entered into the Agreement, whereby Purchaser agreed to purchase that certain real and personal property located at 601 and 701 South 12th Street, Arlington, Virginia as more particularly described therein (collectively referred to herein as the “Property.”), and Seller agreed to sell the Property to Purchaser on the terms and conditions set forth therein; and WHEREAS, Seller and Purchaser desire to modify certain terms of the Agreement for their mutual benefit as set forth below. NOW, THEREFORE, for and in consideration of the premises, the payment of Ten and no/100 ($10.00) Dollars in hand paid by Purchaser to Seller, the mutual covenants and agreements herein set forth, and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby expressly acknowledged by the parties thereto, the parties hereto do hereby covenant and agree as follows: 1. Recitals. The foregoing recitals are true and correct and are incorporated herein by this reference. 2. Purchase Price. The Purchase Price shall be $235,430,000.00. 3. Service Contracts. Pursuant to Paragraph 7(c) of the Agreement. Purchaser agrees that it shall assume all of Seller’s obligations under the Service Contracts identified on Schedule E to the Agreement except for the Property Management Agreement. 4. Seller’s Covenants. The following is hereby inserted as Paragraph 8(j) of the Agreement: (j) Prior to the Closing Date, Seller shall (i) complete the energy management system upgrade and elevator glass replacement currently in process at the Real Property, (ii) replace one cooling tower pump located in Building 601, and (iii) complete repairs on a second cooling tower pump located in Building 601. -------------------------------------------------------------------------------- 5. Prorations. In accordance with Paragraph 13(c) of the Agreement, Purchaser and Seller agree that prorations of Service Contracts and utilities shall be handled in accordance with the proposal set forth in e-mail correspondence from Kathi Borkholder (Seller’s counsel) to Samuel Richardson (Purchaser’s counsel) dated February 8, 2006 at 5:02 p.m, a copy of which is attached hereto. 6. Seller’s Representations. The following is hereby inserted as Paragraph 16(a)(xiv) of the Agreement: (xiv) Seller is not aware of any Facilities Management Contract currently in effect with respect to the Property. 7. Counterparts. This Second Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by each of the parties and delivered to the other party, which may be by facsimile. 8. Capitalized terms. Capitalized terms used in this Second Amendment shall, unless otherwise defined, have the meaning ascribed to them in the Agreement. 9. No Other Amendment. Except as herein amended, the terms and conditions of the Agreement remain in full force and effect. In the event of a conflict between the terms and conditions of this Second Amendment and the terms and conditions of the Agreement, the terms and conditions contained in this Second Amendment shall control. [SIGNATURES BEGIN ON THE NEXT PAGE] -------------------------------------------------------------------------------- IN WITNESS WHEREOF, Purchaser and Seller have caused this Second Amendment to be executed and effective as of February 15, 2006.   “SELLER” CNLR DC ACQUISITIONS I, LLC, a Delaware limited liability company By:   /s/ Kevin B. Habicht Name:   Kevin B. Habicht Its:   Manager Date:   February 15, 2006 “PURCHASER” BROOKFIELD FINANCIAL PROPERTIES, L.P., a Delaware limited partnership By:   Brookfield Financial Properties, Inc., a Delaware corporation, its managing general partner   By:   /s/ Kathleen Kane   Name:   Kathleen Kane   Its:   SVP and General Counsel   Date:   February 15, 2006

  Exhibit 10.32 SECURITIES PURCHASE AGREEMENT      This Securities Purchase Agreement (this “Agreement”) is dated as of August 7, 2006, among Uroplasty, Inc., a Minnesota corporation (the “Company”), and the investors identified on the signature pages hereto (each, an “Investor” and collectively, the “Investors”).      WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act (as defined below) and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Investor, and each Investor, severally and not jointly, desires to purchase from the Company certain securities of the Company, as more fully described in this Agreement.      NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Investors agree as follows: ARTICLE I. DEFINITIONS      1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms shall have the meanings indicated in this Section 1.1:           “Action” means any action, claim, suit, inquiry, notice of violation, proceeding (including, without limitation, any investigation or partial proceeding such as a deposition) or investigation pending or threatened in writing against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency, regulatory authority (Federal, state, provincial, county, local or foreign), stock market, stock exchange or trading facility.           “Additional Shares” has the meaning set forth in Section 4.6.           “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144.           “Business Day” means any day except Saturday, Sunday and any day which is a Federal legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.           “Closing” means the closing of the purchase and sale of the Securities pursuant to Article II of this Agreement.   --------------------------------------------------------------------------------             “Closing Date” means the Business Day immediately following the date on which all of the conditions set forth in Sections 5.1 and 5.2 hereof are satisfied, or such other date as the parties may agree.           “Commission” means the Securities and Exchange Commission.           “Common Stock” means the common stock of the Company, par value $.01 per share, and any securities into which such common stock may hereafter be reclassified, converted or exchanged.           “Common Stock Equivalents” means any securities of the Company or any Subsidiary which entitle the holder thereof to acquire Common Stock at any time, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock or other securities that entitle the holder to receive, directly or indirectly, Common Stock.           “Company Counsel” means Messerli & Kramer P.A.           “Company Deliverables” has the meaning set forth in Section 2.2(a).           “Disclosure Materials” has the meaning set forth in Section 3.1(h).           “Effective Date” means the date that the initial Registration Statement required by Section 2(a) of the Registration Rights Agreement is first declared effective by the Commission.           “Evaluation Date” has the meaning set forth in Section 3.1(s).           “Exchange Act” means the Securities Exchange Act of 1934, as amended.           “GAAP” means U.S. generally accepted accounting principles.           “Intellectual Property Rights” has the meaning set forth in Section 3.1(p).           “Investment Amount” means, with respect to each Investor, the dollar amount that such Investor is investing in the Securities at Closing, as indicated on such Investor’s signature page to this Agreement under the line “Investment Amount.”           “Investor Deliverables” has the meaning set forth in Section 2.2(b).           “Investor Party” has the meaning set forth in Section 4.7.           “Lien” means any lien, charge, encumbrance, security interest, right of first refusal or other restrictions of any kind, other than restrictions applicable to the resale of the Securities under the Securities Act and applicable state securities laws. -2- --------------------------------------------------------------------------------             “Losses” has the meaning set forth in Section 4.7.           “Material Adverse Effect” means any of (i) a material and adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material and adverse effect on the results of operations, assets, prospects, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) an adverse impairment to the Company’s ability to perform on a timely basis any of its obligations under any Transaction Document.           “New York Courts” means the state and Federal courts sitting in the City of New York, Borough of Manhattan.           “Outside Date” means August 15, 2006.           “Per Share Purchase Price” equals $1.50.           “Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.           “Registration Rights Agreement” means the Registration Rights Agreement, dated as of the Closing Date, among the Company and the Investors, in the form of Exhibit B hereto.           “Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale by the Investors of the Shares and the Warrant Shares.           “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.           “SEC Reports” has the meaning set forth in Section 3.1(h).           “Securities” means the Shares, the Warrants and the Warrant Shares.           “Securities Act” means the Securities Act of 1933, as amended.           “Shares” means the shares of Common Stock issued or issuable to the Investors pursuant to this Agreement, including any Additional Shares.           “Short Sales” include, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, swaps and similar arrangements (including on a total return basis), and sales and other transactions through non-US broker dealers or foreign regulated brokers. -3- --------------------------------------------------------------------------------             “Subsidiary” means any subsidiary of the Company required to be identified in Schedule 3.1(a).           “Threshold Price” means the Per Share Purchase Price (subject to equitable adjustment for stock splits, recombinations and similar events that may occur following the Closing Date and prior to the date in question).           “Trading Day” means (i) a day on which the Common Stock is traded on a Trading Market, or (ii) if the Common Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pink Sheets, LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i) and (ii) hereof, then Trading Day shall mean a Business Day.           “Trading Market” means whichever of the New York Stock Exchange, the American Stock Exchange, the NASDAQ National Market, the NASDAQ SmallCap Market or OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.           “Transaction Documents” means this Agreement, the Warrants, the Registration Rights Agreement, and any other documents or agreements executed in connection with the transactions contemplated hereunder.           “Warrants” means the Common Stock purchase warrants in the form of Exhibit A, which are issuable to the Investors at the Closing.           “Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants. ARTICLE II. PURCHASE AND SALE      2.1 Closing. The Closing shall take place at such time and place on the Closing Date as the parties may agree.      2.2 Closing Deliveries. (a) At the Closing, the Company shall deliver or cause to be delivered to each Investor the following (the “Company Deliverables”):                (i) a certificate evidencing a number of Shares equal to such Investor’s Investment Amount divided by the Per Share Purchase Price, registered in the name of such Investor;                (ii) a Warrant, registered in the name of such Investor, pursuant to which such Investor shall have the right to acquire 50% (rounded up to the nearest whole share) of the number of Shares issuable to such Investor pursuant to Section 2.2(a)(i); -4- --------------------------------------------------------------------------------                  (iii) the legal opinion of Company Counsel, in agreed form, addressed to the Investors;                (iv) the Registration Rights Agreement, duly executed by the Company; and                (v) an officer’s certificate, pursuant to Section 5.1(g) herein.           (b) At the Closing, each Investor shall deliver or cause to be delivered to the Company the following (the “Investor Deliverables”):                (i) to the Company, its Investment Amount, in United States dollars and in immediately available funds, by wire transfer to an account designated in writing by the Company for such purpose; and                (ii) the Registration Rights Agreement, duly executed by such Investor. ARTICLE III. REPRESENTATIONS AND WARRANTIES      3.1 Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to each Investor:           (a) Subsidiaries. The Company has no direct or indirect Subsidiaries other than as specified in Schedule 3.1(a). Except as disclosed in Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital stock of each Subsidiary free and clear of any and all Liens, and all the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights.           (b) Organization and Qualification. The Company and each Subsidiary are duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. The Company and each Subsidiary are duly qualified to conduct its respective businesses and are in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.           (c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of -5- --------------------------------------------------------------------------------   the Transaction Documents and otherwise to carry out its obligations thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company in connection therewith. Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.           (d) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including Federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.           (e) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other Federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) the filing with the Commission of one or more Registration Statements in accordance with the requirements Registration Rights Agreement, (ii) filings required by state securities laws, (iii) the filing of a Notice of Sale of Securities on Form D with the Commission under Regulation D of the Securities Act, (iv) the filings required in accordance with Section 4.5 and 4.10, and (v) those that have been made or obtained prior to the date of this Agreement.           (f) Issuance of the Securities. The Securities have been duly authorized and, when issued and paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens. The Company has reserved from its duly authorized capital stock the shares of Common Stock issuable pursuant to -6- --------------------------------------------------------------------------------   this Agreement and the Warrants in order to issue the Shares and the Warrant Shares, including the Additional Shares referred to in Section 4.6 below.           (g) Capitalization. The number of shares and type of all authorized, issued and outstanding capital stock of the Company, and all shares of Common Stock reserved for issuance under the Company’s various option and incentive plans, is specified in the SEC Reports and on Schedule 3.1(g). Except as specified in the SEC Reports and on Schedule 3.1(g), no securities of the Company are entitled to preemptive or similar rights, and no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as specified in the SEC Reports and on Schedule 3.1(g), there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of capital stock of the Company, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of capital stock of the Company, or securities or rights convertible or exchangeable into shares of capital stock of the Company. The issue and sale of the Securities will not, immediately or with the passage of time, obligate the Company to issue shares of capital stock of the Company or other securities to any Person (other than the Investors under the Transaction Documents) 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.           (h) SEC Reports; Financial Statements. The Company has filed all reports, forms or other information required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof (or such shorter period as the Company was required by law to file such reports, forms or other information) (the foregoing materials being collectively referred to herein as the “SEC Reports” and, together with the Schedules to this Agreement (if any), the “Disclosure Materials”). As of their respective dates (except as to SEC Reports amended by the Company, as of the respective dates of such amendment filings), the SEC Reports (as amended) complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports (as amended), when filed (except for amended SEC Reports, when they were so 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. The financial statements of the Company included in the SEC Reports (as amended) comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing (being the time of SEC Report amendment filings, if applicable). Such financial statements (as amended) 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 consolidated 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 -7- --------------------------------------------------------------------------------   statements, to normal, immaterial, year-end audit adjustments. For purposes of this Agreement, any reports, forms or other information provided to the Commission, whether by filing, furnishing or otherwise providing, is included in the term “filed” (or any derivations thereof).           (i) Press Releases. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement do not individually or taken as a whole contain any 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 made and when made, not misleading.           (j) Material Changes. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables, accrued expenses and other liabilities incurred in the ordinary course of business consistent with past practice and (B) liabilities (not to exceed $100,000) not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting or the identity of its auditors, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its shareholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) the Company has not issued any equity securities, except pursuant to existing Company stock option plans and consistent with past practice. The Company does not have pending before the Commission any request for confidential treatment of information.           (k) Litigation. There is no Action which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) except as specifically disclosed in the SEC Reports, could, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof (in his or her capacity as such), is or within the past ten years has been the subject of any Action involving a claim of violation of or liability under Federal or state securities laws or a claim of breach of fiduciary duty, except as specifically disclosed in the SEC Reports. There has not been, and to the knowledge of the Company, there is not pending any investigation by the Commission involving the Company or any current or former director or officer of the Company (in his or her capacity as such). The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.           (l) Labor Relations. No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company.           (m) Compliance. Neither the Company nor any Subsidiary (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 Subsidiary under), nor has -8- --------------------------------------------------------------------------------   the Company or any Subsidiary received 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 is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been 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 could not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. The Company is in compliance with all effective requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations thereunder, that are applicable to it, except where such noncompliance could not have or reasonably be expected to result in a Material Adverse Effect.           (n) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate Federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any such permits.           (o) Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them that is material to their respective businesses and good and marketable title in all personal property owned by them that is material to their respective businesses, in each case free and clear of all Liens, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company and the Subsidiaries are in compliance, except as could not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.           (p) Patents and Trademarks. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights that are necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have could, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect (collectively, the “Intellectual Property Rights”). Neither the Company nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person. Except as set forth in the SEC Reports, to the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. -9- --------------------------------------------------------------------------------             (q) 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 in the businesses in which the Company and the Subsidiaries are engaged. The Company has no reason to believe that it will not be able to renew its and the Subsidiaries’ existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business on terms consistent with market for the Company’s and such Subsidiaries’ respective lines of business.           (r) Transactions With Affiliates and Employees. Except as set forth in the SEC Reports, 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 with the Company or any Subsidiary (other than for services as employees, officers and directors), 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.           (s) Internal Accounting Controls. The Company and the Subsidiaries maintain 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 GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has established disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15(d)-15(e) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company, including its Subsidiaries, is made known to the certifying officers by others within those entities, particularly during the period in which the Company’s Form 10-KSB or 10-QSB, as the case may be, is being prepared. The Company’s certifying officers have evaluated the effectiveness of the Company’s controls and procedures as of the last day of the period covered by the Form 10-QSB for the Company’s most recently ended fiscal quarter (such date, the “Evaluation Date”). The Company presented in its most recently filed Form 10-KSB or Form 10-QSB the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no significant changes in the Company’s internal controls (as described in Item 308(c) of Regulation S-K under the Exchange Act) or, to the Company’s knowledge, without inquiry, in other factors that could significantly affect the Company’s internal controls.           (t) Solvency. Based on the financial condition of the Company as of the Closing Date (and assuming that the Closing shall have occurred), (i) the Company’s fair saleable value of its assets exceeds the amount that will be required to be paid on or in respect of -10- --------------------------------------------------------------------------------   the Company’s existing debts and other liabilities (including known 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, and 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 does not intend 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 debts).           (u) Certain Fees. Except as described in Schedule 3.1(u), no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. The Investors shall have no obligation with respect to any fees or with respect to any claims (other than such fees or commissions owed by an Investor pursuant to written agreements executed by such Investor which fees or commissions shall be the sole responsibility of such Investor) made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement.           (v) Certain Registration Matters. Assuming the accuracy of the Investors’ representations and warranties set forth in Section 3.2(b)-(e), no registration under the Securities Act is required for the offer and sale of the Shares, Warrants and Warrant Shares by the Company to the Investors under the Transaction Documents. The Company is eligible to register the resale of its Common Stock by the Investors on Form SB-2 promulgated under the Securities Act. Except as specified in Schedule 3.1(v), 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 Commission or any other governmental authority that have not been satisfied or exercised.           (w) Listing and Maintenance Requirements. Except as specified in the SEC Reports, the Company has not, in the two years preceding the date hereof, received notice from any Trading Market to the effect that the Company is not in compliance with the listing or maintenance requirements thereof. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with the listing and maintenance requirements for continued listing of the Common Stock on the Trading Market on which the Common Stock is currently listed or quoted. The issuance and sale of the Securities under the Transaction Documents (including the issuance of Additional Shares) does not contravene the rules and regulations of the Trading Market on which the Common Stock is currently listed or quoted, and no approval of the shareholders of the Company thereunder is required for the Company to issue and deliver to the Investors the Securities contemplated by the Transaction Documents. -11- --------------------------------------------------------------------------------             (x) Investment Company. The Company is not, and is not an Affiliate of, and immediately following the Closing will not have become, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.           (y) Application of Takeover Protections. The Company has taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Articles of Incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Investors or shareholders of the Company prior to the Closing Date as a result of the Investors and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation the Company’s issuance of the Securities and the Investors’ ownership of the Securities.           (z) No Additional Agreements. The Company does not have any agreement or understanding with any Investor with respect to the transactions contemplated by the Transaction Documents other than as specified in the Transaction Documents.           (aa) Disclosure. The Company confirms that neither it nor any Person acting on its behalf has provided any Investor or its respective agents or counsel with any information that the Company believes constitutes material, non-public information except insofar as the existence and terms of the proposed transactions hereunder may constitute such information. The Company understands and confirms that the Investors will rely on the foregoing representations and covenants in effecting transactions in securities of the Company. Except as corrected by a subsequent disclosure prior to the date hereof made in the SEC Reports, all disclosure provided to the Investors regarding the Company, its business and the transactions contemplated hereby, furnished by or on behalf of the Company are true and correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.           (bb) Currently Intended Accounting for Transaction. The Company intends to account for the net proceeds raised from the financing which is the subject of this Agreement as equity in its consolidated financial statements.      3.2 Representations and Warranties of the Investors. Each Investor hereby, for itself and for no other Investor, represents and warrants to the Company as follows:           (a) Organization; Authority. If applicable, such Investor is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the applicable Transaction Documents and otherwise to carry out its obligations thereunder. The execution, delivery and performance by such Investor of the transactions contemplated by this Agreement has been duly authorized by all necessary corporate or, if such Investor is not a corporation, such partnership, limited liability -12- --------------------------------------------------------------------------------   company or other applicable like action, on the part of such Investor. Each of this Agreement and the Registration Rights Agreement has been duly executed by such Investor, and when delivered by such Investor in accordance with terms hereof, will constitute the valid and legally binding obligation of such Investor, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.           (b) Investment Intent. Such Investor is acquiring the Securities as principal for its own account for investment purposes only and not with a view to or for distributing or reselling such Securities or any part thereof, without prejudice, however, to such Investor’s right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable Federal and state securities laws. Subject to the immediately preceding sentence, nothing contained herein shall be deemed a representation or warranty by such Investor to hold the Securities for any period of time. Such Investor is acquiring the Securities hereunder in the ordinary course of its business. Such Investor does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities.           (c) Investor Status. At the time such Investor was offered the Securities, it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act. Such Investor is not a registered broker-dealer under Section 15 of the Exchange Act.           (d) General Solicitation. Such Investor is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.           (e) Access to Information. Such Investor acknowledges that it has reviewed the Disclosure Materials and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Securities; (ii) access to information about the Company and the Subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Neither such inquiries nor any other investigation conducted by or on behalf of such Investor or its representatives or counsel shall modify, amend or affect such Investor’s right to rely on the truth, accuracy and completeness of the Disclosure Materials and the Company’s representations and warranties contained in the Transaction Documents.           (f) Certain Trading Activities. Such Investor has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Investor, engaged in any transactions in the securities of the Company (including, without limitations, any -13- --------------------------------------------------------------------------------   Short Sales involving the Company’s securities) since the earlier to occur of (1) the time that such Investor was first contacted by the Company or any other Person regarding an investment in the Company and (2) the 20th day prior to the public announcement of the transactions contemplated by this Agreement. Such Investor covenants that neither it nor any Person acting on its behalf or pursuant to any understanding with it will engage in any transactions in the securities of the Company (including Short Sales) prior to the time that the transactions contemplated by this Agreement are publicly disclosed.           (g) Independent Investment Decision. Such Investor has independently evaluated the merits of its decision to purchase Securities pursuant to this Agreement. The Company acknowledges and agrees that no Investor has made or makes any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3.2. ARTICLE IV. OTHER AGREEMENTS OF THE PARTIES      4.1 (a) Securities may only be disposed of in compliance with state and Federal securities laws. In connection with any transfer of the Securities other than pursuant to an effective registration statement, to the Company, to an Affiliate of an Investor or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act.           (b) Certificates evidencing the Securities will contain the following legend, until such time as they are not required under Section 4.1(c): [NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED] [THESE SECURITIES HAVE NOT BEEN REGISTERED] WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. [THESE SECURITIES AND THE -14- --------------------------------------------------------------------------------   SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES] [THESE SECURITIES] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.           The Company acknowledges and agrees that an Investor may from time to time pledge, and/or grant a security interest in some or all of the Securities pursuant to a bona fide margin agreement in connection with a bona fide margin account and, if required under the terms of such agreement or account, such Investor may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval or consent of the Company and no legal opinion of legal counsel to the pledgee, secured party or pledgor shall be required in connection with the pledge, but such legal opinion may be required in connection with a subsequent transfer following default by the Investor transferee of the pledge. No notice shall be required of such pledge. At the appropriate Investor’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 the preparation and filing of any required prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of selling shareholders thereunder.           (c) Certificates evidencing the Shares and Warrant Shares shall not contain any legend (including the legend set forth in Section 4.1(b)): (i) following a sale of such Securities pursuant to an effective registration statement (including the Registration Statement), (ii) following a sale of such Shares or Warrant Shares pursuant to Rule 144 (assuming the transferor is not an Affiliate of the Company), or (iii) while such Shares or Warrant Shares are eligible for sale under Rule 144(k). If an Investor makes a sale or transfer of Shares or Warrant Shares either (x) pursuant to Rule 144 or (y) pursuant to a registration statement and in each case shall have delivered to the Company or the Company’s transfer agent the certificate representing Shares or Warrant Shares containing a restrictive legend which are the subject of such sale or transfer and a representation letter in customary form (the date of such sale or transfer and Share or Warrant Share delivery being the “Share Delivery Date”) and (1) the Company shall fail to deliver or cause to be delivered to such Investor a certificate representing such Shares or Warrant Shares that is free from all restrictive or other legends by the third Trading Day following the Share Delivery Date and (2) following such third Trading Day after the Share Delivery Date and prior to the time such Shares or Warrant Shares are received free from restrictive legends, the Investor, or any third party on behalf of such Investor, purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Investor of such Shares or Warrant Shares (a “Buy-In”), then the Company shall pay in cash to the Investor (for costs incurred either directly by such Investor or on behalf of a third party) the amount by which the total purchase price paid for Common Stock as a result of the Buy-In (including brokerage commissions, if any) exceed the proceeds received by such Investor as a result of the sale to which such Buy-In relates. The Investor shall provide the Company written notice indicating the amounts payable to the Investor in respect of the Buy-In. -15- --------------------------------------------------------------------------------        4.2 Furnishing of Information. As long as any Investor owns the Securities, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. As long as any Investor owns Securities, if the Company is not required to file reports pursuant to such laws, it will prepare and furnish to the Investors and make publicly available in accordance with Rule 144(c) such information as is required for the Investors to sell the Shares and Warrant Shares under Rule 144. The Company further covenants that it will take such further action as any holder of Securities may reasonably request, all to the extent required from time to time to enable such Person to sell the Shares and Warrant Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144.      4.3 Integration. The Company shall not, and shall use its best efforts to ensure that no Affiliate of the Company shall, 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 Investors, or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market in a manner that would require shareholder approval of the sale of the Securities to the Investors.      4.4 Subsequent Registrations. Other than pursuant to the Registration Statement, prior to the Effective Date, the Company may not file any registration statement (other than on Form S-8 or amendments to previously filed registration statements) with the Commission with respect to any securities of the Company.      4.5 Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York time) on the Trading Day following the execution of this Agreement, and by 9:00 a.m. (New York time) on the Trading Day following the Closing Date, the Company shall issue press releases in a form approved by the Investors disclosing the transactions contemplated hereby and the Closing. On the Trading Day following the execution of this Agreement, the Company will file a Current Report on Form 8-K disclosing the material terms of the Transaction Documents (and attach as exhibits thereto the Transaction Documents), and on the Trading Day following the Closing Date the Company will file an additional Current Report on Form 8-K to disclose the Closing. In addition, the Company will make such other filings and notices in the manner and time required by the Commission and the Trading Market on which the Common Stock is listed. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Investor, or include the name of any Investor in any filing with the Commission (other than the Registration Statement and any exhibits to filings made in respect of this transaction in accordance with periodic filing requirements under the Exchange Act) or any regulatory agency or Trading Market, without the prior written consent of such Investor, except to the extent such disclosure is required by law or Trading Market regulations. -16- --------------------------------------------------------------------------------        4.6 Additional Shares. In the event that during the Anti-Dilution Testing Period (as defined below), the Company proposes to engage in a transaction that, by giving effect to this Section 4.6, would require the Company to issue Additional Shares (as defined below), the Company agrees that it will not engage in any such transaction unless it first receives pre-approval to give effect to this Section 4.6 from the Company’s shareholders at a duly held regular or special meeting thereof held in accordance with the Rules of the American Stock Exchange. Accordingly, the Investors acknowledge and agree that this Section 4.6 will only apply to a transaction for which the Company’s shareholders have so given their pre-approval.           (a) If, prior to the one-year anniversary of the Closing Date (such one-year period being the “Anti-Dilution Testing Period”), the Company issues (or agrees to issue) any shares of Common Stock or if the Company or any Subsidiary issues (or agrees to issue) any Common Stock Equivalents entitling any Person to acquire shares of Common Stock at a price per share less than the Threshold Price (if the holder of the Common Stock or Common Stock Equivalent so issued shall at any time during the Anti-Dilution Testing Period, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights issued in connection with such issuance, be entitled to receive shares of Common Stock at a price less than the Threshold Price, such issuance shall be deemed to have occurred for less than the Threshold Price), then, with each such issuance of Common Stock or Common Stock Equivalents for a purchase price that is less than the Threshold Price, the Company shall immediately issue additional shares of Common Stock (the “Additional Shares”) to each Investor for no additional consideration. The number of Additional Shares issuable to each Investor will equal the number of shares of Common Stock that such Investor’s Investment Amount would have purchased at the Adjusted Per Share Purchase Price (as defined below) minus the number of shares of Common Stock issued to such Investor pursuant to Section 2.2(a)(i) herein. The “Adjusted Per Share Purchase Price” shall equal: PSPP x [(N+v)/(N+n)] where: PSPP = the Per Share Purchase Price. N = the number of shares of Common Stock outstanding immediately prior to the issuance of such shares of Common Stock or such Common Stock Equivalents. v = the number of shares of Common Stock which the aggregate consideration receivable by the Company (determined in accordance with subsection (c) below) would purchase at the Per Share Purchase Price. n = the number of shares of Common Stock issuable in connection with such subsequent issuance. -17- --------------------------------------------------------------------------------   The Company shall notify the Investors in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalent subject to this section, indicating therein the applicable issuance price. The Additional Shares shall be entitled to the registration and other rights set forth in the Registration Rights Agreement and any Additional Shares not registered for resale shall also be afforded general piggyback registration rights (until such time as the affected Investor can resell its Additional Shares pursuant to Rule 144(k)) such that such Additional Shares may be included in any registration statement (other than on Form S-8) filed by the Company. Notwithstanding the foregoing, no issuances of Additional Shares will be made under this Section as a result of: (i) the issuance of Warrant Shares, (ii) to the extent consistent with past practice, the grant of options or warrants, or the issuance of additional securities, under any duly authorized Company stock option, restricted stock plan or stock purchase plan whether now existing or approved by the Company and its shareholders in the future (but not as to any amendments or other modifications to the number of Common Stock issuable thereunder, the terms set forth therein, or the exercise price set forth therein, unless such amendments or other modifications are approved by the Company’s shareholders), (iii) the issuance and sale by the Company of shares of Common Stock or Common Stock Equivalents issued as consideration for the acquisition of another company or business (including the grant of up to 100,000 options or warrants to officers, employees and directors in connection with such an acquisition) if no executive officer, director or 10% beneficial shareholder of the Company is an executive officer, director or 10% beneficial shareholder of such other company or business, and if the acquisition has been approved by the Board of Directors of the Company, (iv) the issuance of up to 200,000 shares of Common Stock or Common Stock Equivalents to a financial institution or leasing company primarily in connection with any debt or lease financing transaction or the establishment or maintenance of any line of credit (other than equity lines or similar transactions) or (v) the issuance of any Common Stock or Common Stock Equivalents upon the exercise, conversion or exchange of Options or Convertible Securities (as those terms are defined in subsection (c)(i) below) outstanding on the date hereof. If during the Anti-Dilution Testing Period, the Company enters into any understanding or agreement to issue or sell securities that would, if such issuance or sale were to occur during the Anti-Dilution Testing Period, trigger an obligation to issue Additional Shares, then notwithstanding the fact that such actual issuance of Common Stock or Common Stock Equivalents occurs after the Anti-Dilution Testing Period, such issuance will obligate the Company to issue Additional Shares under this Section.           (b) Certain Limitations.                (i) Notwithstanding anything to the contrary contained herein, the number of Additional Shares that may be acquired at any given time by an Investor pursuant to this Section shall be limited to the extent necessary to insure that, following such issuance, the total number of shares of Common Stock then beneficially owned by such Investor and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act, does not exceed 4.9% of the total number of issued and outstanding shares of Common Stock (including for such purpose the issuance of Additional Shares). For such purposes, beneficial ownership shall be -18- --------------------------------------------------------------------------------   determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. By written notice to the Company, an Investor may waive the provisions of this Section 4.6(b) as to itself but any such waiver will not be effective until the 61st day after delivery thereof and such waiver shall have no effect on any other Investor.                (ii) Notwithstanding anything to the contrary contained herein, the number of Additional Shares that may be acquired by an Investor pursuant to this Section shall be limited to the extent necessary to insure that, following such issuance, the total number of shares of Common Stock then beneficially owned by such Investor and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act, does not exceed 9.9% of the total number of issued and outstanding shares of Common Stock (including for such purpose the issuance of Additional Shares). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. This restriction may not be waived.                (iii) The Company and each Investor agree that, if and to the extent Sections 4.6(b)(i)-(ii) would restrict the ability of an Investor to receive any Additional Shares, then notwithstanding anything to the contrary set forth herein, the Company shall deliver those Additional Shares as may be acquired by such Investor in accordance with Sections 4.6(b)(i)-(ii). An Investor will promptly notify the Company in writing if the issuance of Additional Shares would be restricted by Sections 4.6(b)(i)-(ii), specifying therein the Additional Shares so restricted. Such Investor shall deliver a notice to the Company when it is able to acquire any remaining Additional Shares not previously deliverable to such Investor due to the applicability of Sections 4.6(b)(i)-(ii), however, such notice shall not take effect until the 61st day following delivery thereof.           (c) For purposes of this Section 4.6, the following subsections (c)(i) to (c)(vi) shall also be applicable:                (i) Issuance of Rights or Options. If 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 -19- --------------------------------------------------------------------------------   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 Threshold 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 Per Share Purchase Price. Except as otherwise provided in subsection 4.6(c)(iii), no adjustment of the Per Share Purchase 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.                (ii) Issuance of Convertible Securities. If 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 Threshold 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 calculating the Per Share Purchase Price, provided that (a) except as otherwise provided in subsection 4.6(c)(iii), no adjustment of the Per Share Purchase 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 Per Share Purchase 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 Per Share Purchase Price have been made pursuant to the other provisions of subsection 4.6(c).                (iii) 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 4.6(c)(i) hereof, the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in subsections 4.6(c)(i) or 4.6(c)(ii), or the rate at which Convertible Securities referred to in subsections 4.6(c)(i) or 4.6(c)(ii) 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 Per Share Purchase Price in effect at the time of such event shall forthwith -20- --------------------------------------------------------------------------------   be readjusted to the Per Share Purchase 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 4.6(c) or any right to convert or exchange Convertible Securities for which any adjustment was made pursuant to this subsection 4.6(c) (including without limitation upon the redemption or purchase for consideration of such Convertible Securities by the Company), the Per Share Purchase Price then in effect hereunder shall forthwith be changed to the Per Share Purchase 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.                (iv) Stock Dividends. Subject to the provisions of this Section 4.6(c), if 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.                (v) Consideration for Stock. If 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 net amount received by the Company therefor, after deduction therefrom of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. If 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, after deduction of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. If 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 Investors). The Board of Directors of the Company shall respond promptly, in writing, to an inquiry by the Investors as to the fair market value of the Additional Rights. In the event that the Board of Directors of the Company and the Investors are unable to agree upon the fair market value of the Additional Rights, the Company and the Investors 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 Investors. -21- --------------------------------------------------------------------------------                  (vi) Record Date. If 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.      4.7 Limitation on Issuance of Future Priced Securities. During the six months following the Closing Date, the Company shall not issue any “Future Priced Securities” as such term is described by NASD IM-4350-1.      4.8 Indemnification of Investors. In addition to the indemnity provided in the Registration Rights Agreement, the Company will indemnify and hold the Investors and their directors, officers, shareholders, partners, employees and agents (each, an “Investor Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation (collectively, “Losses”) that any such Investor Party may suffer or incur as a result of or relating to any misrepresentation, breach or inaccuracy of any representation, warranty, covenant or agreement made by the Company in any Transaction Document. In addition to the indemnity contained herein, the Company will reimburse each Investor Party for its reasonable legal and other expenses (including the cost of any investigation, preparation and travel in connection therewith) incurred in connection therewith, as such expenses are incurred.      4.9 Non-Public Information. The Company covenants and agrees that neither it nor any other Person acting on its behalf will provide any Investor or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Investor shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that each Investor shall be relying on the foregoing representations in effecting transactions in securities of the Company.      4.10 Listing of Securities. The Company agrees, (i) if the Company applies to have the Common Stock traded on any other Trading Market, it will include in such application the Shares and Warrant Shares, and will take such other action as is necessary or desirable to cause the Shares and Warrant Shares to be listed on such other Trading Market as promptly as possible, and (ii) it will take all action reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market and will comply in all material respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market.      4.11 Use of Proceeds. The Company will use the net proceeds from the sale of the Securities hereunder for working capital purposes and not for the satisfaction of any portion of the Company’s debt (other than payment of trade payables and accrued expenses in the ordinary -22- --------------------------------------------------------------------------------   course of the Company’s business and consistent with prior practices), or to redeem any Common Stock or Common Stock Equivalents. ARTICLE V. CONDITIONS PRECEDENT TO CLOSINGS      5.1 Conditions Precedent to the Obligations of the Investors to Purchase Securities. The obligation of each Investor to acquire Securities at the Closing is subject to the satisfaction or waiver by such Investor, at or before such Closing, of each of the following conditions:           (a) Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct in all material respects as of the date when made and as of such Closing as though made on and as of such date;           (b) Performance. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to such Closing;           (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents;           (d) Adverse Changes. Since the date of execution of this Agreement, no event or series of events shall have occurred that reasonably could have or result in a Material Adverse Effect;           (e) No Suspensions of Trading in Common Stock; Listing. Trading in the Common Stock shall not have been suspended by the Commission or any Trading Market (except for any suspensions of trading of not more than one Trading Day solely to permit dissemination of material information regarding the Company) at any time since the date of execution of this Agreement, and the Common Stock shall have been at all times since such date listed for trading on a Trading Market;           (f) Company Deliverables. The Company shall have delivered the Company Deliverables in accordance with Section 2.2(a); and           (g) Closing Officer’s Certificate. At the Closing, the Company shall have delivered to each Investor an officer’s certificate to the effect that each of the conditions specified in Sections 5.1(a) — 5.1(e) is satisfied in all respects.      5.2 Conditions Precedent to the Obligations of the Company to sell Securities. The obligation of the Company to sell Securities at the Closing is subject to the satisfaction or waiver by the Company, at or before such Closing, of each of the following conditions: -23- --------------------------------------------------------------------------------             (a) Representations and Warranties. The representations and warranties of each Investor contained herein shall be true and correct in all material respects as of the date when made and as of such Closing as though made on and as of such date;           (b) Performance. Each Investor shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by such Investor at or prior to such Closing;           (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents; and           (d) Investors Deliverables. Each Investor shall have delivered its Investors Deliverables in accordance with Section 2.2(b). ARTICLE VI. MISCELLANEOUS      6.1 Fees and Expenses. Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of the Transaction Documents. The Company shall pay all stamp and other taxes and duties levied in connection with the sale of the Securities.      6.2 Entire Agreement. The Transaction Documents, together with the Schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, discussions and representations, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.      6.3 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile (provided the sender receives a machine-generated confirmation of successful transmission) at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: -24- --------------------------------------------------------------------------------         If to the Company:   Uroplasty, Inc.     5420 Feltl Road     Minnetonka, Minnesota 55343     Facsimile: (952) 426-6199     Attn.: David B. Kaysen, President and CEO       With a copy to:   Messerli & Kramer P.A.     150 South Fifth Street, Suite 1800     Minneapolis, MN 55402     Facsimile: (612) 672-3777     Attn.: Jeffrey C. Robbins, Esq.       If to an Investor:   To the address set forth under such Investor’s name     on the signature pages hereof; or such other address as may be     designated in writing hereafter, in the same manner, by such     Person.      6.4 Amendments; Waivers; No Additional Consideration. No provision of this Agreement may be waived or amended except in a written instrument signed by the Company and the Investors holding a majority of the Shares. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right. No consideration shall be offered or paid to any Investor to amend or consent to a waiver or modification of any provision of any Transaction Document unless the same consideration is also offered to all Investors who then hold Shares.      6.5 Termination. This Agreement may be terminated prior to Closing:           (a) by written agreement of the Investors and the Company;           (b) by the Company or an Investor (as to itself but no other Investor) upon written notice to the other, if the Closing shall not have taken place by 6:30 p.m. Eastern time on the Outside Date; provided, that the right to terminate this Agreement under this Section 6.5(b) shall not be available to any Person whose failure to comply with its obligations under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such time; or           (c) by an Investor (as to itself but no other Investor) if it concludes in good faith that any of the conditions precedent contained in Section 5.1(c), (d) or (e) shall have been breached or shall not be capable of being satisfied by the Outside Date despite the assumed best efforts of the Company. -25- --------------------------------------------------------------------------------        In the event of a termination pursuant to this Section, the Company shall promptly notify all non-terminating Investors. Upon a termination in accordance with this Section 6.5, the Company and the terminating Investor(s) shall not have any further obligation or liability (including as arising from such termination) to the other and no Investor will have any liability to any other Investor under the Transaction Documents as a result therefrom.      6.6 Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. This Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement or any of the Transaction Documents.      6.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investors. Any Investor may assign any or all of its rights under this Agreement to any Person to whom such Investor assigns or transfers any Securities, provided such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions hereof that apply to the “Investors.”      6.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.7 (as to each Investor Party).      6.9 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement 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 Actions concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective Affiliates, 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 (including with respect to the enforcement of the any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Action, any claim that it is not personally subject to the jurisdiction of any such New York Court, or that such Action 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 Action by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of -26- --------------------------------------------------------------------------------   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 Agreement or the transactions contemplated hereby. If either party shall commence an Action to enforce any provisions of a Transaction Document, then the prevailing party in such Action shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Action.      6.10 Survival. The representations, warranties, agreements and covenants contained herein shall survive the Closing and the delivery of the Securities.      6.11 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.      6.12 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.      6.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Investor exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Investor may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.      6.14 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities. If a replacement certificate or instrument evidencing any Securities is requested due to a mutilation thereof, the Company may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement. -27- --------------------------------------------------------------------------------        6.15 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Investors and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.      6.16 Payment Set Aside. To the extent that the Company makes a payment or payments to any Investor pursuant to any Transaction Document or an Investor enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or Federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.      6.17 Independent Nature of Investors’ Obligations and Rights. The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Document. The decision of each Investor to purchase Securities pursuant to the Transaction Documents has been made by such Investor independently of any other Investor. Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Investor acknowledges that no other Investor has acted as agent for such Investor in connection with making its investment hereunder and that no Investor will be acting as agent of such Investor in connection with monitoring its investment in the Securities or enforcing its rights under the Transaction Documents. Each Investor shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose. The Company acknowledges that each of the Investors has been provided with the same Transaction Documents for the purpose of closing a transaction with multiple Investors and not because it was required or requested to do so by any Investor.      6.18 Limitation of Liability. Notwithstanding anything herein to the contrary, the Company acknowledges and agrees that the liability of an Investor arising directly or indirectly, under any Transaction Document of any and every nature whatsoever shall be satisfied solely out of the assets of such Investor, and that no trustee, officer, other investment vehicle or any other -28- --------------------------------------------------------------------------------   Affiliate of such Investor or any investor, shareholder or holder of shares of beneficial interest of such a Investor shall be personally liable for any liabilities of such Investor. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOLLOW] -29- --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.                                 UROPLASTY, INC.                       By:                               David B. Kaysen, President                  and Chief Executive Officer     [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOR INVESTORS FOLLOW] -30- --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement as of the date first written above.                                                 NAME OF INVESTOR                                           By:         Name:                   Title:           Investment Amount: $                                     Tax ID No.:                                                         ADDRESS FOR NOTICE                           c/o:                             Street:                                City/State/Zip:                               Attention:                               Tel:                               Fax:                                                                 DELIVERY INSTRUCTIONS         (if different from above)           c/o:                               Street:                             City/State/Zip:                                 Attention:                           Tel:                         -31-

Exhibit 10.11 WHX CORPORATION 2006 BONUS PLAN 1. PURPOSE OF THE PLAN. The goal of the 2006 Bonus Plan (the "Plan") is to offer an incentive plan that will help recruit and retain outstanding talent by providing both short-term incentives for achieving annual targets while rewarding key management for achieving long-term growth goals. 2. ADMINISTRATION OF THE PLAN. The Compensation Committee (the "Committee") of the Board of Directors (the "Board") of WHX Corporation (the "Company") shall have full power and authority to designate recipients of awards ("Awards"), determine the terms and conditions of such Awards (which need not be identical) and to interpret the provisions and supervise the administration of the Plan. The Committee may delegate, in its sole discretion, approval of bonuses for certain employees of Handy & Harman ("H&H"), a wholly-owned subsidiary of the Company, to the President/CEO of H&H (the "CEO") and/or to the Board of Directors of H&H. Subject to the provisions of the Plan, the Committee shall interpret the Plan and all Awards granted under the Plan, shall make such rules as it deems necessary for the proper administration of the Plan, shall make all other determinations necessary or advisable for the administration of the Plan and shall correct any defects or supply any omission or reconcile any inconsistency in the Plan or in any Awards granted under the Plan in the manner and to the extent that the Committee deems desirable to carry into effect the Plan or any Awards. The act or determination of a majority of the Committee shall be the act or determination of the Committee and any decision reduced to writing and signed by all of the members of the Committee shall be fully effective as if it had been made by a majority at a meeting duly held. Subject to the provisions of the Plan, any action taken or determination made by the Committee pursuant to this and the other Sections of the Plan shall be conclusive on all parties. In the event that for any reason the Committee is unable to act, or if there shall be no such Committee, then the Board shall administer the Plan, and references herein to the Committee (except in the proviso to this sentence) shall be deemed to be references to the Board. 3. DESIGNATION OF GRANTEES. The persons eligible for participation in the Plan as recipients of Awards shall include officers and employees of the Company or any of its subsidiaries (the "Grantees"). In selecting the Grantees, and in determining the Awards, the Committee may consider any factors it deems relevant, including without limitation, the office or position held by the Grantee, the Grantee's degree of responsibility for and contribution to the growth and success of the Company or any of its subsidiaries, the Grantee's length of service, promotions and potential. Generally, Grantees will be recommended by the CEO of H&H to the Committee. 4. GRANT OF AWARDS. The Committee in its sole discretion shall set specific goals for certain Grantees on a periodic basis. Such goals may be set on an annual basis pursuant to the Company's Short Term Incentive Plan ("STIP") or on a longer-term basis pursuant to the Company's Long Term Incentive Plan ("LTIP"). The goals for each Grantee, as well as the Awards attached to reaching such goals, will be communicated to each Grantee as the CEO or the Committee shall determine, but in each such case shall be set forth in writing and approved by either the Committee, the CEO and/or the Board of Directors of H&H. The Plan shall not be in effect in any given year with respect to any Grantee until he/she initials the written goals sheet applicable to such Grantee, which initialing shall signify his/her understanding of and agreement with all of the terms and conditions of the Plan. It is contemplated that the Committee will adopt specific targets under the STIP and LTIP on an annual basis, and will review recommendations received by the CEO. All calculations upon which Awards are based shall be certified by the Chief Financial Officer of the Company. In order to be eligible to receive an award pursuant to this Plan, the Grantee must be employed by the Company on the earlier of the date Awards are generally paid to Grantees or the March 31 following the payout year. 5. TAXES. The Company may make such provisions as it may deem appropriate, consistent with applicable law, in connection with any Awards granted under the Plan with respect to the withholding of any taxes (including income or employment taxes) or any other tax matters. 6. EFFECTIVE DATE OF PLAN. The Plan shall be effective on January 1, 2006. 7. AMENDMENT AND TERMINATION. The Committee or the Board may amend, suspend, or terminate the Plan or authorize, increase or withhold the payment of any Award in its absolute and complete discretion. The decision of the Committee or the Board shall be final, binding and conclusive. 8. GOVERNMENT REGULATIONS. The Plan, and the grant of Awards hereunder, and the obligation of the Company to deliver such awards shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies as may be required. 9. GENERAL PROVISIONS. (a) EMPLOYMENT MATTERS. The adoption of the Plan shall not confer upon any Grantee any right to continued employment with the Company or its subsidiaries, or in the case of a Grantee who is a director, continued service as a director with the Company or its subsidiaries, as the case may be, nor 2 shall it interfere in any way with the right of the Company or any of its subsidiaries to terminate the employment of any of its employees or the service of any of its directors. All participants in the Plan shall be and remain at all times employees at will, and the Company and each subsidiary shall have the absolute right to terminate any such employment at any time, with or without cause, in its absolute discretion, subject to the terms of any written employment agreement that any participant may have with the Company or any subsidiary thereof. (b) LIMITATION OF LIABILITY. No member of the Board or the Committee, or any officer or employee of the Company acting on behalf of the Board or the Committee, shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Committee and each and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation. (c) TERMINATION. Unless otherwise determined by the Committee, if any Grantee's employment with or service to the Company or any of its subsidiaries is terminated for Cause (as defined below) or voluntarily by Grantee or for any other reason except as explicitly provided in the next sentence, such Grantee's Award(s) shall be cancelled. If such Grantee's employment with or service to the Company or any of its subsidiaries is terminated because of termination by the Company other than for Cause, or because of death or Disability, such Grantee's Award(s) shall be granted to such Grantee to the extent of the pro-rata portion of the earned portion of the "Team" Award, if any, and the pro-rata portion of the earned portion of the "Individual" Award, if any, for the year so employed, in each case as determined in the sole and complete discretion of the Committee. For the purpose of this Plan, "Cause" shall have the meaning set forth in such Grantee's employment agreement or if no such agreement exists or such term is not provided for, Cause shall mean: (i) the Grantee engaging in conduct which is materially injurious to the Company or any of their respective customer or supplier relationships, monetarily or otherwise; (ii) the Grantee engaging in any act of fraud, misappropriation or embezzlement or sexual or other harassment of any employee of the Company; (iii) the Grantee engaging in any act which would or does constitute a felony; (iv) the willful or continued failure by the Grantee to substantially perform his duties, including, but not limited to, willful misconduct, gross negligence or other acts of dishonesty; or (v) the Grantee's material violation or breach of the Plan or any agreement with the Company or its subsidiaries. For the purpose of this Plan, "Disability" shall have the meaning set forth in such Grantee's employment agreement or if no such agreement exists or such term is not provided for, Disability shall mean: the Grantee's absence from the full-time performance of his duties hereunder for at least ninety (90) days, whether or not consecutive, within any twelve (12) consecutive months as a result of any incapacity due to physical or mental illness. (d) MODIFICATION; PRIOR PLANS. Notwithstanding anything set forth in this Plan or in any letter sent to an individual Grantee, the calculation, determination and payment of any Award is subject to the final determination of the Committee, which shall be entitled to alter, amend or nullify the terms of the Plan, or to authorize, increase or withhold the payment of any Award in its absolute and sole discretion. The decision of the Committee shall be final, 3 binding and conclusive. The terms and conditions of this Plan shall supersede and cancel any and all prior bonus plans and arrangements and participation in this Plan shall nullify Grantee's right or entitlement to any bonus under any other such bonus plan or arrangement of the Company or any of its subsidiaries. WHX CORPORATION Effective January 1, 2006 4

EXHIBIT 10.3   TRADEMARK LICENSE EXTENSION AGREEMENT   This Extension Agreement dated as of April 10, 2006 is by and between Hallmark Licensing, Inc. (“Hallmark Licensing”) and Crown Media United States, LLC (“Crown US”).   WHEREAS, Crown US and Hallmark Licensing have previously entered into that certain Amended and Restated Trademark License Agreement between the parties dated as of March 17, 2001 as extended on November 30, 2002, as of August 28, 2003, as of August 1, 2004, and as of August 1, 2005 (the “License Agreement”); and   WHEREAS, the parties desire to further extend the term of the License Agreement;   NOW, THEREFORE, Crown US and Hallmark Licensing hereby agree as follows:   The term of the License Agreement shall be extended for an additional period terminating on September 1, 2007, subject to any earlier termination pursuant to the terms of the License Agreement.   All other terms and conditions of the License Agreement will remain unchanged and in full force and effect.   IN WITNESS WHEREOF, the parties hereto have executed this Extension Agreement as of the date set forth above.     HALLMARK LICENSING, INC.     By: /s/ Deanne Stedem         Title: /s/ Vice President               CROWN MEDIA UNITED STATES, LLC       By: /s/ Charles Stanford         Title: /s/ Vice President     --------------------------------------------------------------------------------